Companies

Bharti Airtel up 2% on approval to raise further capital through ₹21,000 crore rights issue

Our Bureau Mumbai | Updated on August 30, 2021

The firm’s board has approved the issuance of equity shares of face value of ₹5 each of the company on rights basis to eligible equity shareholders of the company as on the record date, of an issue size of upto ₹21,000 crore

The shares of Bharti Airtel were up over 2 per cent during the morning trade on Monday after the company's board of directors approved the plan to raise further capital. The Telecom services provider has announced a ₹ 21,000-crore rights issue.

At 10:26 , Airtel was trading at ₹608.75 on the BSE, up ₹14.80 or 2.49 per cent. It opened at ₹597.75 as against the previous close of ₹593.95. It hit an intra-day high of ₹609.25 and a low of ₹591.10. On the NSE, it was trading at ₹608.90, up ₹13.75 or 2.31 per cent.

The company on Sunday said that its board of directors had "reviewed the industry scenario, business environment, financial/ business strategy of the company and approved the company’s plan to raise further capital.”

Accordingly, the board has approved the issuance of equity shares of face value of ₹5 each of the company on rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of upto ₹21,000 crore, it said. The rights issue price will be ₹535 per fully paid-up equity share (including a premium of ₹530 per equity share). the rights entitlement ratio is 1:14 i.e. one equity share for every 14 equity shares held by eligible shareholders as on the record date.

‘Special Committee of Directors’

Further the board has constituted a ‘Special Committee of Directors’ to decide the other terms and conditions of the issue including issue period and the record date. The promoter and promoter group of the company will collectively subscribe to the full extent of their aggregate rights entitlement. In addition, they will also subscribe to any unsubscribed shares in the issue, the company said.

According to Motilal Oswal Research, “This capital raise is surprising as the management in its last few calls stated that its leverage and liquidity position is comfortable and self-sustainable, with healthy FCF generation in all verticals, thus indicating no additional capital requirement.”

Also read: SC restrains DoT from invoking Airtel’s bank guarantees

This is the third fundraising round in the last three years after it raised a cumulatively ₹420b in FY20 (37 per cent dilution) through a successive issuance of rights, QIP, and FCCB. Including the upcoming rights issue, it will be a cumulative 46 per cent dilution in less than three years, Motilal Oswal Research said.

However, it remained bullish on the stock, maintaining a 'Buy' rating at a target price of ₹720 owing to the potential of revenue growth with concerns over VIL’s survival. “The unexpected capital raise may cause a negative reaction in the short term, but we see a good earnings growth opportunity over the next 12 months. We value BHARTI on an FY23E basis, assigning an EV/EBITDA of 11x to its India Mobile business and 5x to its Africa business, arriving at a SoTP-based TP of ₹720,” it said.

Published on August 30, 2021

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