This plan from Bharti Airtel shows they want to have enough cash in the bank to invest in its networks to increase capacity and, most importantly, to pay off its debts with ease.
On August 29, Bharti Airtel said that its Board of Directors had approved issuing equity shares for the face value of Rs 5 each to raise capital to Rs 21,000 crore.
The firm confirmed that the Board approved setting the right issue price at 535 per fully paid-up equity share, including a premium of Rs 530 per equity share.
Over the time horizon of 36 months, the firm said around 25% on application and balance in two more additional calls might be decided by the Board and from time to time based on the company’s requirement.
The airtel said that every 14 equity shares held by an individual are eligible to buy one equity share.
The telco board also constituted a ‘special committee of directors to decide the issue’s other terms and conditions, including the issue period and the record date.
Earlier on August 25, MoneyControl reported that Bharti Airtel is choosing other options for raising funds. On August 29.
The firm had said that it would explore the possibilities to raise money via equity or debt instruments.
Following the Sebi Regulations, 2015, the announcement was made when Airtel, along with rival Vodafone-Idea (Vi), is reeling under financial challenges by different fronts.
In the recent order in which the supreme court dismissed the application asking for recalculation of dues.
It was an extensive setback on the issue related to Telcom companies’ adjusted gross revenue (AGR) related dues.
Should you buy shares now?
Bharti Airtel board approved up to ₹21,000-crore fundraising via a rights issue. In Monday’s early deals, Bharti Airtel shares traded on BSE over 1% higher to ₹600 apiece.
Telecom service provider, Bharti Airtel’s Board approved raising to ₹21,000 crores by way of the rights issue for ₹535 per share amid plans to expand its network and prepare for the launch of 5G services.
On Monday, deals on the BSE Bharti Airtel shares traded over 1% higher than the previous.
Airtel said, “Board has approved the issuance of equity shares for a face value of ₹ five each. To eligible equity shareholders of the company as on the record date.”
Shareholders will be eligible to buy one share for every 14 held in Bharti Airtel Telcom Firm.
Timelines are not yet mentioned, but as discussed, 25% will be paid upfront, and the rest will be called over the next 36 months as per requirement.
Bharti founder-chairman Sunil Mittal and others in the founder group will also participate in the share purchase.
Brokerage firm Motilal Oswal said that capital raise is a surprising act as the management in their last few calls stated that its leverage and liquidity position is comfortable and self-sustainable, with healthy FCF generation in all verticals.
Thus, there is no additional capital requirement.
“The unexpected capital raise move by Airtel may cause a negative reaction in the short term, but we see good earnings and growth opportunity over the coming 12 months,” it said in the note.
The brokerage has a ‘Buy rating with a target price of ₹720 per share on large scale opportunities in the next 2-4 quarters, and it sees the Bharti Airtel is in a well-placed position to gain.
What are big Investors and Brokers saying?
Head of Research at Swastika Investment, Santosh Meena, said that the market is waiting for more clarity because there is a concern related to management intent.
Despite a solid growth outlook, it always sees supply pressure in 600-620 areas. Airtel has called to investor scheduled today at 2:30 PM.
“610 is an immediate and critical resistance that coincides with its 20-DMA. It has to cross and sustain above 610 level to show any strength for a new move towards an all-time high; otherwise, there is a risk of profit booking where 570-550 will be the critical demand zone,” Meena added.
On Saturday, brokerage emkay global said that the airtel stock had outperformed the Sensex in the last 2 to 3 years.
After tariff hikes and amid the possibility of the duopolistic market due to substantial weakening of the financial position of Vodafone Idea.
