Shares of telecom provider Bharti Airtel Ltd rose nearly 2% on Monday on the National Stock Exchange reacting to the company's announcement of a rights issue. Airtel's board on Sunday approved raising up to ₹21,000 crore by way of rights issue at ₹535 per share.
Although the timelines are not mentioned, around 25% will be paid upfront and the rest will be called as per requirement over the next 36 months. It should be noted that this is the third fundraising round in the last three years after it raised a cumulatively ₹42000 crore in FY20 rights issue, qualified institutional placements and foreign currency convertible bonds.
Analysts say at ₹535 per share, which is 1:14 ratio, implies a 7% equity dilution and is a mere 10% discount to its current market price, with alimited incentive for existing holders to subscribe if the stock falls.
What could also bother investors is the cause for this fundraising, which has not been disclosed.
According to analysts at Motilal Oswal Financial Services Ltd, the last couple of fundraises were carried out in the backdrop of intense competition in the market and at a period of high leverage. However, 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 free cash flow generation in all verticals, thus indicating no additional capital requirement, they said in a report.
"Historically, the management has given a very clear capex outlook, with a yearly guidance. 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," added the Motilal Oswal report.
With Vodafone Idea struggling to survive, Bharti Airtel could continue to gain more subscribers leading to higher market share. Some analysts say, the company may use these funds for upcoming opportunities as the sector seems to be fast heading towards duopoly.
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Bharti Airtel stock in focus after its fundraise announcement via rights issue - Mint
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