The Bharti stock closed Friday’s session at Rs 593.95. The Street anticipates the dilution of about 7% could be an overhang on Bharti’s stock price.
Bharti Airtel will raise up to Rs 21,000 crore through a rights share offering, the telecom operator said on Sunday after it board okayed the issue at Rs 535 apiece, including a premium of Rs 530 per share. The shares will be issued in the ratio of 1 for every 14 held. The promoter and promoter group will not just subscribe to shares they are entitled to but also pick up any unsubscribed shares.
The Bharti stock closed Friday’s session at Rs 593.95. The Street anticipates the dilution of about 7% could be an overhang on Bharti’s stock price. They cite the 30% underperformance to the Nifty in the two months following the 2.8% stake sale by the promoters in May last year. The Bharti stock has under-performed the Sensex in the last six months and hugely over the past year gaining just 13.5% to the Sensex’s 42%.
Analysts at Jefferies wrote the announcement came as a surprise since there are no near-term chunky repayments coming up and it is unlikely that Bharti would be looking to prepay its spectrum liabilities to the govt. “A capital raise to enhance capacity in anticipation of large market share shifts from VIL could be seen positively, however any stake bought in Indus Towers may be seen negatively,” they noted.
Moreover, they pointed to the lack of visibility just yet on 5G auctions as also the fact that both the Indian and African operations are free-cash-flow positive. “In the post results call three weeks ago, the management had expressed that they are comfortable with current leverage levels,” the analysts observed. Bharti’s standalone net debt/ebitda was at 3.7x in FY21.
Bharti Airtel’s capital comprises 549.2 crore outstanding shares. The additional shares issued by way of rights shares will be 39.2 crore taking the total to 588.43 crore shares. Subscribers to the right issue will need to pay 25% on application and the remainder in two more additional calls within an overall time-horizon of 36 months.