Airtel share price jumps over 4%, board to consider fundraising via preferential share issue; should you buy?

Airtel share price rose 4.2% on Tuesday to touch an intraday high of Rs 720.15 on the BSE. The stock has rallied nearly 6% in a month.

Airtel share price rose 4.2% on Tuesday to touch an intraday high of Rs 720.15 on BSE (File Photo PTI)

Bharti Airtel share price surged over 4% on Tuesday, a day after the telco said its board will consider raising funds via a preferential share issue to investors other than its promoter group. The issuance of shares will apply to non-promoters, according to the regulatory filing. This means that the promoter stake in the telco will dilute after the potential issue. Airtel share price rose 4.2% today to touch an intraday high of Rs 720.15 on the Bombay Stock Exchange (BSE). The stock has rallied nearly 6% in a month, and over 25% in the last one year”.

“A meeting of the board of directors of the company is scheduled to be held on Friday, January 28, 2022, to, inter-alia, consider and evaluate the proposal for issuance of equity shares through preferential issue (other than to promoter/promoter group), subject to all such regulatory/statutory approvals as may be required, including the approval of shareholders of the company,” the company said in a regulatory filing.

Currently, the Mittal family and SingTel (Airtel’s promoter group) hold 55.93% of the telecom major, while the rest is held by the public. The Mittal family directly and indirectly owns around 24.13% stake, and SingTel holds 31.72%, per the shareholding information. The latest fundraise plans has raised speculations of a possible stake sale in Airtel to a strategic global investor as part of the company’s digital asset monetisation plans.

Jefferies: BUY
Target price: Rs 925

“Bharti Airtel’s announcement to consider an equity issuance on a preferential basis has come as a surprise as there is no immediate need for capital, in our view. An issuance to usher in a strategic investor that boosts its enterprise/digital offerings will be seen positively; however, any large acquisitions will be viewed negatively,” said Jefferies in a note. The recent tariff hikes should help the company deliver 20% YoY growth in consolidated revenues in FY23 – its highest in a decade, it added.

“Given the strong growth outlook, we maintain our positive view on the stock, and see any related pullbacks as a buying opportunity,” the international brokerage further said. While the potential capital raise will be a near-term overhang, Jefferies has maintained its ‘Buy’ rating on the telecom stock with a target price of Rs 925 apiece.

Proficient Equities: BUY-Rs 715
SL – Rs 662 | Target- Rs 783 |Target 2- Rs 863

“Airtel share price was up more than 4% today considering the telco’s plan to raise funds via a preferential share issue. A meeting will be held on Friday, Jan 28 2022, to evaluate the proposal for the issuance of equity shares. Current promoter holdings are as follows Mittal Family -24.13%, Singtel-31.72%, rest by the public. Although, the move is slightly doubtful as earlier there was a rights issue of Rs 21,000 crore and now this. The company aims to get in 5G technologies as auctions will be held this year. The telecom space is very competitive and capital intensive and such steps are required to gain market share,” said Manoj Dalmia, Founder and Director-Proficient Equities Ltd.

Airtel share price may touch Rs 1,050 in a year

Ravi Singhal, Vice Chairman, GCL Securities is bullish on the stock. He told Financial Express Online that the stock looks great, especially since many problems of the telecom company have been solved. While there are some issues that are yet to be resolved, Singhal believes that the stock may rally, especially after the 5G rollout. “It can even touch Rs 888 in 6 months and Rs 1,050 in one year,” he added.

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