Bharti Airtel share price jumps after mega rights issue announced; should you buy, sell, hold?

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August 30, 2021 1:28 PM

Bharti Airtel share price gained over 2.5 per cent to Rs Rs 609.25 apiece intraday on BSE, after the telecom giant said it will raise up to Rs 21,000 crore by way of rights issue.

Bharti Airtel, Bharti Airtel rights issueAmidst the IPO frenzy, now the mega rights issue announced by Bharti Airtel has led to a decent up move in its stock price. Image: Reuters

Bharti Airtel share price gained over 2.5 per cent to Rs Rs 609.25 apiece intraday on BSE, after the telecom giant said it will raise up to Rs 21,000 crore by way of rights issue. The rights issue will be at Rs 535 per share, at a 1:14 ratio, implying a 7 per cent equity dilution. The issue price is at a 10 per cent discount to its current level. The promoters and promoter group will subscribe to shares they are entitled to, and will also pick up any unsubscribed shares.

Earlier, Bharti Airtel share price hit a record high of Rs 644 apiece on 18 August 2021, while a low of Rs 394 last year in October. In traded volume terms, 6.79 lakh shares have exchanged hands on BSE, while 2.27 crore have traded on NSE, so far in the trade.

Analysts at Motilal Oswal Financial Services said that the proactive capital raise could be partly justified as it ensures Bharti is well funded for targeting any large scale opportunity in the ongoing market consolidation, competing with deep pocketed peer Reliance Jio, and creating war chest for 5G technology upgrade. “The gradual 36 month issuance indicates that there may not be any significant immediate requirement,” analysts said. The brokerage firm has given a ‘buy’ rating with a target price of Rs 720, a rally of 21 per cent.

Emkay Global Financial Services analysts favor Bharti Airtel in the telecom space given superior and consistent execution across business segments and benefits accruing in the India wireless business with the weakening of Vodafone Idea (VIL). Sustained re-rating of Bharti hinges on tariff hike, strict control over capex and capital allocation. Further, looking at the past FII participation trends also matters for better returns. The brokerage firm has given ‘buy’ rating to the stock with a target price of rs 730, an upside of 23 per cent.

Amidst the IPO frenzy, now the mega rights issue announced by Bharti Airtel has led to a decent up move in its stock price, said an analyst. “With almost a duopoly market and the ability to sustain despite competitive pricing, the rights issue should be subscribed by the existing investors. Technically, a daily closing above 612 should lead to higher targets of 640 & 730 in the near term. 585 remains strong support,” Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, told Financial Express Online.

Bharti Airtel’s capital raising may have a negative impact in the short term, since it is unexpected as they have mentioned that their leverage and liquidity situation is stable, but company has strategically beaten JIO, their biggest rival, and has been able to attract a greater number of subscribers as compared to their rivals, said an analyst. “Bharti Airtel is also going aggressive in making an ecosystem like Airtel Xstream fiber for their subscribers by giving lucrative offers for faster internet. We believe that in the long run Bharti Airtel is going to do well and we recommend that investors should hold the stock for gains in the long term,” Ashis Biswas, Head of Technical Research at CapitalVia Global Research, told Financial Express Online.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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