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Bharti Airtel Rights Issue Details: Should you Invest?

Bharti Airtel Rights Issue Details: Should you Invest?

Last updated: 06 Oct, 2021 | 02:43 pm

Bharti Airtel Rights Issue Details: Should you Invest?

About Bharti Airtel’s rights issue

  • The rights issue of Bharti Airtel has been priced at ₹535 per share, a discount of about 23% to current market price of Rs 690
  • Eligible shareholders can buy 1 share for every 14 shares held in Bharti Airtel
  • Investors will have to pay only 25% on the application now. This amounts to Rs 133.75 per equity share. The balance amount of Rs 401.25 will have to be paid in two tranches, the timeline for which will be announced later. 
  • Bharti Airtel is looking to raise Rs 21,000 crore through this rights issue. The company plans to utilise around Rs 16,000 crore for re/pre-payment of certain liabilities and the rest for general corporate purposes. The company had fixed the record date as 28th September for this Rights Issue. 
  • Bharti Airtel has said that the promoter group will collectively subscribe to the full extent of their aggregate rights entitlement. In addition, they will also subscribe to any unsubscribed shares in the issue.
  • The issue will remain open between October 5th and October 21st, 2021. 

How to participate in the rights issue?

  • Netbanking: Eligible investors can go to their bank account and apply for rights, similar to application in an IPO (there will be an option in the bank portal). They must enter the number of shares that they wish to apply for. Your account will be blocked corresponding to the amount needed to buy these shares. 
  • Investros can also apply to the rights issue through the RTA website at Karvy and directly pay for their application from their bank account using the RTA’s payment gateway. Link:Margin Trading Facility - MTF

A few FAQs for eligible investors

Is it necessary to apply for all eligible shares?

No. In case you are eligible to invest for 10 shares in the rights issue, you can choose to apply for only 5 shares, and renounce 5 shares. 

In case you do not want to apply for the rights, you can sell these Rights Entitlement (RE) in the LIVE market from your holdings. You will find this under Bharti Airtel-RE in your broker’s trading portal. Bharti Airtel’s Rights Entitlement closed at Rs 207 on BSE this afternoon. 

Can I apply for more shares than I’m eligible for?

Yes, you can. As a lot of eligible investors may wish to not exercise their rights to the full extent, you can apply for more than your eligibility. 

Bharti Airtel Rights Issue: INDmoney Analysis

Bharti Airtel RE is trading at a 35% premium to its intrinsic value (the difference between Airtel’s share price and the Rights issue price of Rs 535). Here’s what investors can do: 

  • Given such a high premium, investors who are looking for a short term profit can sell their Rights Entitlement and book gains. 
  • Once they receive the proceeds of the RE, they can ‘Buy’ the stock directly, instead of participating in the Rights Issue. This way the effective price will come down to Rs 483, (current price of Rs 690 less RE proceeds of Rs 207). This is lesser than the Rights Issue price of Rs 535.
  • Even though the investor has to pay up only Rs 133.75 and the balance over the next 3 years, selling the RE today turns out to be a better option (after considering the interest costs). 
  • Shareholders who don’t wish to subscribe to the rights issue can sell their REs till 14, October 2021.
  • In case eligible investors don’t sell the Rights Entitlement, nor apply for eligible shares in the Rights Issue, they will lose out. Hence, it is recommended that they either sell the RE’s at the ongoing price of Rs 207 or at least apply for the rights issue by paying the first installment of Rs 133.75.
  • Bharti Airtel shares closed Wednesday’s session at Rs 691.40 on BSE.
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