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Telecom major Bharti Airtel recently announced its mega 21,000 crore rights issue which will open on Tuesday. Airtel's board in August approved fundraising by way of rights issue, amid plans to expand its network and prepare for the launch of 5G services, at a price of 535 per share, including premium of 230.

“Among the three large telecom players, Bharti Airtel is our preferred bet. Airtel is expected to benefit from the weakening of VIL and has also taken a leadership stance w.r.t raising of tariffs, which will significantly affect profitability and cash flows," said Divam Sharma, Co-founder of Green Portfolio.

The rights issue is 535 per share, while the current price is 681 (as on 4th Oct). We believe this is a good opportunity and shareholders should subscribe to the rights issue from a long term perspective," Sharma recommended.

The telco's committee had approved September 28 as record date for the purpose of determining the eligible shareholders. The rights entitlement ratio entails one equity share for every 14 shares held by eligible shareholders as on the record date.

“The Right Entitlement (RE) was credited by October 4th into the Demat account of shareholders as on the record date (September 28th). Therefore, the RE would trade between 133.75 (tranche one subscription price) and 133.75 + 140.9 (premium of the current market price over the right issue price). The actual trading price will be dependent on the supply and demand," said Sonam Srivastava, Founder, Wright Research.

In the initial trading, domestic managers could be selling to offload the Bharti Airtel RE. "Still, any dip would be an excellent opportunity to buy the entitlement. Though, there might not be as much exuberance to buy the Airtel RE compared to the Reliance RE seen last year as fund houses are already overweight Bharti Airtel. But the scrip will trade at a premium given the strong Airtel growth story," she added.

The mega fundraising is bound to give more firepower to Airtel as the company takes on rivals in the fiercely-competitive Indian telecom market. Right issue is one way through which companies raise additional capital by offering to its existing shareholders to buy additional shares.

"The reforms and the additional capital raised via the rights issue shall put it up on the even keep to compete with Jio.. I recommend a buy on the right issue entitlement offer of the fundamentally strong Bharti Airtel," sugggested Srivastava.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

 

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