Bharti Airtel share price gained 5 percent in the afternoon session on August 31. The share price has been on the rise since the company's board gave the go-ahead to raise up to Rs 21,000 crore through a rights issue.
The board approved the issuance of equity shares of face value of Rs 5 each on rights basis to eligible shareholders as on the record date (to be notified later), of an issue size of up to Rs 21,000 crore," the company said in its release.
The board approved the issue price at Rs 535 per fully paid-up share, including a premium of Rs 530.
A day after telecom major Bharti Airtel announced that its Board of Directors has approved to raise capital up to Rs 21,000 crore via a rights issue, Sunil Bharti Mittal, while addressing the media, said the company's debt is at an 'extraordinary' level and that he believes "there is an opportunity to accelerate growth. We needed access to growth capital."
The chairman of the telco also estimated the ARPU (average revenue per user) to trend towards Rs 200 in this financial year and said it was time to raise tariffs. Airtel's ARPU rose Rs 146 from Rs 145 in the March quarter. The current ARPU, as stated in Q1 results, is Rs 146. He also clarified that there were no plans to sell more promoter stakes as that would be 'inappropriate'.
Bharti Airtel's fund raising is expected to strengthen its competitive positioning in the market and provide the telco with the necessary ammunition for aggressive 5G rollout, analysts said, according to a PTI report.
The capital raising announcement, though unexpected and surprising, would enable Airtel to enhance its market share and provides it wherewithal to make faster investment in a scenario India moves to a two-player market earlier than expected, some analysts felt.
Global research firm CLSA has maintained its buy rating on the stock with target at Rs 780 per share. "Sunil Bharti Mittal sees a need for ARPU to reach Rs 200 in 2022 against our forecast of Rs 199 by FY24," the brokerage firm said, according to a CNBC-TV18 report.
"The company believes 5G will be a reality in H2FY23 at least in top cities and is hopeful of spectrum pricing being lowered. We see upside potential to our forecasts for the company with valuation compelling at current levels," it added.
Citi also has a buy call on the stock with target at Rs 760 per share. "Commitment of promoters to the Rights Issue is positive and should inspire confidence. Staggered nature of capital raise indicates gradual deployment of funds," the research firm said.
"Key to stock performance will hinge on strong FCF generation. FCF generation contingent on market share gains and tariff hikes," it added.
Domestic research firm ICICI Direct has a buy on the stock with target of Rs 720 per share with a time frame of 12 months. "The company expects 5G spectrum auction in early FY23 and rollout from second half with rollout initially in large cities and expansion into smaller markets in later years. Furthermore, 5G device ecosystem has improved with increased proportion of 5G device shipment and reasonable prices," the brokerage firm said.
"The promoters stake is likely to be stable as Bharti Telecom is debt free. This move of expanding growth war chest (to capture incremental market share and 5G foray) without stretching leverage is positive, in our view. We remain constructive on Airtel ascribing it as one of our top picks. We maintain buy rating with unchanged DCF based target price of Rs 720. We also advise subscribing to the rights issue," it added.
The stock was trading at Rs 649.40, up Rs 29.05, or 4.68 percent. It has touched a 52-week high of Rs 651.90. It has touched an intraday high of Rs 651.90 and an intraday low of Rs 625.50.
The scrip was trading with volumes of 1,010,532 shares, compared to its five day average of 536,731 shares, an increase of 88.28 percent.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.