Bharti Airtel planning fund raising via rights issue

Bharti Airtel planning fund raising via rights issue

Shares of telecom provider Bharti Airtel rose nearly 2% on Monday on the National Stock Exchange reacting to the company’s announcement of a rights issue.
Airtel’s board on Sunday approved raising up to Rs 21,000 crore by way of rights issue at Rs 535 per share.
Although the timelines are not mentioned, around 25% will be paid upfront and the rest will be called as per requirement over the next 36 months. It should be noted that this is the third fundraising round in the last three years after it raised a cumulatively Rs 42,000 crore in FY20 rights issue, qualified institutional placements and foreign currency convertible bonds.

The proposed rights issue at Rs 535 per share, which is 1:14 ratio, implies a 7% equity dilution and is a mere 10% discount to its current market price, with alimited incentive for existing holders to subscribe if the stock falls.
What could also bother investors is the cause for this fundraising, which has not been disclosed.

Bharti Airtel’s last couple of fundraises were carried out in the backdrop of intense competition in the market and at a period of high leverage. However, this capital raise is surprising as the management in its last few calls stated that its leverage and liquidity position is comfortable and self-sustainable, with healthy free cash flow generation in all verticals, thus indicating no additional capital requirement.
The unexpected capital raise may cause a negative reaction in the short term.

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