Bharti Airtel, on 29 August 2021, announced to raise funds via rights issuance.
Owing to ‘present economic conditions’ and a future business strategy, the telco is seeking to raise capital amounting to Rs. 21,000 crores.
The company is looking to raise funds to enter and sustain itself in the upcoming and competitive 5G market.
Below is a detailed account of this story.
What is a Rights Issue?
A rights issue is a type of share offer where existing shareholders are invited to buy more shares in the company. Thereby, existing stakeholders increase their stake in an organisation. Usually, this organisation offer these shares at a discount.
Key Highlights of the Bharti Airtel Rights Issue
- At the tail end of August, Bharti Airtel’s board has approved raising more funds via a rights issue.
- This telecom giant hopes to raise Rs. 21,000 crores from existing shareholders as announced on Sunday, 29 August.
- The Rights Issue is priced at Rs. 535 per share, having a face value of Rs. 5. Hence, it is earning the company a premium of Rs. 530.
- This news helped boost Bharti Airtel’s stock. It closed at 1.2% higher on the Bombay Stock Exchange on Friday.
Rights Issue Payment Mode
As implied by a rights issue, only existing shareholders may participate. Hence, the company has specified the payment modes and the terms.
The rights issue terms state the following mode of payment for existing shareholders of Bharti Airtel:
- Subscribers will need to pay 25% of the price on the application.
- Further, they can pay this balance in two additional calls, which the telecom company will settle later.
- The overall time duration for completion of this payment, however, will be 36 months.
- Bharti Airtel further stated that the Rights Entitlement Ratio would be 1:14. It implies that for 14 equity shares held by a shareholder, they are entitled to 1 equity share at present.
- A ‘Special Committee of Directors’ has been formed by the company, who will be responsible for deciding the terms and conditions of the rights issue.
Bharti Airtel and its equally troubled rival Vodafone-Idea, are doing just about everything to end the hefty lead pulled by Reliance Jio. However, while the company has gained 38.1 lakh in subscribers, it still received a blow when India’s Supreme Court recently dismissed its application to recalculate the AGR (adjusted gross revenue) dues.
Hence, this new rights issuance looks to push the company into commanding the 5G round of telecom racing.
Frequently Asked Questions
- How many subscribers does Bharti Airtel have?
Aitel’s prepaid plans had about 320 million subscribers in May 2021.
- At how much of a discount is this rights issuance?
Based on the closing stock price at BSE on Friday of Rs. 593.95, Bharti Airtel is offering rights issuance at 10% discount.
- How many subscribers did Bharti Airtel lose in 2021?
As per recent data, Bharti Airtel lost over 43 lakh subscribers in May 2021.