Bharti Airtel Rights Issue to Open on 05th October
Bharti airtel has just announced that its proposed Rs.21,000 crore rights issue will be open from 05-Oct to 21-Oct. The rights shares are being issued in the ratio of 1 right share for every 14 shared held i.e. in the ratio of 1:14. The record date for the rights eligibility determination has been fixed as 28-Sep. That means, to be eligible for the rights, investors must have purchased the shares latest by 24-Sep as the stock will go ex-rights from 27-Sep.
The rights shares price has been fixed at Rs.535 per share, which represents a 27.98% discount to the closing price of 24-Sep at Rs.742.90. Normally, companies tend to price the rights at a steep discount to incentivize the existing shareholders to apply for the rights issue. This is the second largest rights issue by an Indian company after the Rs.53,000 crore rights by Reliance Industries last year. In the Bharti rights, 25% is payable on application.
The rights entitlements (RE) will get credited to the demat accounts of eligible shareholders by 04-Oct so that the RE is available to the shareholders at the time of the rights opening. Investors have two choices. They can either use the REs to apply for the rights shares in the proportion eligible. Alternatively, they can just renounce the rights by selling the RE in the market as it will be traded. The RE is expected to list at a premium of 50-60%.
While 25% of the subscription amount will be payable by the rights subscribers on application, the balance will have to be paid in two tranches, which will be intimated to the shareholders separately. Rights represent an expansion of capital base so it is EPS dilutive. Hence the shareholders must either exercise the rights or renounce the rights by selling the RE. Letting the rights expire results in loss for the shareholders.
The rights entitlements will be traded on the stock exchange with an RE suffix and will be permitted to trade between 05-Oct and 18-Oct, during which period, traders choose to exercise or renounce the RE.
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