Bharti Airtel to raise Rs.21,000 crore via Rights Issue
The board of Bharti Airtel has approved the issue of rights shares to the tune of Rs.21,000 crore or about $2.83 billion. The company has announced that the rights will be priced at Rs.535 per share, which represents a discount of 9.78% to the closing price of the stock on 27-Aug. Normally, companies issue rights to existing shareholders at an attractive discount to make the subscription attractive.
Bharti Airtel is yet to announce the record date for the rights issue because the rights offer will only be made to shareholders whose names appear in the register of shareholders as on the record date. Normally, 2 trading days prior to the record date is considered the last cum-rights date and the day after that, the stock starts trading ex-rights.
The board has already spelt out terms of payment for the rights issue. eligible shareholders will only have to pay 25% of the amount at the time of application of rights and the balance 75% will be payable in two instalments within a period of 36 months. The instalment dates are yet to be decided. Existing shareholders will get 1 rights share for every 14 shares held.
This will be the single biggest rights issue in India after the Rs.53,000 crore rights issue by Reliance Industries in 2020, which also entailed paying the rights subscription in 3 instalments. That means, Bharti shares will also trade simultaneously under partly-paid and fully-paid categories.
Promoters will fully subscribe to their quota of rights and will also take up any rights not taken up by other shareholders. Bharti Airtel needs a continuous supply of funds to take on competition from Reliance Jio as well as to pay the AGR dues of Rs.20,000 crore that is still pending to the Department of Telecommunications towards AGR charges. Rights proceeds will be used to bridge the funding gap.
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