Telecom major Bharti Airtel has said that it will raise ₹21,000 crore through the rights issue route.
About Bharti Airtel’s right issue
The price for the rights issue is ₹535 per share, which is 16% lower than Bharti Airtel’s closing stock price on August 30. For every 14 shares, existing shareholders of the telecom service provider can buy 1 share.
Interestingly, the company will raise 25% of the rights issue amount first and the remaining will be called over the horizon of 36 months. Further, the promoters will not only subscribe to their part of the rights issue but will also apply for unsubscribed shares, if necessary. To a certain extent, this reveals that the promoters are confident about the future prospects of the company.
It’s also important to note here that the company had raised ₹25,000 crore in May 2019 through rights issue, which was oversubscribed.
The funds can be used for
For 5G push
The telecom major can use the funds for 5G spectrum auction or even strengthening the existing infrastructure. It can also use it for aggressive 5G rollout.
Pay-off AGR dues
The company can also use these funds to pay-off a portion of its adjusted gross revenue (AGR) dues to the government.
Compete with rivals
Vodafone Idea’s customer-base is currently eroding, while the two big players—Reliance Jio and Bharti Airtel—are adding new customers. In such a scenario, Bharti Airtel can benefit from having a strong cash position.
Good to know
What is a rights issue?
A company announces a rights issue to raise additional funds from its existing shareholders. Through this route, a company usually sells additional shares to its shareholders at a discounted price. The funds raised through the rights issue are usually used by companies to expand their business or reduce debt.
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