Should you buy Bharti Airtel post Rs 21,000 rights issue?

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Brokerages retained their bullish view on Bharti Airtel after the company’s board approved raising up to Rs 21,000 crore by way of rights issue. The scrip traded 1.02% higher at Rs 600 at around 12.30 pm on Monday, while the benchmark BSE Sensex advanced nearly 1% to 56,639.

The board, which met to consider the company’s capital raising plans, cleared rights issue price of Rs 535 per fully paid-up equity share, including a premium of Rs 530 per equity share. In a BSE filing, Airtel said that the “board approved the issuance of equity shares of the face value of Rs 5 each of the company on rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of up to Rs 21,000 crores”.

The rights entitlement ratio entails 1 equity share for every 14 equity shares held by eligible shareholders as on the record date.

Global brokerage firm CLSA maintained a ‘Buy’ call on Bharti Airtel with a target price of Rs 780. “Rights issue came on unexpected lines. Bharti Airtel rights issue and call options create headroom,” CLSA said.

In a separate report, Emkay Global Financial Services said that Bharti Airtel remains their preferred bet in the telecom space given superior and consistent execution across business segments and benefits accruing in the India wireless business with the weakening of Vodafone Idea.

“Having said that, the tariff hike is of supreme importance for strong free cash flow generation. Sustained re-rating of Bharti hinges on tariff hike, strict control over capex and capital allocation. Further, looking at the past FII participation trends also matters for better returns. Past trends (10 years) also reveal that the sector provides more trading opportunities than structural shareholder returns,” the brokerage said. Emkay has fixed a target price of Rs 730 for Bharti Airtel.