Sunil Bharti Mittal-led telecom services provider Bharti Airtel’s qualified institutional investor (QIP) worth Rs.14,000 crore ($2 billion) at an indicative price is Rs.435 per share, will start receiving expressions of interest (EOIs) today.
The issue is at a 5.2% discount to its last closing price.
The last date to receive the application form, along with the payment of subscription money is January 14.
The funds will be used to pay Bharti Airtel’s dues to the Department of Telecommunication (DoT).
The dues were triggered by an adverse ruling by the Supreme Court that rejected the definition of adjusted gross revenue (AGR) proposed by telcos and excluded revenue from non-core telecom operations like rent, dividend, and interest income.
The DoT order forced Bharti Airtel to post a whopping Rs.23,045 crore loss in Q2 from a net profit of Rs 118 crore a year ago.
In addition to the above, Bharti Airtel will additionally raise Rs.7,000 crore ($1 billion) through the issue of foreign currency convertible bonds (FCCBs).
The latest share sale comes less than a year after Airtel raised Rs.25,000 crore through a rights issue in May 2019.
In the near future, Bharti Airtel will require resources as DoT prepares to hold the first spectrum auction for 5G airwaves by April.
DoT plans to put 8,300 megahertz of spectrum at a reserve price of ₹5.23 trillion under the hammer.
Of the 8,300MHz, 6,050MHz are allocated for 5G services.
Overall we believe that this QIP offered by Bharti Airtel is largely it’s an ongoing liability with DOT as cash flows have been hit badly due to severe competition from Reliance Jio and the large debt already present on its balance sheet
Going ahead this issue will further dilute the equity by 6 to 7% leading to poor earnings growth ahead. Hence while in the short term it may look good longer-term investors are unlike to generate any big wealth from the stock here on as competition still remains very high and is unlikely to estate the stock in the near term
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