The company aims to use the capital for growth purposes going ahead, with the promoters giving explicit assurance of participating in the issue and mopping up any unsubscribed shares.
Shareholders will have the shares issued to their dematerialised account and will have the option to subscribe to the rights of those shares by paying the first tranche of Rs 133.75 per share before October 18, and the remaining Rs 401.25 in two tranches over the next 36 months.
On Tuesday, the Rights Entitlements of the company will start trading at pre-open session 9:00-9:15 pm and then will be traded on trade-for-trade basis in normal market hours. Brokerage firm Edelweiss Securities said the Rights Entitlements would likely list at intrinsic value (the difference between the closing price of Bharti Airtel’s stock on Monday and the price of the rights issue).
The listing premium or discount on the intrinsic value usually depends on the demand and supply for such instruments. A Rights Entitlement gives the owner of the shares credited to their demat account the option to sell those in the secondary market if they choose not to participate in the rights issue.
“Now in the opening hour, we can expect some pressure in RR (Rights Renunciation) Form as it’s a part of all the passive indices. Going by past experience (RIL issue), domestic managers will immediately exit the RR-Forms of Bharti Airtel,” said Abhilash Pagaria of Edelweiss Securities in a note.
Pagaria believes the opening hour selloff in the Bharti Airtel RE will provide a great buying opportunity for investors looking to get a piece of the Bharti Airtel story.
Even the existing holders can switch some holding from ordinary shares to partly-paid shares, he said. Pagaria, however, ruled out any exuberance of the kind seen in the Rights Entitlement of Reliance Industries last year.
The exuberance in RIL’s RE was triggered by domestic fund managers, who under-owned the RIL stock and saw the RE as a good option to match the stock’s weight in the headline indices to its weight in their portfolios. Analysts expect domestic fund managers to sell the rights issue shares of Bharti Airtel as they are already overweight on the counter.
“In an ideal scenario, on conservative basis, they (Bharti Airtel RE) should command a premium of Rs 30-55 over the intrinsic value,” Pagaria said.
The rights issue subscription period for Bharti Airtel’s issue will end on October 18 and shareholders will get their allotment of the partly-paid shares on October 26. The credit of the partly-paid shares will reflect in the demat accounts on October 27.
Edelweiss expects the partly-paid shares to list on October 28 or November 1.
