On Tuesday shares of Bharti Airtel were trading higher by 3 per cent at Rs 639.25 on the BSE in intra-day trade, up 8 per cent in the past two days after the telecom services provider on Sunday announced a fundraise of Rs 21,000 crore by way of the rights issue, primarily to fund its dues linked to adjusted gross revenue (AGR).
Further, according to a media report, Google is now in talks to make large investments in Airtel, thus boosting the stock further. The stock had hit a record high of Rs 644 on August 16, 2021. The Sunil Mittal-led firm has set the rights issue price of Rs 532 per share. Moreover, the rights entitlement ratio entails one equity share for every 14 equity shares held by eligible shareholders as on the record date. The company is yet to announce the ex-date, RE trading window, and allotment timelines for the rights offering.
As far as terms of payment of the issue price are concerned, 25 per cent is to be paid on application, balance in two more additional calls as may be decided by the board or committee of the board, based on the company’s requirements within an overall time horizon of 36 months. The promoter and promoter group of the company will collectively subscribe to the full extent of their aggregate rights entitlement along with any unsubscribed shares in the issue.
Meanwhile, indicating a target for a tariff hike, Mittal said the monthly ARPU (average revenue per user) should touch Rs 200 by the end of the current fiscal, projecting a 40 per cent rise from the current Rs 146 a month. Eventually, it should go up to Rs 300 to serve the customers well, he said.
According to a Times of India report, American internet giant Alphabet Inc’s Google could well be on its way to making “substantial investments, running into several thousands of crores of rupees”, into Bharti Airtel, Jio’s main rival. The BSE on Monday said the exchange has sought clarification from Bharti Airtel with respect to a news article appearing on timesofindia.indiatimes.com August 28, 2021, titled “Google now in talks to make large investments in Airtel”. The reply is awaited.
The brokerage firm Motilal Oswal Securities sees a strong earnings growth opportunity over the next 12 months. We value Bharti on an FY23E basis, assigning an EV/EBITDA of 11x to its India Mobile business and 5x to its Africa business, arriving at a SoTP-based target price of Rs 720.
However, this does not factor in the near-term triggers of Rs 90–100 billion EBITDA potential from the market consolidation, the brokerage clarified. This could drive double-digit RoCE and strong FCF generation. Bharti India Mobile’s around 500bp revenue market share driving around 40 per cent EBITDA growth in the last four quarters is a validation of this thesis, the brokerage firm said in a company update.