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    Bharti Airtel shares fall after board finalises fundraising plans; brokerages maintain buy

    Bharti Airtel shares fall after board finalises fundraising plans; brokerages maintain buy

    Bharti Airtel shares fall after board finalises fundraising plans; brokerages maintain buy
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    By Pranati Deva   IST (Updated)

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    Bharti Airtel fell nearly 4 percent in early morning deals on Friday after the board, on Thursday, finalised plans to raise as much as Rs 32,000 crore.

    Shares of Bharti Airtel fell over 4 percent in early morning deals on Friday after the board finalised plans to raise as much as Rs 32,000 crore to reduce debt and financing costs to take on competitions. The stock declined as much as 4.3 percent intraday to Rs 304.40 per share on the BSE. At 10.14 AM, Bharti Airtel shares were trading at Rs 305, down 4.07 percent, while the benchmark Sensex was up 0.6 percent to 36,072.73.
    Bharti Airtel on Thursday said the fundraising plan will help the company meet capital expenditure to fight the telecom price war.
    Of the Rs 32,000 crore, Rs 25,000 crore will be raised by way of a rights issue and another Rs 7,000 crore will be mobilised through foreign currency perpetual bonds.
    "Raising capital will help address the rising leverage levels of the company. This should be seen as a 'War-chest' in battle for market share," Credit Suisse said in a note.
    According to CLSA, capital raising will lower the company's net debt by 30 percent, if the proceeds are used for deleveraging, meanwhile, the equity issuance, will also strengthen the balance sheet.
    In a notice to bourses, Bharti said that the board has approved the issue of rights at a price of Rs 220 per share. This represents a 31.13 percent discount to Thursday’s closing price of Rs 319.45 on the NSE.
    As per Citi, the ex-rights price should be at Rs 295 per share.
    The company will issue 1.14 billion shares, increasing its equity base by over 22% to 5.13 billion equity shares. The rights entitlement ratio has been pegged at 19 shares for every 67 held, the press release added.
    "Total number of shares outstanding would increase by 28 percent, implying 22% earnings per share (EPS) dilution. High discount should raise probability of the rights issue being well subscribed," Citi Brokerage said.
    "Given the high promoter ownership, issue requires Singtel and Mittals to contribute $1.4 billion and $1 billion, respectively. Overall, commitment from promoters should be seen positively," Credit Suisse added.
    CLSA retains 'buy' rating with a target of Rs 410 per share. Credit Suisse, on the other hand, maintains its 'neutral' call with a target of Rs 320 per share. Meanwhile, Citi has a 'buy' call on the stock with a target of Rs 390 per share.
    The company posted a nearly 72 percent decline in quarterly profit in January due to continuing pricing pressure. It was Bharti’s 11th straight profit decline on a year-on-year basis, reeling from the impact of a price war triggered by the entry of Reliance Jio, owned by Reliance Industries' Mukesh Ambani.
    Bharti Airtel has a total debt of Rs 1.06 lakh crore as of December 31, 2018.
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