Airtel announces Rs 21,000 crore rights issue. Promoters underwrite it. Is it start of Airtel Version 2.0?

The issue is suitably timed given the current bullishness in the overall markets. Issue is also sweetly priced at Rs 535/ share – a 10% discount to the previous day’s closing price.

Other salient features of the issue include –

  • Rights will be offered in the ratio of 1:14
  • 25% of the amount will be payable on application and balance in two calls over next 36 months to be decided by the management.
  • Promoters hold 55.8% in the Company and they will contribute proportionately. They will also subscribe to any unsubscribed portion of the balance. This means more than Rs 11,500 crore will be contributed by the promoters, which is a significant contribution and bodes well for the overall investors’ comfort.

Why the fund raise?

With Jio’s onslaught over the Indian telecom industry, Indian telecoms in general have been bleeding over the last few years. Increasing the billing rates has been difficult and along with that money is needed for upcoming 5G rollout as well as AGR dues repayment.

Besides, companies also need to plan for an eventuality to serve Vodafone Idea’s (VIL) customers if VIL were to collapse.

Equity base also needs to be enhanced to provide overall comfort to the investors given high debt levels (Airtel’s debt is almost at Rs 1.6 lakh crore).

Factoring in everything, it was a much needed step.

However, it may not be adequate and in my personal view may just be a start.

Overall industry dynamics, I feel are just starting to stabilise –

  • Pricing war almost seems to be over. In fact gradually one can notice cautious price increases by all the players.
  • After raising money from marquee investors last year, Jio is being watched closely and would be expected to deliver. International listing may not be very far off.
  • Operationally Airtel seems to have seen the worst, has utilised last few years for consolidation and may just be getting ready for the next round of growth.

Above stabilisation along with India’s overall dynamics should excite large international investors to explore further investments and Airtel being one of the two significant players, should be a natural beneficiary.

I think this is the start of Airtel version 2.0 !

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