Bharti Airtel Rights Entitlement: Estimates

By Research Desk
about 3 years ago

Bharti Airtel Right Entitlement (RE) is the right to apply for Rights Issue shares, at Rs. 535 per share, which is likely to list on 5th Oct and trade till 19th Oct. We recommend subscription to rights, which can be made by purchase of RE (if not holding Bharti Airtel share), max till 19th Oct. Based on 1:14 rights ratio and current market price of Rs. 695, RE may trade at around Rs. 200. This is based on Present market price of share minus Rights issue price of Rs. 535 per share. In this, an amount of Rs. 40, being interst saving element, as given in note below, will get added. 

After the rights issue period closes on 21st Oct 21, and rights shares get allotted, the partly paid shares will be listed. 25% of rights issue price or Rs. 133.75 per share is to be paid on application, and balance 75% or Rs. 401.25 per share in 2 tranches, at a later date, within the next 3 years.

This acquisition of shares via rights issue can be considered as taking a Future position over 18 months, as F&O also presently has 18% margin on open exposure. Hence, a lot of buying interest may be seen in RE of Rights.

Partly paid (PP) shares may trade at around Rs. 335:


Amount in Rs.

CMP of Bharti Airtel  on Ex Rights... (A)

             695 / share

Add: Interest element on unpaid amount of Rs. 400 per share, for 18 months @ 7% per annum ... (B)


Less: Amount unpaid on Rights shares Application ... (C)


Estimated price of PP share (A-B-C)

Rs. 335 / share

The difference between the CMP and PP share is approx the Net present value of balance call money of Rs. 401.25 (discounted for an average of 18 months at 7% p.a.) being Rs. 41 per share


Lot of buying interest in RE may be seen, as share is likely to rule firm, post XR as well, while more gain in PP share may be seen, by the time, those shares get listed.

This is not a Buy or Sell recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.

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