Bharti Airtel's Rights Entitlements Hit Upper Circuit On First Trading Day

Bharti Airtel Ltd.’s rights entitlements hit the 40% upper circuit on the first day of subscription.

The rights entitlements opened at Rs 191 on Tuesday, 30.7% higher than the Rs 146.1 intrinsic value, the difference between the carrier’s share price of Rs 681.1 apiece on Oct. 4 and the rights price of Rs 535, according to Edelweiss Alternative Research. They hit a low of Rs 151 before hitting the upper circuit at Rs 204.5.

Trading in the telecom operator’s rights entitlements will remain open till Oct. 14. Its rights issue to mop up Rs 21,000 crore, which opened for subscription on Oct. 5, will close on Oct. 21.

The rights entitlements are expected to trade in the range of Rs 133.5 apiece, which is the amount per share to be paid on application, and Rs 279.6 apiece, the application amount plus the intrinsic value. But the actual price may vary according to demand and supply.

“REs shall not be mistaken for ordinary shares of the concerned company,” the BSE notification on Bharti Airtel’s rights entitlement dated Oct. 1 said. “The purchase of REs only gives the right to the trading members to participate in the ongoing Rights Issue of the concerned company by making an application with requisite application money or renounce the REs before the issue closes.”

REs shall be settled on a T+2 rolling settlement basis. The trades shall be settled on a trade-for-trade basis. REs which are neither subscribed by making an application with requisite application money nor renounced on or before the issue closing date shall lapse and shall be extinguished after the issue closing date, the BSE notice said.

The company had approved fundraising through the rights issue at its board meeting on Aug. 29. Shares will be offered at Rs 535 a share. Record date for determining eligible shareholders was Sept. 28 and the entitlement ratio is one share for every 14 stocks held.

The terms of payment include 25% of the price (Rs 133.75 a share) that is to be paid at the time of application. The balance of 75% (Rs 401.25) will be paid in two or more calls that will be decided by the board. The maximum time frame for the payment is 36 months.

Singapore Telecom, a promoter group entity of Bharti Airtel, announced last month its decision to subscribe to its full rights entitlement for total consideration of Rs 2,940 crore (about $405 million) over up to three years.