Airtel's right entitlement trading off to flying start, close 24% higher

Trading in Bharti Airtel’s rights entitlement (RE) got off to a flying start on Tuesday. The REs closed at Rs 205, or about 24 per cent higher than their intrinsic value (current price minus rights issue price) of Rs 165. The REs should rise further as they ended at the day’s upper trading limit. About Rs 240 crore worth of REs changed hands on the NSE and the BSE. Shares of Bharti Airtel rose 2.7 per cent to close at Rs 699.5. Bharti Airtel has fixed rights issue price at Rs 535 per share. Investors are paying a premium for the REs as they will have to pay Rs 535 to subscribe to one share over a three-year period.

Bharti Airtel’s Rs 21,000-crore rights issue will remain open for subscription between October 5 and October 21. Eligible shareholders have got one RE for every 14 shares held of the company as on September 28. The RE trading window remains open till October 18. The special trading window will allow shareholders, who don’t wish to subscribe in the rights issue, sell their REs. Bharti Airtel is following rival Reliance Industries’ template for its right issue, whereby shareholders will have to only pay 25 per cent on application and balance in two more additional calls, which will be exercised over a three-year period.