Shares of Bharti Airtel advanced 2 percent in the early deals on March 10, after the telecom major announced that it has entered into an agreement to acquire a 9 percent equity stake in Avaada CleanTN Project Private Limited, a special purpose vehicle formed for the purpose of owning and operating the Captive Power Plant.
At 11:00 am, the stock was trading at Rs 702.05 apiece on the NSE, up 1.53 percent, while the benchmark Nifty50 climbed 371.10 points or 2.27 percent at 16,716.45. Bharti Airtel touched an intraday high of Rs 707.30 and an intraday low of Rs 695.60.
The country’s second-largest telecom company has acquired 7,885,150 equity shares in Avaada for Rs 7.88 crore, it said in the stock exchange filing.
Earlier, Bharti Airtel shareholders approved the issue of preferential shares to Google for its about Rs 7,500 crore investment in the company to buy a 1.28 percent stake. A special resolution to approve Google’s investment was approved by over 99 percent of the shareholders, according to the voting result of an extraordinary general meeting (EGM).
Motilal Oswal has given a buy rating to the stock with a target price of Rs 910 apiece. The research and broking firm sees an upside of 29 percent from the current level.
Bharti Airtel’s Rs 2,500 crore investment to acquire Indus Tower stake is based on the precondition that the amount paid to Vodafone Plc shall be infused as fresh equity in VIL. Subsequently, this amount will be used by VIL to clear its outstanding dues towards Indus. Indus, in turn, should use the amount to pay annual dividends. Assuming Rs 20 per share dividend, Bharti Airtel should receive Rs 2500 crore (including a 4.7% stake). The transaction,
thus, is cash flow neutral for Bharti, and its existing FCF generation and deleveraging trajectory may not be disturbed, it said.
Motilal Oswal believes Bharti Airtel may look to acquire an additional 5% share, possibly to increase its stake beyond 50% and become the majority shareholder. This will safeguard Bharti’s holding in Indus, which offers it critical infrastructure. With the onset of 5G and the possibility of increased CAPEX, Bharti may require improvement in capital allocation, it added.