Brokerages turn bullish on this stock, here's why

Shares of Bharti Airtel rose 3 per cent to hit an intraday high of Rs 639.25 on BSE as brokerages maintained their bullish stance on the stock after its board approved raising up to Rs 21,000 crore through a rights issue.

The company's board of directors at its meeting comprehensively reviewed the industry scenario, business environment, financial/ business strategy of the company and approved the plan to raise further capital.

"Accordingly, the board approved the issuance of equity shares of face value of Rs 5/- each of the company on rights basis to eligible equity shareholders of the company as on the record date (to be notified later), of an issue size of upto Rs 21,000 crore," the telecom operator said in an exchange filing.

The rights issues will be priced at Rs 535 per fully paid-up equity share, while the rights entitlement ratio will be one equity share for every 14 equity shares held by eligible shareholders as on record date.

The stock opened 1.5 per cent higher at Rs 629.80 against the previous close of Rs 620.35 on BSE. It has gained 23.5 per cent in the last 12 months and has risen 25 per cent since the beginning of this year.

The stock has been gaining for the last 3 days and has risen 7.82 per cent in the same period. With a market capitalisation of Rs 3,49,018 crore, the shares stand higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Motilal Oswal has a 'Buy' call on the stock with a target price of Rs 720 per share. "The leverage position at 3x is comfortable for the normal business, but does not offer comfort to fuel growth through debt. The rightsissue would provide a war chest for future growth, and as it would be in tranches, it would be callable as per the requirement. The funds would not be used to acquire stake in Indus Tower or One Web," the brokerage house noted.

"We see a strong earnings growth opportunity over the next 12 months. We value BHARTI on an FY23E basis, assigning an EV/EBITDA of 11x to its India Mobile business and 5x to its Africa business, arriving at a SoTP-based target price of Rs 720," it added.

ICICI Direct has a 'Buy' call on the stock with a target price of Rs 720 per share. "The promoter's stake is likely to be stable as Bharti Telecom is debt-free. This move of expanding growth war chest (to capture incremental market share and 5G foray) without stretching leverage is positive, in our view. We remain constructive on Airtel ascribing it as one of our top picks. We maintain buy rating with unchanged DCF based target price of Rs 720. We also advise subscribing to the rights issue," the brokerage house said.

Dolat Capital expects Bharti to capitalize on alternate revenue streams viz. FTTH, enterprise, content, payment, healthcare, education etc either in partnership with other players that ride on the telco's infrastructure or by competing with them.

The research firm has a 'Buy' call on the stock with a target price of Rs 762 per share.