Stock Tips: Veteran telecom company Bharti Airtel has announced to raise capital, which was shocking for the experts. According to experts, there is no special need to raise capital for the telecom company right now, so this decision is very shocking. According to experts, if Vodafone Idea users will shift to Airtel, raising capital for this is positive, but raising capital for buying a stake in Indus Towers can be negative. Analysts have retained their buy rating on Airtel.
On the other hand, the rating analysts of Ujjivan Small Finance Bank (Ujjivan SFB) have downgraded. Earlier this ‘Add’ was rated but now it has been ‘Hold’. Analysts downgraded its rating due to uncertainty over asset quality and appointment of new MD and CEO.
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Bharti Airtel- Buy
- Bharti Airtel has informed the exchange about its plans to raise capital. According to the information given to the exchange, the board will consider a plan to raise capital through equity, equity-linked and/or debt instruments on August 29, two days before the AGM (Annual General Meeting). However, it has not yet been decided how much capital is planned to be raised. The company’s standalone net debt/EBITDA was 3.7x in FY21, so the chances of raising debt capital are slim.
- According to analysts at brokerage firm Jefferies, the decision to raise capital is shocking as there are no huge repayment plans in the recent past, no plans to prepay spectrum liabilities, no prospects of 5G auctions, India And business in Africa is positive and management is comfortable with current leverage levels.
- If Vodafone Idea users shift to Airtel or Vodafone Idea acquires spectrum at a distressed valuation, then it will be positive if the company is planning to raise funds for this.
- In the last few years, Airtel has invested Rs 6,000 crore to buy 20 per cent stake in Warburg Pincus (Link)’s DTS business and 5 per cent in Indus Towers. In such a situation, analysts believe that if the company plans to raise capital to increase stake in Indus Towers, then it may prove to be negative due to the sluggish growth forecast.
- Bharti Airtel’s stock has lost 6 per cent in the last two months and has underperformed the Nifty by 30 per cent. However, considering the possibility of an increase in the market share, Jefferies has given it a buy rating and has given investment advice on the target price of Rs 685.
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Ujjivan Small Finance Bank (Ujjivan SFB)- Hold
- Samit Ghosh was elected as additional director on the board of Ujjivan SFB amid concerns raised at the senior management and board level and the recent resignation of MD and CEO Nitin Chugh. Apart from this, three other members have also been appointed in the board.
- The board has expressed concern about the asset quality and has set a target to improve the balance sheet in the second quarter of FY 2022.
- The immediate focus of the Board is to improve and manage the asset quality, strengthen the collection team, re-engineer the senior management team. In the new leadership, the bank has to prepare a roadmap for smooth transition and timely reverse the process of merger of Holco and Bank.
- Analysts at ICICI Securities have downgraded it due to heavy provisioning forecast in the second quarter of FY22 and uncertainty over the appointment of new MD and CEO.
- Earlier this stock’s rating was ‘Add’ which analysts at ICICI Securities have decided to downgrade to ‘Hold’.
- Analysts have reduced the target price from Rs 31 to Rs 20.