Here's why Airtel shares are surging in trade

Here's why Airtel shares are surging in trade
BCCL
  • The stocks of Bharti Airtel rallied as much as 5% during the early trading hours on Thursday.
  • According to a CNBC Awaaz report, the telecom major received banking and investment regulators nod to increase FDI in the Airtel Payments Bank up to 74%.
  • The Department of Telecommunications (DoT) has announced that the next round of spectrum auctions will start on March 1.
Bharti Airtel's stocks rallied as much as 5% during the early trading hours on Thursday after the news reports surfaced that the company received a green light from banking and investment regulators to increase foreign direct investment (FDI) in its Payment Bank. This helped the stock breach past the ₹550 mark after nearly five months.

According to a CNBC Awaaz report, the telecom major received Reserve Bank of India (RBI) and Foreign Investment Promotion Board (FIPB) nod to increase FDI up to 74%.

Airtel did not immediately respond to Business Insider’s email seeking comment.

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Here's why Airtel shares are surging in trade

However, that may not be the entire reason. Peer Vodafone-Idea also gained as much as 3% after the Department of Telecommunications (DoT) has announced that the next round of spectrum auctions will start on March 1.

Here's why Airtel shares are surging in trade

RBI's approval would permit Airtel to raise more funds from other foreign investors for its payments bank.

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This would be beneficial for Bharti Airtel that needs to raise ₹13,000 crore for renewing the expiring spectrum. According to a Motilal Oswal report dated December 2020, “Airtel would require a capex of ₹ 130 billion at reserve price to renew their expiring spectrum. Furthermore, telcos would need to furnish additional capex to buy fresh spectrum.”

In India, the policy for foreign shareholding in the payments bank is the same as Foreign Direct Investment (FDI) policy for private sector banks.

RBI’s current FDI regulations

ParticularsPaid up capital %
FDI allowed74%
To be held by residents26%

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The company’s share price has recorded nearly a 27% jump since September 31.

What next?

According to Reliance Securities, Airtel has many positive triggers that are supporting the stock up move. “With record number of subscriber additions in 3Q, strong conversions from 2G to 4G and full impact of tariff hike in Dec’19 may result in strong 3QFY21 numbers for the company,” said Binod Modi,Head Strategy at Reliance Securities.

Even Axis Securities was bullish on its long term perspective and has included Airtel in its 2021 top picks. “(Airtel’s) subscriber additions in the last two months have surpassed Reliance Jio. With more price hikes expected in 2021, Bharti Airtel is set to be the biggest beneficiary,” according to Axis Securities.
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Bharti Airtel: The street view

BrokerageTarget Price
Motilal Oswal₹650
ICICI Securities₹700
CLSA₹715

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