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Bharti Airtel Rights Entitlement | Shall I buy? | CA Rachana Ranade - YouTube
Channel: CA Rachana Phadke Ranade
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Hey folks CA Rachana Ranade here and I welcome you聽
all to another interesting video which is about聽聽
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Bharati Airtel Rights Issue. So what are we聽
going to learn in this one? First of all, we are聽聽
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going to talk about what is a rights issue versus聽
what's a right entitlement. We are also going to聽聽
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talk about what are the various options which are聽
available to a shareholder of Bharati Airtel, we聽聽
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are also going to talk about how to calculate the聽
intrinsic value of an RE and we are finally going聽聽
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to talk about a very very important question which聽
is, is there any opportunity which is available聽聽
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for a shareholder to earn some extra profit if聽
I apply for RE or if I invest in right shares.
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Next 3 minutes at least 100 percent attention聽
because you're going to get to know a lot聽聽
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of concepts and in the most simplified manner聽
right. So here we have Mr. Chandu, who is he?聽聽
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He is a very smart investor of Bharati Airtel聽
okay, he is very much aware about what is聽聽
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happening in Bharati retail right now, he knows聽
that ARP was increasing, average revenue per user聽聽
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is increasing. He knows that airtel is conducting聽
some 5g trials and that's why you know there are聽聽
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great chances that Q2 results are coming few聽
quarter results are going to be really nice. So,聽聽
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he is expecting something from Bharati Airtel.聽
What is he expecting? That he gets rewarded,聽聽
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either by way of what? Dividend, okay so by聽
way of dividend or by way of maybe bonus shares聽聽
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or maybe buy the of rights shares. Now you might聽
be wondering what are these right shares? I will聽聽
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give you in a very simple understanding as to what聽
are right shares, you know about right shares?聽聽
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no? pay attention! Okay, first, right shares聽
are given only to existing shareholders. Sit聽聽
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sit, okay understand. Right shares are聽
given only to existing shareholders, who are聽聽
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existing shareholders, whose name appears in the聽
shareholders register only as on record date okay.聽聽
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So existing shareholders, understood. Second one,聽
only in a specific ratio, Which specific ratio,聽聽
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that company will announce, it could be like聽
let's say one is to five or one is to ten,聽聽
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example one is to five means you'll聽
get one right shares for every聽聽
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five shares held okay. One is to ten will be one聽
right share for every 10 shares held. Simple okay,聽聽
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third very important. You will be eligible to get聽
the right shares at a discounted price, discount聽聽
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as compared to the market price. Assume that the聽
share is trading at 700, then you'll be eligible聽聽
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to get the share at let's say 550 or at 600, in聽
simple words at a discount to market price okay.聽聽
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And last one is you will get these right聽
shares as a right, not an obligation means,聽聽
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it's not mandatory to apply for these right聽
shares, so if you are a shareholder of Bharati聽聽
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Airtel, are you going to apply? Yes. Okay what聽
about you Chandu? no? You're not going to apply,聽聽
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oh my god! Now you can imagine assume current聽
market price is 700 and assume Bharati Airtel聽聽
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is going to issue these right shares at 535,聽
then his discount that he would have gotten,聽聽
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165 rupees benefit that he would have gotten,聽
that's going to get vanished, he's not going to聽聽
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get eligible to you know take benefit of the聽
discount, oh my god! Now to solve this issue聽聽
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SEBI, in the year 2020, somewhere around January聽
2020 came up with the concept of RE, what is RE?聽聽
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RE is Rights Entitlement. In simple words聽
RE is nothing but like a tradable token.聽聽
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That's how it looks in your demat account聽
okay, in simple words this tradable token,聽聽
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what you can do Chandu, if you don't want the聽
right shares you, can give this you can trade this聽聽
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token with someone else and that some person that聽
investor will give you money. So in simple words聽聽
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Chandu, even if he doesn't want to apply for聽
right shares will be in a position to get money聽聽
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by selling his RE. Now few more points about聽
what are the exact details about Bharati shares,聽聽
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RE, rights issue, record date, ratio everything聽
coming up in the next part of the video.聽聽
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So now let's understand what is the聽
quantum of Bharati airtel's rights issue,聽聽
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they have come up with a rights issue of 39.3聽
crore equity shares and which amounts to twenty聽聽
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one thousand crore rupees, my god! That's such a聽
huge amount! Now the question is what is Bharati聽聽
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Airtel going to do with this big amount? If you聽
want to know the answer to this question, you'll聽聽
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have to go to my Instagram account, you'll have聽
to check a reel that I have posted today itself,聽聽
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wherein I have told you the reason for this聽
rights issue and also for your convenience I have聽聽
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pasted the link of that reel in the pinned聽
comment, so don't forget to check that out.聽聽
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Now let's come to the important issue details of聽
Bharati Airtel Rights Issue. What is the record聽聽
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date, record date is 28th of September 2021 means聽
what, if you buy the shares of Bharati Airtel聽聽
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today, are you going to be eligible to get right聽
shares? answer is no, why? What was the record聽聽
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date? It was 20th of September. The construction聽
people right next door are mad because they are聽聽
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not going to get the right shares even if they聽
buy today so they are drilling with few more聽聽
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force so bear with the noise, anyways. What is聽
the ratio of right shares, it is 1:14 means what,聽聽
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if you have 14 shares in your demat account聽
you'll be entitled to get one right shares,聽聽
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simple? Okay next one is issue price, issue聽
price is 535. If you remember I told you that聽聽
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you will get right shares generally at a price聽
which is discount to the current market price,聽聽
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that's the right shares' price. Very very very聽
important issue period and RE trading period,聽聽
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have a look at this issue period for聽
rights is 5th of October to October 21st,聽聽
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in simple words I will tell you my own example,聽
do I have Bharati Airtel return shares? yes. Did聽聽
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I have it as on record date? yes, don't ask me how聽
much okay. So, do I have REs in my demat account聽聽
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right now, yes. Till what date can I apply for聽
right shares? what will be the last date before聽聽
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which I can apply for the right shares? That will聽
be 21st of October, okay; but wait, assume that I聽聽
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would have been in the Chandu category and assume聽
that I don't want to apply for right shares,聽聽
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I want to sell off my RE, what is the important聽
date for me? That will be 5th of October to聽聽
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14th of October because RE trading window聽
ends on 14th of October, that's tomorrow,聽聽
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yes. So if you're not planning to apply for聽
right shares, be sure that you're selling it聽聽
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off before 14th of October that is tomorrow. What聽
is the tentative date of listing of right shares,聽聽
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it's first of November 2021 and the聽
last and very important point is that,聽聽
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if you were to apply for right shares, 535聽
rupees, do you have to pay entire amount,聽聽
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no. Company has said that on application you聽
are going to pay only one fourth that is 133.75聽聽
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and balance will be taken by the company in聽
two or more calls that balance money will be聽聽
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401 rupees 25 paise. I hope all the details about聽
Bharati shares rights issue are absolutely clear.
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Now let's try and understand very important part聽
as to how can you calculate the intrinsic value of聽聽
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the RE, Rights Entitlement. Now if you want to聽
go by a formula, first simple straight forward,聽聽
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let's try and go with the formula and if you聽
want you can try and understand the logic also,聽聽
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but first by formula what's the answer? Simple,聽
it says whatever is the latest traded price聽聽
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of, which day, of the previous day okay, so latest聽
traded price of previous day minus the rights聽聽
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price, whatever is the answer that is nothing but聽
your intrinsic value of the RE okay. First I am聽聽
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telling you the formula. What is the LTP of the聽
previous day? LTP of the previous day that is on聽聽
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4th of October was 681 rupees 40 paisa, if聽
you remember I told you that on 5th of October聽聽
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RE trading had started, remember, yes聽
what was the right price it was 535,聽聽
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so what is the intrinsic value, intrinsic value聽
will come to 146 rupees 40 paisa, means what?聽聽
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Ideally the RE, the token if you remember, if you聽
remember Chandu was not going to apply for right聽聽
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shares so he's going to sell the token. For what聽
price? He should have been able to sell the token,聽聽
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he should have been able to sell the token at聽
at least 146 rupees 40 paisa, but now you can聽聽
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imagine, if there is more and more demand for聽
this, then will the price of this RE increase?聽聽
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Yes, when this RE got actually listed on which聽
day? RE got listed on 5th of October 2021,聽聽
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any guesses at what price did it list? It listed聽
at 204 rupees, 95 paisa and it got locked at an聽聽
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upper circuit of 40 percent. Oh my god that's聽
such an amazing thing! So please understand聽聽
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that is there an upper circuit for RE as well,聽
answer is yes okay. So this is formula wise聽聽
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okay now in next max one minute I will try and聽
explain you the logic, if you can well and good,聽聽
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if not, it's okay that's how you calculate聽
the intrinsic value using a formula okay.聽聽
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Now assume that on 4th of October evening, I聽
am visualizing what will happen tomorrow okay,聽聽
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simple thing, assume that the current market price聽
remains same, for an example, 681 rupees 40 paisa,聽聽
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what will happen theoretically? bookishly what聽
will happen understand. I will go, I will buy聽聽
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the right share at what? 535. Am I entitled聽
to that, yes I will buy the right share at 535聽聽
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and I will sell it in the open market at what 681聽
rupees 40 paisa. What is the difference between聽聽
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these two? The difference between these two is聽
nothing but 146 rupees 40 paisa and that my friend聽聽
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is nothing but the intrinsic value of RE. So the聽
difference between the current market price of the聽聽
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actual share minus the right shares' price that is聽
the benefit is nothing but RE's intrinsic value.
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Now the million dollar question, is there still聽
any upside left for Bharati Airtel or not? I will聽聽
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tell you my simple calculation okay, tell me if聽
you agree with my calculation or not. Have a look聽聽
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at these figures. What is the issue price of the聽
right shares it's 5 35 okay, as I am shooting the聽聽
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video, 11th of October, market hours have closed聽
so today the closing price of RE was 204 rupees 20聽聽
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paisa okay. What is the CMP or the LTP of Bharati聽
Airtel main share? It is 690 rupees 85 paisa聽聽
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okay. One last time I am telling you 204.20,聽
690.85. Now tell me logically, theoretically,聽聽
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what is the theoretical price of Bharati聽
Airtel? Okay, what will be the theoretical聽聽
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price tell me, my rights price plus the聽
RE price, what is the right price,535.聽聽
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What is the RE price 204 rupees 20 paisa, so聽
add up these two figures and what will you聽聽
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get 739 rupees 20 paisa. In simple words聽
any person who is buying RE even today,聽聽
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he knows for sure that okay I am paying 204.20聽
plus I am ready to pay 535, means he expects聽聽
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that the price of Bharati Airtel will be above聽
that, at a later date correct. So he's expecting聽聽
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the price to go beyond 740 so what is the current聽
market price? As I am shooting the video at 690.85聽聽
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so this translates into a potential upside of聽
almost 7%, that's my mathematical calculation,聽聽
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let me know your thoughts about the聽
potential upside on Bharati Airtel.
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Now let's again understand an amazing concept of聽
how investing in a PP can fetch you more money聽聽
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than investing in the actual stock. PP, all right聽
you'll get to know it, first, again let's go back聽聽
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to our journey, first what happens, you can apply聽
for the RE or you can invest in RE. RE was what?聽聽
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Right Entitlement right. After you buy the RE then聽
you can buy the right shares. If you remember,聽聽
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you had to pay only 25% of the rights amount and聽
then I said that roughly around 1st of November,聽聽
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these ride shares will get listed on the stock聽
exchange right. Is this happening for the first聽聽
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time in history that partly paid shares are being聽
listed, no. First one was Reliance Industries, so聽聽
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today we have two Reliance Industry shares,聽
two means, two categories. One is Reliance聽聽
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Industry fully paid up share, one is Reliance聽
Industry partly paid up share okay. Similarly,聽聽
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we will have two Bharati Airtel different category聽
shares, one will Bhartiya Airtel fully paid option聽聽
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and one will be Bharati Airtel partly paid up聽
shares okay. Have a look at how reliance PP聽聽
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versus reliance shares have performed in the聽
past, I have taken four random dates okay. If聽聽
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you see carefully 8th October, 3rd September, 2聽
examples where the share went up and 13 September,聽聽
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25th June when the share went down. Two examples聽
have taken for each. If you see in absolute terms,聽聽
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Reliance Industries upside and Reliance PP upside聽
is almost the same 98.85, 97.25, 94 and 92.聽聽
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In absolute terms, in rupee terms upside is same聽
but percentage-wise you will see a difference.聽聽
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RIL has gone up by three point eight four聽
percent and RILPP has gone up by five point聽聽
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zero three percent. Why, if your math is good,聽
your denominator is small in case of PP, the聽聽
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amount itself is small in PP correct. Same logic聽
is going to apply for Bharati Airtel. So now,聽聽
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given a choice, am I going to trade in Bharati聽
Airtel PP shares or in Bharati Airtel shares?聽聽
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obviously I will trade in Bharati聽
Airtel PP. Why, denominator is small,聽聽
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that is why my magnification of percentage gains聽
will be higher. But what if the share falls? Have聽聽
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a look at this, when the shares fell on these two聽
dates, September and June dates that have taken,聽聽
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Reliance main share fell by 54 and 49 on two聽
different dates same dates PP fell by 48 and聽聽
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46 so percentage fall if you can see, PP fell by聽
a shared higher, PP fell at two point seven four聽聽
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vis-脿-vis two point two three and PP fell at three聽
point zero three vis-脿-vis two point two eight.聽聽
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So here the fall is also shade higher as compared聽
to the main share. So in simple words, if you're聽聽
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investing in PP, it's as good as high risk, high聽
return so if you feel that you want to do that聽聽
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category you can surely try of investing a small聽
amount, if you feel so, not a direct advice, then聽聽
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try and just check out the Bharati Airtel PP聽
share once it gets listed on the stock exchange.
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Well I have talked about this so聽
many times on our channel that聽聽
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yes Bharati Airtel is one of my favorite聽
shares, so am I going to add few more shares?聽聽
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yes! But not the main shares, now I am going to聽
plan and add PP shares and again try to study聽聽
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what is the correlation between Bharati Airtel PP聽
shares and Bharati Airtel main shares. If you got聽聽
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to learn something new from today's video,聽
don't forget to share it with your friends,聽聽
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also with your family members and if you're聽
still not subscribed to the channel please聽聽
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do that and even don't forget to hit that like聽
button. Till then, take care, Jai Hind and bye.
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