Vodafone Idea’s ₹18,000-crore follow-on public offer (FPO) has been fully subscribed on the final day of the bidding process, marking a resurgence in investor confidence for the debt-ridden telecom operator.
The FPO, the largest ever in India’s financial history, surpassing Yes Bank’s 2020 record of ₹15,000 cxrore, attracted significant interest from institutional and individual investors alike, with an overall subscription of 5.04 times.
Subscription Details
- The quota reserved for qualified institutional bidders (QIBs) was oversubscribed 13.89 times, signalling strong demand from large investors.
- Non-institutional investors showed high interest as well, subscribing 3.40 times their allocated portion.
- However, the retail investors’ portion was subscribed 0.68 times, indicating more cautious participation from individual investors.
The pricing of the FPO, offering shares in the range of ₹10-11 per equity share, strategically positioned the offering below the prevailing market price, a move aimed at attracting investor participation.
Implications for Shareholders
Analysts believe that the FPO will provide Vodafone Idea with much-needed capital to address its operational challenges and pursue growth opportunities.
The funds are expected to boost the company’s competitiveness in India’s fierce telecom market, where it currently trails behind industry leaders like Reliance Jio and Bharti Airtel.
Usage of the Proceeds
Vodafone Idea plans to allocate a substantial portion of the funds towards expanding network infrastructure, including the rollout of 5G technology and strengthening of 4G services –
- Approximately ₹12,750 crore will be spent on expanding 4G and 5G networks, including setting up new sites and upgrading existing ones.
- An additional ₹2,175.31 crore will go towards deferred spectrum payments.
- The remaining funds will be used for general corporate purposes such as working capital requirements.
CEO Akshaya Moondra emphasized that the capital raised would be key in accelerating the company’s growth, particularly in addressing coverage gaps and improving market presence.
Challenges and Opportunities for Vodafone
Despite the positive response to the FPO, analysts caution that Vodafone Idea still faces significant challenges such as subscriber attrition and debt restructuring. The company’s ability to execute its strategic initiatives, including network expansion and debt management, will be critical in determining its long-term viability and competitiveness.
Investor Sentiment
While some analysts remain cautious about Vodafone Idea’s short-term prospects, others view the FPO as an opportunity for high-risk investors seeking exposure to the telecom sector.
Marwadi Financial Services, for one, has assigned a “Subscribe” rating to the FPO, citing the company’s strong brand presence and reasonable valuation relative to its peers.
Market Response
- Vodafone Idea’s share price witnessed a slight decline (5.04%) during the FPO period, closing at ₹12.25 on 22 April.
- The grey market premium (GMP) for Vodafone Idea shares hovered around ₹0.50-₹1.50, signalling a potential listing pop of 4-5%.
