Vodafone Idea’s Rs 18,000 crore Follow-on Public Offer (FPO) opens for subscription today, Thursday, April 18, and will close on Monday, April 22.
The FPO price band has been set between Rs 10 to Rs 11 per share, with a minimum bid limit of 1,298 equity shares and subsequent bids in multiples thereof.
Market experts have expressed optimism about the FPO, with all signs pointing towards a bullish outlook. The total offer size amounts to Rs 18,000 crore, consisting of fresh equity shares.
According to the red herring prospectus (RHP), the proceeds from the new issue will primarily finance the expansion of the company’s network infrastructure, including the establishment of new 4G and 5G sites, with an allocation of Rs 12,750 crore.
Additionally, funds will be allocated for the payment of deferred spectrum payments to the Department of Telecommunications (DoT) and general corporate purposes.
As per the shareholding pattern for the quarter ending in March (Q4FY24), the government holds a 32.19% stake in Vodafone Idea, making it the largest stakeholder. This stake was acquired in 2022 when Vodafone Idea converted its unpaid debt to the government into a 36% stake.
In today’s trading session, Vodafone Idea’s share price gained to intra-day high of Rs 12.50 apiece on the NSE, marking more than 3% increase from Tuesday’s close.
Meanwhile, the Grey Market Premium (GMP) for Vodafone Idea FPO stands at Rs 1.50. Investment experts anticipate the listing price to be around Rs 12.5, suggesting a potential gain of approximately 13.64%, as reported by investorgain.com.
Experts on Vodafone Idea FPO
“As per my readings Vodafone Idea (Vi) is aiming for a total fund raise of Rs 45,000 crore through a combination of equity and debt. Rs. 18000 crore would be through FPO (follow-on public) and Rs 2000 crore via preferential shares to one of its promoter entities (at Rs 14.87 apiece, up 40 percent from the FPO floor price.) and rest we believe Vi is in discussions with banks to secure debt funding,” said Prashanth Tapse Sr VP Research analyst at Mehta equities
Tapse also adds that If FPO goes fully subscribed it would provide huge financial relief to the company and enable it to invest and expand faster in its 4G infrastructure and setting up 5G infra as well which is the need of the hour when compared to peers. The money which is coming in would help the company to overcome the hurdles, roll out 5g and improve its operational performance which can lead to better growth possibility in the competitive landscape. If the plan gets executed well, there can be possible return to a growth trajectory but it will still require years before it can come back with intense competitive environment.
Commenting from an investor’s perspective Tapse adds that this fund raising would lead to huge equity dilution to its shareholders. Considering near term gloomy risk of continuously losing money as well as subscriber attrition due to the lack of expansion of 4G/ services to peers like Jio and Airtel, we are not so keen advice our conservative investors to invest money in follow-on public offer while only risky investors can consider parking funds for India’s telecom growth story in the long term.