 "India's biggest FPO in the bag: Birla says Vi to make 'smart turnaround'")
Vodafone Idea, which has successfully raised Rs 18,000 crore in India’s largest follow-on public offering (FPO), will make a “smart turnaround” as the country requires three strong wireless telephony networks, Aditya Birla Group Chairman Kumar Mangalam Birla said on Thursday.
The company’s stock rose more than 5 per cent after new shares issued in the FPO began trading on the bourses on Thursday. Though the stock plunged as much as 10 per cent in initial trade, it rebounded nearly 17 per cent from the day’s low to end at Rs 13.8. A total of 10.6 billion shares, worth Rs 14,320 crore, were traded on the National Stock Exchange (NSE) and BSE.
This, according to market players, was the first time that the volume of shares traded had exceeded 10 billion for a company in a single day.
This, according to market players, was the first time that the volume of shares traded had exceeded 10 billion for a company in a single day.
At the listing ceremony, Birla said: “The Aditya Birla group has remained committed to this sector for over two and a half decades now. Along with our partner, the Vodafone group, we have invested around Rs 1,70,000 crore in the Indian telecom industry. Before this FPO, more than 75 per cent of the Rs 30,000 crore the company raised in the past 5 years came from the two promoter groups. The latest fundraise has also seen an investment of over Rs 2,000 crore from the Aditya Birla group. This continued commitment stems from our belief in the promise of India’s digital story.”
“On the back of this fundraise and with continued support from banks, Vodafone Idea will stage a smart turnaround,” Birla asserted. He added that the proceeds were earmarked for a significant capital expenditure cycle. This growth capex would pave the way for the company’s network and technological upgrade across key markets, which would, in turn, enhance operational efficiencies and lead to better performance. “The cycle of investment will trigger the cycle of growth.”
More From This Section
After the FPO — which garnered nearly seven times more demand than shares on offer — Vodafone Idea’s paid-up capital has increased to Rs 66,483 crore and the number of outstanding equity shares to around 66.5 billion, both highest among domestically listed firms. The Union government’s stake in the telecom company has come down from 32.19 per cent to 24 per cent. While Vodafone Plc’s stake is 23 per cent, the ABG group’s holding after dilution stands at 18 per cent.
The over 1.1 million FPO applicants saw the value of their investment surging 25 per cent on Thursday. Analysts said the stock rose on follow-up demand from investors, amid hopes of a turnaround in fortunes of the debt-laden telecom operator, but believed further upsides might be capped.
While the bulk of the bids in the offering came from foreign funds like GQG Partners, Fidelity, UBS and Morgan Stanley, the retail portion was just about fully subscribed.
Calling the successful conclusion of the FPO a turning point for the telecom industry, Birla said: “The fact that so many marquee investors participated in this equity issuance is a testament to the government’s Digital India vision. The emphatic oversubscription demonstrates the tremendous potential of India’s digital story and Vodafone Idea’s role in it. The robust engagement from both foreign and domestic investors is heartening. Notably, the full subscription of the retail portion is truly commendable, given the sheer scale of the offer.”
Vodafone Idea’s journey to this point has been shaped significantly by the government's path-breaking reform package, Birla said. “The policy environment today encourages investment, innovation, and competition. India’s digital economy is booming, and robust telecom networks are crucial to support this growth. A nation of 1.4 billion people deserves three private telecom players.”
However, the successful IPO, may not be the end of troubles for Vodafone Idea. As Nuvama Institutional Equities had said earlier this week, the company’s “big problem, even after its FPO and tariff hikes, is its stretched balance sheet laden with liabilities of Rs 2.5 trillion”. The Aditya Birla group firm would “need some waiver to meet its debt obligations and, even if it manages that, it still has to compete with established players with sound financials”.
The brokerage, which has a ‘hold’ rating on VIL with a price target of Rs 14, said: “We are biding our time for more concrete steps to play out and VIL becoming an investible idea.”