 "Ahead of FPO, Vi raises Rs 5,400 cr, anchor book subscribed over 2x")
[This report has been updated]
Ahead of the launch of its Rs 18,000 crore follow-on public offer (FPO), Vodafone Idea (Vi) has allotted 4.9 billion shares to anchor investors at Rs 11 apiece — the top end of the price band — raising Rs 5,400 crore. The demand in the anchor investor category was two-three times more than the shares on offer, revealed people involved with India’s largest FPO.
A total of 74 schemes received allotments in the anchor category, with US-based GQG Partners subscribing to Rs 1,347 crore worth of shares, nearly a quarter of the available shares in the anchor category. Other large subscribers included Fidelity, Stichting, Redwheel, Motilal Oswal Mutual Fund, and Troo Capital.
Vi’s anchor book allotment was the third-largest — after Paytm and Life Insurance Corporation raised Rs 8,325 crore and Rs 5,627 crore, respectively, in their anchor rounds. Of the total anchor book, 16.2 per cent was allotted to five domestic mutual funds — HDFC, Motilal Oswal, Quant, Baroda BNP, and 360One — through 11 schemes.
A banker handling the share sale said: “The higher demand will spill over onto the main book.”
He further said that GQG is likely to invest more in the main book. Initial reports suggested that GQG was eyeing an investment of over Rs 4,000 crore in the Vodafone Idea FPO.
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The allottees were decided after a meeting of the ‘capital raising committee’ of the telecom company late on Tuesday. An anchor allotment is made a day before the FPO opens. As Wednesday was a market holiday, the offer will open for subscription on Thursday and close on Monday. Axis Capital, Jefferies India, and SBI Capital are the investment banks managing the share sale.
Market players said that the encouraging demand seen in the anchor category would boost sentiment ahead of the cash-strapped telco’s FPO. The company is also struggling with the loss of subscribers to stronger rivals Reliance Jio Infocomm and Bharti Airtel.
Vodafone Idea has set the FPO price band at Rs 10-11 per share. The stock ended at Rs 12.9 on Tuesday, down 1.9 per cent from its previous close. The upper end of the price band is nearly 15 per cent below the current stock price.
Of the Rs 18,000 crore expected to be raised, Vodafone Idea plans to spend Rs 12,750 crore on expanding the capacity of its existing and new 4G sites and setting up new 5G sites. About Rs 2,175 crore will be spent on deferred payments for spectrum to the Department of Telecommunications and the goods and services department.
The FPO will also increase the company’s paid-up capital to nearly Rs 65,000 crore and the number of outstanding equity shares to 65,000 million — both the highest among listed firms in the country. This could lead to a long-term overhang on its share price.
After the share sale, the promoter shareholding in Vodafone Idea, currently at 48.75 per cent, will drop to 36.87 per cent.
Some analysts feel that the fresh capital infusion via the offering will allow the company to improve subscriber retention. However, others doubt if Rs 18,000 crore will be sufficient, given the company’s accumulated losses of nearly Rs 1.4 trillion and the substantial capital needed to bridge the growing capability gap between the network of Vodafone Idea and those of its larger peers.
The mobile operator has consistently reported losses in the past eight years, with its net loss and cash loss in 2022-23 standing at Rs 29,371 crore and Rs 6,251 crore, respectively. Both these figures worsened on a year-on-year basis. By comparison, it reported a net loss of Rs 23,563 crore and a cash loss of Rs 6,681 crore during the April-December period of 2023-24.