Vodafone Idea FPO: Issue subscribed nearly 49% a day before its close

The follow-on public offering (FPO) of Vodafone Idea (VIL) was 49 per cent subscribed on Friday, a day before its close.

The country’s largest-ever FPO garnered bids for nearly 6.2 billion shares, as against 12.6 billion on offer.

VIL has already allotted 4.9 billion shares to anchor investors, which includes GQG Partners Fidelity, Stichting, Redwheel, Motilal Oswal Mutual Fund and Troo Capital.

VIL plans to raise Rs 18000 crores from the FPO.

The qualified institutional buyer (QIB) portion of the FPO was subscribed 93 per cent, with almost nine out of 10 bids coming from foreign portfolio investors.

Meanwhile, the high net-worth individual (HNI) portion and retail portion of the FPO were subscribed 75 per cent and 13 per cent, respectively.

Investment bankers said most of the bids typically come on the last day of the issue. Meanwhile, shares of VIL slipped 2.12 per cent in secondary market trading to close at Rs 12.92. The stock, however, is still trading 17.5 per cent above the upper end of the FPO price band of Rs 11. Anchor investors were allotted shares at Rs 11. Market players said it is key that the stock holds around the current levels to encourage retail and HNI investors to participate in the FPO.

The FPO proceeds and the recent Rs 2,075-crore preferential issuance made to the promoter Aditya Birla group is expected to give a few more years of runway to the beleaguered telecom operator.

VIL plans to expand the existing and new 4G sites and set up new 5G sites with the FPO proceeds. It will spend about Rs 2,175 crore on deferred spectrum payments to the Department of Telecommunications.

Currently, Vodafone Idea is one of the most indebted and financially stressed companies in the country with a total outstanding debt of Rs 2.38 trillion and a negative net worth of Rs 74,359 crore at the end of March 2023.

The mobile operator has been consistently making losses for the last eight years and reported a net loss of Rs 29,371 crore and cash loss of Rs 6,251 crore in FY 2022-23.

Both these numbers had worsened on a year-on-year basis. In comparison, it reported a net loss of Rs 23,563 crore and a cash loss of Rs 6,681 crore during the April to December 2023 period (9MFY24).

Due to continuous losses incurred by its operations, Vodafone Idea has lagged behind its peers in fresh investment in network expansion and new technologies such as 5G.

For example, in the last three years, Vodafone Idea has cumulatively invested around Rs 48,000 crore on capex, less than half that of Bharti Airtel’s around Rs 1.12 trillion and one-fifth that of Reliance Jio’s Rs 2.5 trillion capex in the period.