 "FILE PHOTO: A man walks across the LED display board showing the logo of Vodafone-Idea at the India Mobile Congress 2022, at Pragati Maidan, in New Delhi, India, October 3, 2022. REUTERS/Anushree Fadnavis/File Photo")
Shares of Vodafone Idea Ltd (VIL) slumped 9 per cent on Wednesday to end at Rs 13.1. The sharp drop comes a day ahead of the listing of 16.36 billion new equity shares issued in the Rs 18,000-crore follow-on public offering (FPO). Following the strong demand in the FPO, VIL has decided to issue the new shares at Rs 11 apiece, the upper-end of the price band. The latest close is still 19 per cent above the FPO price.
“Some existing investors of VIL cashed out on concerns that the new shares will exit downward pressure. Also, some FPO applicants too were able to sell shares as the new shares will get credited later tonight which can be used for delivery,” said an executive with a brokerage.
VIL’s FPO, the country’s largest-ever, saw nearly seven times more demand than shares on offer, with majority of the bids coming from foreign portfolio investors.
Following the FPO, the telecom company’s paid-up capital has increased to Rs 66,483 crore and outstanding equity shares to around 66.5 billion, both highest among domestically listed firms.
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Nuvama Institutional Equities (NIE) said on Tuesday: “VIL’s big problem, even after its FPO and tariff hikes, is its stretched balance sheet laden with liabilities of Rs 2.5 trillion.” It said the company will 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.
“We turn positive on the telecom sector, and reckon a combination of tariff hikes and government support shall boost the operators’ financials and returns profiles. We view Bharti [Airtel, another telecom company] as the best way to play this event in the sector, and raise its target price; reiterate ‘BUY’. We are also raising VIL’s TP (target price), and upgrading it to ‘HOLD’ – as we see the company finally becoming a ‘going concern’. We are biding our time for more concrete steps to play out and VI becoming an investible idea,” said NIE.
The brokerage has a price target of Rs 14 on VIL.
