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Shares of Vodafone Idea were trading higher by 7 per cent at Rs 13.73 on the BSE in Tuesday’s intra-day trade, following the Rs 18,000 crore follow-on public offer (FPO) by telecom services provider attracting nearly Rs 90,000 crore in bids from investors. As much as two-thirds of the subscriptions came from overseas investors.
India’s largest FPO was subscribed 6.4 times. The qualified institutional buyer (QIB) portion of the share sale was bought 17.6 times, with 82 per cent of the bids coming from foreign portfolio investors (FPIs), the exchange data shows.
The high networth individual (HNI) portion of the offer garnered 4.13 times subscription. But the retail portion remained undersubscribed, garnering bids for just 92 per cent of shares on offer, data shows.
Market sources revealed that US-based GQG Partners, which had subscribed for shares worth Rs 1,347 crore in the anchor quota, applied for additional shares in the main book of the FPO, the Business Standard reported.
Meanwhile, Vodafone Idea today announced that the board determined and approved the offer price for FPO and anchor investor of Rs 11 per share.
The higher end of the price band i.e. Rs 11 is at a discount of around 26 per cent compared to recently approved preferential issue price to the promoter entity at Rs 14.87 and a discount of 17 per cent compared to Monday’s closing price of Rs 12.95.
The mega fundraise by Vodafone Idea, which comes close on the heels of a Rs 2,075 crore fund infusion by the Aditya Birla Group via a preferential share issue earlier this month, is significant as it enables Vodafone Idea to ready a war chest for the much-delayed 5G rollout and strengthening 4G services, according to analysts.
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Equity infusion in Vodafone Idea is likely to result in Rs 45,000 crore funding and should enable Vodafone Idea to narrow the 4G coverage/capacity gap with peers. This would not only arrest sub losses but also enable faster upgrade of 2G users to 4G. Direct tariff hikes, coupled with this upgrade, should drive Vodafone Idea’s average revenue per user (ARPU) from Rs 145 in Q3FY24 to Rs 241 in FY27, according to analysts at IIFL Securities.
“There is a decent chance of a favourable verdict in the AGR curative petition (we assume 50 per cent liability relief on Rs 70,000 crore AGR dues). If we assume Rs 35,000 crore government dues getting converted into equity, Jun-25 Target price comes to Rs 14/share. We also conduct a sensitivity analysis to multiple variables, which suggests limited downside risk from the FPO price,” the brokerage firm said in a telecom sector update.
