Vodafone Idea shares jump 10% after update on Rs 18,000 crore FPO; what's ahead?

Vodafone Idea shares jump 10% after update on Rs 18,000 crore FPO; what’s ahead?

Vodafone Idea Ltd saw its shares rallying over 10 per cent in Tuesday’s trade after the board members of telecom operator determined and approved the offer price of Rs 11 per share for its recently concluded Rs 18,000 crore follow on public offer (FPO). The FPO, which ran from April 18 to April 22, is seen bridging Vodafone Idea’s network coverage gap and enhancing its competitiveness. The telecom operator approved the offer price for anchor investor at Rs 11 per shares, as per a BSE filing.

“We request you to take the above on record and the same be treated as compliance under the applicable provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended. All capitalized terms referred to herein shall have the meaning as ascribed to them in the Prospectus unless defined otherwise,” Vodafone Idea said.

Following the development, the Vodafone Idea stock rose 10.24 per cent to hit a high of Rs 14.21 on BSE. Despite this, the scrip is down 19 per cent year-to-date.

India’s biggest FPO was reportedly subscribed by institutional investors such as GQG, Capital Group, and Fidelity Investments. The quota for qualified institutional buyers (QIBs) was subscribed 1.23 times, while that of non-institutional investor (NII) portion and the retail segment were subscribed 1.93 times and 42 per cent, respectively.

“Vi has experienced a decline of approximately 19 per cent in market share post-merger, attributed to inadequate network investment. Efforts are underway to rectify this by bridging the network coverage gap in 4G, aiming to mitigate some market share losses,” Ventura Securities said.

IIFL Securities, which has a target price of Rs 14 on Vodafone Idea, said the equity infusion could be followed by a debt raising, which may result in Rs 45,000 crore funding. This, it said, 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 ARPU from Rs 145 in Q3FY24 to Rs 241 in FY27,” it said.

With a sharp reduction in bank debt, Vodafone Idea would be able to secure further funding from banks and that the fundraise should improve its near-term fortunes, Kotak said in a recent note.

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