Vodafone's Rs 18,000 crore FPO opens: Should you subscribe or skip?

Vodafone’s Rs 18,000 crore FPO opens: Should you subscribe or skip?

The follow-on public offering (FPO) of Vodafone Idea opened for public issue on Thursday aiming to raise Rs 18,000 crore.Â

Vodafone Idea managed to secure Rs 5,400 crore from 74 anchor investors on Wednesday. Among these investors were the likes of GQG Partners, The Master Trust Bank of Japan, UBS, and others.

The issue is entirely a fresh issue of 1,636.36 crore shares with subscription closing on Monday, April 22. Allotment is expected to be finalised on Tuesday, April 23.Â

The price range for the FPO is fixed between Rs 10 to Rs 11 per share. The minimum lot size to apply is 1298 shares.

Should you subscribe?

A report from Swastika Investmart Ltd cautions potential investors about the challenges facing Vodafone Idea.

It said that the company has been witnessing a consistent decline in its user base, unlike its competitors.Â

“A potential financial crunch looms in 2026 when significant spectrum and AGR (Adjusted Gross Revenue) dues of up to $4 billion become payable. Despite the attractive 15-17% discount offered through the FPO, VI’s path to a near-term revival seems uncertain. Therefore, investors should carefully consider these factors, particularly VI’s financial health and future liabilities, before participating in the FPO,” said Swastika Investmart Ltd.Â

GMP for Vodafone Idea FPO

The last Grey Market Premium (GMP) for VI FPO as of April 18th, stands at Rs 1.70. Considering the price band of Rs 11.00, the estimated listing price for VI FPO is Rs 12.70. The expected percentage gain/loss per share is projected at 15.45%.

Vodafone Idea FPO details

The capital raised through the FPO is earmarked for expanding the company’s network infrastructure, including setting up new 5G sites and bolstering the existing 4G network. A significant portion of the proceeds, Rs 12,750 crore, will be allocated for purchasing equipment for network expansion. Out of this, Rs 5,720 crore is planned for establishing the 5G network.

By the fiscal year 2025, Vodafone Idea aims to set up 10,000 new 5G sites with an expenditure of Rs 2,600 crore. The target for the fiscal year 2026 is to establish 12,000 additional 5G sites, spending Rs 3,120 crore. Additionally, a portion of the proceeds will be directed towards reducing debt, potentially improving the company’s financial position.

During a recent press conference, Vodafone Idea revealed its plan to cover subscribers contributing to 40% of its revenue with 5G services within the next 24-30 months.

The company intends to initiate orders for 5G network equipment once funding is secured, with the rollout of 5G services expected in select areas within 6-9 months of the offering.

As of December 31, 2023, Vodafone Idea boasted over 223.0 million subscribers and held a subscriber market share of 19.3%.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)