This significant move, marking the third-largest allotment to anchor investors in India's history, is a testament to the company's robust financial planning and its unwavering commitment to growth.
An anchor allotment, a crucial step in the process of a follow-on public offering (FPO), is made a day before the FPO opens. In this case, Vodafone Idea's Rs. 18,000 crore FPO, India's largest ever, will open for subscription on Thursday and close on Monday. The anchor allotment, which successfully raised a substantial amount of Rs. 5,400 crore, is a testament to the company's strategic financial planning and its commitment to growth. The FPO is being managed by Axis Capital, Jefferies India, and SBI Capital.
A total of 74 schemes received allotments in the anchor category, reflecting the diverse and robust investor base of Vodafone Idea. Notably, US-based GQG Partners subscribed to Rs. 1,347 crore worth of shares, nearly a quarter of the available shares in the anchor category. This significant participation from a global investor underscores the company's appeal in international markets. Other large subscribers included Fidelity, Stichting, Redwheel, Motilal Oswal Mutual Fund, and Troo Capital, further highlighting the company's ability to attract investments from a wide range of investors.
The company has allotted 16.2% of the total anchor book to five domestic mutual funds — HDFC, Motilal Oswal, Quant, Baroda BNP, and 360One — through 11 schemes.
The fresh capital infusion from the FPO is expected to bolster Vodafone Idea's financial position and improve its subscriber retention. It's worth noting that the company has been grappling with substantial capital needs and accumulated losses, which some analysts have raised as a concern. Over the past eight years, the mobile operator has consistently reported losses, with its net loss and cash loss in 2022-23 standing at Rs. 29,371 crore and Rs. 6,251 crore, respectively. These figures worsened on a year-on-year basis. By comparison, it reported a net loss of Rs. 23,563 crore and a cash loss of Rs. 6,681 crore during the April-December period of 2023-24.
Vodafone Idea has set the FPO price band at Rs. 10-11 per share, a strategic move aimed at balancing the company's valuation and the potential returns for investors. The Vodafone Idea stock ended at Rs. 12.9 on Tuesday, down 1.9% from its previous close. The upper end of the price band is nearly 15% below the current stock price, which could be seen as a conservative valuation. This pricing strategy could make the FPO more attractive to potential investors, potentially boosting the subscription rate and the overall success of the offering.
Of the Rs. 18,000 crore expected to be raised, Vodafone Idea has ambitious plans. It intends to invest Rs. 12,750 crore in expanding the capacity of its existing and new 4G sites and setting up new 5G sites. This forward-looking strategy is a clear indication of the company's determination to seize growth opportunities in the dynamic telecom market.
The FPO, which is expected to increase the company's paid-up capital to nearly Rs. 65,000 crore and the number of outstanding equity shares to 65,000 million, could potentially lead to a long-term overhang in its share price. This is a significant development, as it would make Vodafone Idea's paid-up capital and the number of outstanding equity shares the highest among listed firms in the country. After the FPO, the promoter shareholding in Vodafone Idea, currently at 48.75%, will drop to 36.87%. This change in shareholding structure could have implications for the company's share price in the long run.
Market players said the encouraging demand seen in the anchor category would boost sentiment ahead of the beleaguered telecom player's FPO. The company needs help with the loss of subscribers to stronger rivals Reliance Jio Infocomm and Bharti Airtel.
Copyright © News India © 2024