Home Tax News Vodafone Idea to launch Rs 18,000-cr FPO at Rs 10-11 price band on Thursday

Vodafone Idea to launch Rs 18,000-cr FPO at Rs 10-11 price band on Thursday

Vodafone Idea to launch Rs 18,000-cr FPO at Rs 10-11 price band on Thursday

Vodafone Idea (VIL) will launch an Rs 18,000-crore follow-on public offering (FPO) next week as the beleaguered telecom service provider looks to shore up its balance sheet to defend its turf against stronger rivals Reliance Jio Infocomm and Bharti Airtel. If successful, it will be the country’s largest-ever FPO after Yes Bank’s Rs 15,000-crore share sale in July 2020. In February 2023, the Rs 20,000-crore FPO by Adani Enterprises was cancelled—despite garnering full subscription—amid the storm created by the US-based short seller Hindenburg Research.

VIL’s FPO opens for subscription on 18 April and closes on 22 April. The Birla-group firm will start the roadshows for the share sale on Monday. A Reuters report, quoting unnamed sources, said US-based GQG Partners is planning to invest about Rs 4,200 crore in the FPO and SBI Mutual Fund between Rs 1,700 crore and Rs 2,500 crore. Investment bankers handling the share sale told Business Standard that they expect the share sale to generate more demand than shares on offer given the attractive pricing.

VIL has set the price band for the FPO at Rs 10-11 per share. After disclosing the pricing, shares of VIL fell as much as 5.8 per cent to Rs 12.2. The stock later recovered to end at Rs 13.2, with a gain of 1.54 per cent on its previous day’s close. The lower end of the FPO price band is 24 per cent lower than the last close and 32 per cent discount to the recently approved Rs 2,075-crore preferential issue to the promoter Aditya Birla group.

In February, VIL’s board had approved an equity fundraise of Rs 20,000 crore and a total of Rs 45,000 crore, through a mix of equity and debt.

The fundraise will provide financial relief to the company and allow it to make additional investments in its network.

Currently, Vodafone Idea is one of the most indebted and financially stressed companies in the country with a total outstanding debt of Rs 2.38 trillion and a negative net worth of Rs 74,359 crore at the end of March 2023.

The mobile operator has been consistently making losses for the last eight years and reported a net loss of Rs 29,371 crore and a cash loss of Rs 6,251 crore in FY 2022-23. Both these numbers had worsened on a year-on-year basis. In comparison, it reported a net loss of Rs 23,563 crore and a cash loss of Rs 6,681 crore during the April to December 2023 period (9MFY24).

Thanks to continuous losses incurred by its operations, Vodafone Idea has lagged behind its peers in fresh investment in network expansion and new technologies such as 5G. For example, in the last three years, Vodafone Idea has cumulatively invested around Rs 48,000 crore on capex, less than half that of Bharti Airtel’s around Rs 1.12 trillion and one-fifth that of Reliance Jio’s Rs 2.5 trillion capex in the period.

Besides, Vodafone Idea’s investment in marketing and brand promotion is also among the lowest in the industry. All this has resulted in a steady loss of subscribers and stagnation in revenues. The active subscribers on the Vodafone Idea network have declined from a high of 333.6 million in May 2019 to 215.2 million at the end of December 2023. The company’s loss has benefited Reliance Jio and Bharti Airtel.

Some analysts feel that the fresh capital infusion from the FPOs will allow the company to improve the retention of subscribers. However, some doubt if Rs 18,000 crore will be enough given the company’s accumulated losses worth nearly Rs 1.4 trillion and the huge capital needed to bridge the growing capability gap between the Vodafone Idea network and that of its bigger peers now.

The FPO will also swell the company’s paid-up capital to nearly Rs 65,000 crore and the number of outstanding equity shares to 65,000 million – both highest among the listed firms in the country. This could lead to a long-term overhang in its share price.

First Published: Apr 12 2024 | 7:25 PM IST


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