Vodafone Idea FPO opens today; stock jumps over 4%

Vi has raised Rs 5,400 crore from 74 anchor investors, the firm said in a press statement on Wednesday. The investors include GQG Partners, The Master Trust Bank of Japan, UBS, Morgan Stanley Investment Management, Fidelity, Quant, Citigroup Global Markets, Australian Super, and Motilal Oswal.

The company allotted 490.9 crore shares to anchor investors at Rs 11 per share. Notably, the largest portion of shares, comprising 26% of the total allocation to anchor investors, was secured by GQG Partners, valued at Rs 1,345 crore. Fidelity Investments committed approximately Rs 772 crore to the FPO, while Troo Capital and Australian Super will also be investing Rs 331 crore and Rs 130 crore, respectively.

Approximately 16.2% of the total allocation amounting to Rs 874 crore to anchor investors was allocated to five domestic mutual funds, led by Motilal Oswal Midcap Fund, which invested Rs 500 crores.

Despite the backing of big funds, analysts are quite cautious about retail investors putting their money into the FPO, the largest on D-Street so far.

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Even though the offer might be a step in the right direction and alleviate some of the company's concerns, it is difficult to say how long it will take for the company to show some profitability and reduce debt significantly. The telco hasn’t reported an annual profit since 2016.

"The FPO will bring big funds and it will get oversubscribed. However, investors must not expect major listing gains and avoid taking a blind call. It's a loss-making company and can't see them being profitable in the next 12-18 months," said Avinash Gorakshakar of Profitmart Securities.

VI is the third largest telco in India based on subscriber base. The company is raising funds for capex purposes of increasing its network infrastructure by expanding the capacity of the existing 4G sites and setting up new 4G and 5G infrastructure as well.

The company said it expects to roll out 5G services in select pockets in 6-9 months of the issue. The 5G rollout will cover 40% of the company's overall revenue base in the next 24-30 months.

VI has not been able to roll out 5G services because of a lack of funds. It can be noted that both its rivals and Reliance Jio -- to whom it has ceded market share -- have been active on 5G for some months now.

"India’s ARPU ($2.1 per month) is the lowest amongst the major economies, an increase in the cost of data plans by the telecom industries indicates a higher scope for ARPU improvement to generate a reasonable return on investment. Improving teledensity will also help the company’s growth in the future," said SBI Securities.

While the fund-raise should improve the company's near-term fortunes, analysts don’t expect the company to gain any meaningful market share from peers and remain concerned about potential large equity dilution.

The public offer, at a price band of Rs 10-11, will conclude on April 22.

At 10:32 am, the scrip was trading 2.8% higher at Rs 13.3 on BSE.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)