On the third and final day of the auction process, Vodafone Idea’s follow-on public offering (FPO) achieved full subscription, principally driven by the significant interest demonstrated by institution and high-net-worth individual (HNI) investors.
The issue achieved an acceptance rate of 29 percent on the initial day of the auction procedure. Nevertheless, as of the end of the following day, the rate of subscription had risen to 54 percent.
The telecommunications company, Vodafone Idea FPO, is presently making its shares available for purchase in a price between Rs 10-11 a share. Investors can apply for an initial grant of 1,298 shares and follow-up multiples.
The FPO issuance, valued at Rs 18,000 crore, involves a fresh share sale of 16,363,636,363 equity shares. This establishes itself as the most substantial follow-on offer in the Indian markets.
Analysis of Investor Bidding Patterns
Investors submitted bids for 50,07,11,08,032 equity shares, almost 4 times the offered shares. This occurred by 3.00 PM on Monday, April 22. The three-day bidding process, which commenced on Thursday, April 18, is currently in its final stages.
The allocation for qualified-institutional bidders (QIBs) received bids in a ratio of 10.42. The quota for non-institutional investors had a subscription rate of 3.17.At the same time, the allotment for retail investors was purchased at a rate of only 63 percent.
Vodafone Idea is a telecommunications company that was established in March 1995. It offers a range of services including data, voice, and value-added services on 2G, 3G, and 4G technologies. These services encompass short communication and digital solutions for both enterprises and consumers.
The shares of Vodafone Idea have experienced a decline in value, with the current grey market premium for the counter standing at a meager Rs 0.50. This indicates a potential increase in the listing price of 4-5 percent for investors.
The premium observed in the informal market was Rs 0.60 during the weekend, whereas it reached approximately Rs 1.50 on the initial day of the auction process.
Vodafone Idea FPO: Enhancing Competitiveness in Indian Telecom
Brokerage firms are predominantly optimistic due to the expected increase in tariffs, the rise in average revenue per user (ARPU), the expansion of capacity, and the intentions to reduce growth.
Analysts, who are monitoring the situation, are of the opinion that the fundraising will assist the corporation in overcoming its financial difficulties. Nevertheless, it is expected that the expansion of the user base and the successful implementation of revival strategies would be crucial factors to monitor.
The Vodafone Idea FPO signifies a positive step, enhancing competitiveness in India’s telecom sector.Two major companies dominate this sector.
According to Manish Chowdhury, the Head of Research at StoxBox, the company’s objective to increase its 4G penetration and introduce 5G services in the coming quarters will boost the ARPU, which is now lower than that of its competitors.
Vodafone Idea is expected to secure better funding for future needs, including equity and debt, to meet obligations and expand.
According to the speaker, the recent injection of capital by promoters and the government’s initiatives to ensure the firm’s sustainability have generated optimism over the company’s potential for recovery.
This suggests that investors with a moderate to high-risk tolerance should consider investing in the company for a medium to long-term outlook.
Verizon Idea FPO Details and Analysis
Verizon Idea allocated 50% of the net offer for QIBs. Non-institutional investors receive 15% of shares.
The net offer will be allocated to retail investors at a rate of 35 percent. The telecommunications company has successfully secured a total of Rs 5,400 crore in funding from several institutional investors through an anchor book.
Geojit Financial Services states VIL is high-risk in the short to medium-term. This is due to ongoing losses and subscriber attrition. Limited development of 4G services, compared to industry counterparts, is cited as a factor.
The future prospects will be contingent upon the restructuring of debt and the expansion of 4G and 5G services. The statement assigns a subscribe rating to high-risk investors on a long-term basis due to robust parental backing.
Axis Capital, Jefferies India, and SBI Capital Markets manage the Vodafone Idea FPO.They are the book running lead managers. Link Intime India acts as the registrant for the issuance. The FPO shares are scheduled to be listed on the BSE and NSE on Thursday, April 25, 2024.