The Vodafone Idea follow-on public offering (FPO) has opened for public subscription with the aim of raising Rs 18,000 crore. The company has already secured Rs 5,400 crore from 74 anchor investors, including prominent names like GQG Partners and UBS. The FPO consists entirely of a fresh issue of 1,636.36 crore shares, and the subscription period will close on Monday, April 22, with the allotment expected to be finalized on Tuesday, April 23.
Potential investors should carefully consider the challenges facing Vodafone Idea before participating in the FPO. The company has been experiencing a consistent decline in its user base compared to its competitors. Additionally, there is a looming financial crunch in 2026 when significant spectrum and AGR dues become payable, potentially amounting to $4 billion. Despite the attractive discount offered through the FPO, Vodafone Idea's path to near-term revival seems uncertain, and investors should weigh these factors carefully.
As of April 18th, the Grey Market Premium (GMP) for Vodafone Idea FPO stands at Rs 1.70. Based on the price band of Rs 10 to Rs 11 per share, the estimated listing price for Vodafone Idea FPO is projected to be Rs 12.70, with an expected percentage gain/loss per share of 15.45%.
The capital raised through the FPO will be used to expand the company's network infrastructure, including setting up new 5G sites and strengthening the existing 4G network. A significant portion of the proceeds, Rs 12,750 crore, will be allocated for purchasing equipment for network expansion, with Rs 5,720 crore earmarked for establishing the 5G network.
Vodafone Idea aims to set up 10,000 new 5G sites by fiscal year 2025, with a further 12,000 additional 5G sites targeted for fiscal year 2026. The company also plans to allocate a portion of the proceeds towards reducing debt, potentially improving its financial position.
Despite the challenges and uncertainties, Vodafone Idea remains committed to its strategic goals, including covering subscribers contributing to 40% of its revenue with 5G services within the next 24-30 months. The rollout of 5G services is 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%. Investors will need to carefully evaluate the company's prospects and risk factors before making investment decisions regarding the FPO.
