India’s Biggest FPO: Vodafone Idea to opens FPO of Rs.18,000 crore on April 18
Vodafone Idea Limited (VIL) is scheduled to initiate a follow-on public offering (FPO) with a valuation of Rs 18,000 crore next week. In an effort to strengthen its balance sheet and compete with strong rivals like Reliance Jio Infocomm and Bharti Airtel, the struggling telecom service provider is making this transaction.
If it is successful, this will be India’s largest FPO, topping the Rs. 15,000 crore share sale by YES Bank in July 2020. Notably, the Rs. 20,000 crore FPO offered by Adani Enterprises was completely subscribed but subsequently cancelled in February 2023 due to controversy sparked by a report published by US-based short seller Hindenburg Research.
The subscription period for the FPO will begin on April 18 and end on April 22. Roadshows are going to start on Monday.
US-based GQG Partners intends to spend about Rs 4,200 crore in the FPO, while SBI Mutual Fund aims to bet between Rs 1,700 crore and Rs 2,500 crore, according to a Reuters report citing unnamed sources. Because of the appealing pricing, investment bankers handling the FPO said they expect it to generate more demand than shares on sale.
The pricing range for the FPO has been fixed by VIL at Rs 10–11 per share. Following the pricing revelation, intraday trading on Friday saw a 5.8% drop in VIL’s shares to Rs 12.2 apiece; however, these shares later recovered to settle at Rs 13.2, up 1.54% from the previous day’s closing. The FPO pricing band’s lower end is 24% cheaper than its previous closing and 32% cheaper than the newly approved Rs 2,075-crore preferential offer to the Aditya Birla group, the issuer.
The board of the telco authorized a fundraise of Rs.20,000 crore in equity and a total of Rs.45,000 crore through a combination of debt and equity in February. The company will benefit financially from this fundraiser and be able to expand its network investment opportunities.
With a total outstanding debt of Rs. 2.38 trillion and a negative net value of Rs 74,359 crore (as of March 2023), Vodafone Idea is currently among the most indebted and financially challenged firms in the nation.
For the previous eight years, the mobile operator has continuously recorded losses; in 2022–2023 it reported a net loss of Rs. 29,371 crore and a cash loss of Rs. 6,251 crore. Annually, these two numbers have gotten worse. In contrast, during the April–December 2023 period (9MFY24), it declared a cash loss of Rs. 6,681 crore and a net loss of Rs. 3,563 crore.
