Vodafone Idea FPO sees muted response on day 1

Vodafone Idea’s follow-on public offer (FPO) is off to a cautious start on day one, with just 26 per cent of the shares on offer being subscribed.

According to the Bombay Stock Exchange data, at the end of day 1, the quota for qualified institutional buyers saw 61 per cent subscription, the retail portion had 6 per cent subscription, and the non-institutional investor category had 28 per cent subscribers. 

A total of 1,260 crore shares were on offer today, priced between ₹10 and ₹11.

Investors like Fidelity, UBS, and Jupiter Fund Management acquired shares worth ₹5,400 crore as anchor investors ahead of the FPO. Vi hopes to bring in a total of ₹18,000 crore from this issue.

The FPO will run from April 18 to April 22. Total shares on offer is 1,260 crore; this excludes shares purchased by anchor investors. The FPO needs a subscription of 90 per cent in order to go through. The response by investors at the moment is tepid.

Path to recovery

These funds, if they come through, will pave the path to recovery. Vi plans to extend its 4G network in areas where coverage is weak. The operator has been losing subscribers due to gaps in its 4G network. In its red herring prospectus, it stated that it aims to add 26,000 4G sites using these funds. Vi also has several network payments coming in imminently, which it will not be able to meet without the funds from FPO. 

The critical question for investors is whether these funds will be enough to improve Vodafone Idea’s 4G network enough to arrest subscriber loss, particularly in rural areas where its 2G subscribers are unable to upgrade to the operator’s 4G network. It is also important that Vodafone Idea continues to get government support.

Vodafone Idea CEO Akshay Moondra, in his comments before the FPO said that they expect relief from the government to continue when AGR and spectrum dues come up. In a pitch to investors, Moondra stated that some relief from the government is expected in the future. 

On Thursday, the Vodafone Idea share price ended 2.17 per cent higher at ₹13.20 apiece on BSE.

The price band for Vodafone Idea FPO is set in the range of ₹10 to ₹11 per unit. Bids can consist of multiples of 1,298 equity shares, with a minimum bid limit of that amount.

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