Vodafone Idea FPO: The FPO price band has been set between Rs 10 to Rs 11 per share; Should you buy?
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Vodafone Idea’s Rs 18,000 crore Follow-on Public Offer (FPO) is now open for subscription and will close on Monday, April 22. The FPO price band has been set between Rs 10 to Rs 11 per share, with a minimum bid limit of 1,298 equity shares and subsequent bids in multiples thereof.
Shares of Vodafone Idea jumped 4.3 per cent to Rs 13.48 in Thursday’s intra-day deal, as the telecom’s Rs 18,000 crore follow-on public offer (FPO), which opened today for the public, received a strong response from anchor investors, including the famed GQG Partners.
Voda Idea stock touched a high of Rs 13.48 and a low of Rs 13.08 in trades so far on the BSE.
According to the red herring prospectus (RHP), the net proceeds from the new issue will be used by the company to finance the following: (i) acquisition of equipment for the expansion of its network infrastructure, amounting to ₹12,750 crore; this includes (a) the establishment of new 4G sites; (b) the augmentation of capacity at both existing and new 4G sites; and (c) the establishment of new 5G sites; (ii) payment of certain deferred payments for spectrum to the DoT and the GST thereon, amounting to ₹2,175 crore; and (v) the remaining amount for general corporate purposes.
Government stake in Vodafone idea is 32.19% based on the shareholding pattern for the quarter that ended in March (Q4FY24), as per BSE data.
As per news reports, in 2022, Vodafone Idea transformed its unpaid debt to the government into a 36% stake, making the Indian government the company’s largest stakeholder.
GMP Today
Vodafone Idea FPO GMP or grey market premium is ₹1.50. According to investorgain.com, the expected listing price for VI FPO is ₹12.5, or a gain of around 13.64%.
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Should You Invest?
Arun Kejriwal, founder of Kejriwal Research and Investment Services, claims that there is a lot of expectation and talk that this scrip would follow Yes Bank’s lead and that there will be a lot of interest after this issue. There will be a chance for investors to profit handsomely. Without any doubts, the scrip should do well since there is a lot of demand in it and a substantial or respectable premium being offered on the grey market. Regarding the application, it is justified because there is a 15-20% profit margin to be made now. It’s uncertain if it will stay there or if it will somewhat rise or decline.
“However, the intention of the government is very clear. They don’t want this company to fail and allow this important sector to be a duopoly. So they will back this company. With the fundraise, they would look into capex, which they haven’t done in a very long time,” added Arun.
Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, said: “The Vodafone Idea FPO is believed to be going big. If it is completely subscribed, Tapse claims, it will be the largest FPO in history, surpassing the ₹15,000 crore Yes Bank and ₹10,542 crore ONGC offers.”
According to Prashanth, Vodafone Idea is now facing financial strain to maintain its balance sheet and eventually operate the firm in a competitive market because of its debt and unpaid AGR to the government.
If FPO’s complete subscription would bring the firm a significant financial boost and allow it to spend and grow more quickly in its 4G infrastructure and the establishment of 5G infrastructure, which is urgently needed.
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“Both the industry perspective and the execution strategy are critical to the FPO’s success. Given that I think the FPO offer price range is a little conservative for investors, I think a lot of funds or investors will be drawn in by the industry’s projected growth,” said Tapse.
