Rama Krishna Sangem
Vodafone Idea shares slipped 9 per cent to Rs 13.09 on the BSE in April 24, Wednesday’s intra-day trade ahead of listing of fresh shares allotted in the company’s further public offer (FPO). The shares allotted in FPO are expected to list on Thursday. The stock had rallied 12 per cent, on Tuesday, on strong foreign investor’s response for FPO.
At 02:58 pm; Vodafone Idea was trading 8.9 per cent lower at Rs 13.12 on the BSE, as compared to 0.17 per cent rise in the S&P BSE Sensex. A combined 1,664 million equity shares have changed hands on the NSE and BSE. Vodafone Idea’s board at its meeting held on Tuesday, April 23, 2024, approved the allotment of 16,364 million equity shares at the offer price of Rs 11 per equity share, aggregating to Rs 18,000 crore.
Vodafone Idea is the third largest telecommunications service provider in India based on subscriber base. The company’s FPO is poised to address two critical objectives, bridging the network coverage gap, and enhancing competitiveness to some extent. Furthermore, a notable reduction in Vodafone Idea’s bank debt is anticipated to pave the way for securing additional funding from banks.
VI to roll out 5G
The mega fundraise by Vodafone Idea is significant as it enables the company to ready a war chest for the much-delayed 5G rollout and strengthening 4G services, according to analysts.
India’s average revenue per user or ARPU ($2.1 per month) is the lowest amongst the major economies, an increase in the cost of data plans by the telecom industries indicates a higher scope for ARPU improvement to generate a reasonable return on investment. Improving teledensity will also help the company’s growth in the future, SBI Securities had said in FPO note.
While this capital injection is expected to bolster Vodafone Idea’s immediate outlook, substantial market share gains vis-à-vis peers are not on the horizon. The concerns remain regarding potential significant equity dilution resulting from the conversion of government dues, potentially leading to over 80 per cent government ownership. Such a scenario could limit meaningful upside for Vodafone Idea’s minority investors, Ventura Securities said in note.
