DIAL VI FOR VICTORY: CASH-STRAPPED TELCO PULLS OFF BIGGEST FPO
Mumbai: Vodafone Idea's ₹18,000 crore follow-on public offer (FPO), India's biggest, closed successfully on Monday, having been subscribed 7 times, with strong demand from global institutional investors.
The allotment for qualified institutional buyers (QIBs) was subscribed 19.3 times, of which 82% bids came from foreign institutional investors (FIIs). The non-institutional investor (NII) portion got bids for 4.5 times the shares set aside for them. The retail segment was fully subscribed. The offer had opened on April 18. The FPO is part of a broader ₹45,000 crore funding programme that's key to the company's survival.
Several large FIIs, such as GQG, Capital Group, Morgan Stanley, Fidelity Investments, Blackrock and Citadel among others subscribed to the issue during the three-day bidding period, according to sources. GQG put in bids for about $200 million while several large foreign investors - who had previously participated in the anchor book - submitted bids of around $100 million each, they said.
"Vi appears to have succeeded with its current equity fund-raise with backing of a wide gamut of QIBs," said Vivekanand Subbaraman, analyst, Ambit Capital. "While current funding and tariffs aren't adequate for Vi to tide over spectrum or AGR (adjusted gross revenue) payments beyond the September 25 moratorium, QIBs appear to believe they don't have much to lose but can gain disproportionately if Vi thrives."
Govt Stake to Fall to 23%
The largest FPO prior to this was by Yes Bank in July 2020 that raised ₹15,000 crore with subscription at 93%. Adani Enterprises' ₹20,000 crore FPO was fully subscribed in February last year but was abruptly cancelled the day after it closed, following a 28.5% decline in the share price in response to the Hindenburg Research report.
Vodafone Idea, formed by the merger of the Aditya Birla Group's Idea Cellular and the India unit of Vodafone Plc in 2018, had priced the issue at ₹10-11 a share, a 26% discount to the ₹14.87 a share that was recently set for the preferential issue to one of the promoters. The stock ended marginally down at ₹12.89 on the BSE Monday.
The Indian government is the largest shareholder in Vi, with a stake of more than 33%, which it got in lieu of dues as part of a previous rescue plan. The stake is set to decline to 23% as it didn't participate in the FPO.
Last Tuesday, the telco raised ₹5,400 crore by allotting 491 crore shares to 74 anchor investors at ₹11 per share. Rajiv Jain's GQG Partners invested nearly ₹1,350 crore in Vi's anchor book. Foreign institutional investors such as UBS, AustralianSuper, Fidelity, Redwheel Funds, Abu Dhabi Investment Authority, Allspring Global Investments, Morgan Stanley Investment Funds, Government Pension Fund Global, Copthall Mauritius Investment, and Societe Generale were among others that subscribed to the anchor book. Domestic mutual funds such as HDFC, Quant, Motilal Oswal, Baroda BNP Paribas, and 360 One were also among the anchor investors.
The board of the loss-making telco early this month approved a preferential share issue to raise ₹2,075 crore from an Aditya Birla Group (ABG) entity, Oriana Investments Pte Ltd. That set the stage for a wider ₹45,000 crore funding programme, including ₹25,000 crore of debt, key to helping the telco compete effectively against rivals Reliance Jio and Bharti Airtel, and stem rapid subscriber losses.
Most analysts had recommended subscribing to the FPO, saying that the operator's prospects stand to improve with the fresh infusion of money after the share sale.
Vodafone Idea needs funds to repay vendors such as tower company Indus Towers, strengthen its 4G network and fund the launch of 5G services in a bid to stem subscriber losses and regain lost ground. Rivals Reliance Jio and Bharti Airtel have already completed the pan-India rollout of 5G services.