FPO marks the start of Vodafone Idea 2.0: Kumar Mangalam Birla

Aditya Birla Group chairman Kumar Mangalam Birla said on Thursday that the success of Vodafone Idea’s ₹18,000-crore follow-on public offer, India’s largest FPO till date, marked a turning point for the telecom industry. 

Calling the third-largest carrier a “national asset”, he said Vodafone Idea would stage a smart turnaround on the back of the fundraise and support from banks. “This moment in some ways marks the beginning of Vodafone Idea 2.0. I believe that a revitalised Vodafone Idea is important for India," Birla said in a statement. He told mediapersons that the fund raise was a “fresh lease of life” for the carrier.

Shares of Vodafone Idea Ltd opened at ₹11.80 on the NSE on Thursday, a premium of 7.2% over the issue price of ₹11, after its FPO shares listed on the bourses. Vodafone Idea stock closed 6.1% up at ₹13.9 apiece on BSE on Thursday.

“The fact that so many marquee investors participated in this equity issuance is a testament to the government’s vision of a digital India,” Birla said, adding that the oversubscription to the FPO (it was subscribed seven times and the institutional portion 19 times), demonstrated India’s tremendous potential and Vodafone Idea’s role in it.

“The robust engagement from both foreign and domestic investors is heartening. The full subscription of the retail portion is truly commendable, given the sheer scale of the offer,” he added.

Also read: Vodafone Idea’s post-FPO priority: Clearing vendor dues

Birla thanked the government for the company's reform package and its "commitment to preserving a competitive three-player market”, saying it was transformational for the entire sector. The government is the single largest shareholder in the telco with 32.2% stake. 

Birla added that the Aditya Birla Group and Vodafone Group had cumulatively invested around ₹1.7 trillion in the Indian telecom industry. Before the FPO, more than 75% of the ₹30,000 crore the company raised in the past five years came from the two promoter groups, he said.

The latest fundraise includes a ₹2,075-crore investment from the Aditya Birla Group. Proceeds from the fundraise will be used for significant capital expenditure, which will trigger a cycle of growth, he said.

Also read: Dial Vi for revival: Its FPO was a success

“On the back of this fundraise and continued support from banks, Vodafone Idea will stage a smart turnaround. This moment in some ways marks the beginning of Vodafone Idea 2.0. I believe that a revitalised Vodafone Idea is important for India,” he added.

"A rejuvenated Vi together with other telecom players will meaningfully contribute to the exciting and sustainable growth journey ahead,” Birla said.

SBI leading credit infusion: source

In March, Vodafone Idea shareholders approved a plan to raise ₹45,000 crore, of which ₹18,000 crore has been raised through the FPO. State Bank of India is said to be leading the credit infusion, people familiar with the matter said. The company will use the proceeds to expand its 4G network and introduce 5G infrastructure, CEO Akshaya Moondra said.

“We, as bankers, have lived through considerable concerns that the entity has gone through… the outcome is nothing but the trust and confidence shown by Mr Birla,” Dinesh Khara, SBI chairperson said at the FPO listing. He added that the wider investor community has backed the business because Birla assumed chairmanship of Vodafone Idea and is “showing the way”. Birla returned to the board of Vodafone Idea in April 2023 after stepping down in 2021. Vodafone Idea struggled to raise capital from private investors for a year before launching the FPO this month.

“With the opportunities that exists in the country, if our own investors would not be there, the sector will go away to foreign investors. Not that we are against them, we welcome them, but at the same time, as proud Indians, we should also be the beneficiaries of the growth which will be seen in the sector,” Khara added.

The company also has significant debt from SBI and several other banks that is due for repayment in 2024. Vodafone Idea’s net debt is more than ₹2.14 trillion, of which it owes ₹1.9 trillion to the government as deferred spectrum payments. It also owes ₹7,000 crore to Indus Towers. Vodafone Plc, which did not participate in the FPO, has a 21.05% stake in Indus Towers. In 2021, the Indian government converted interest dues of ₹16,000 crore into around 33% of Vodafone Idea’s equity.

The ₹18,000-crore FPO, the largest in India to date, was subscribed nearly seven times and was closed in a “record 54 days”, said Atul Mehra, MD & CEO, Axis Capital, one of the merchant bankers for the issue.

Smart investors who applied for the FPO borrowed the shares from the stock exchanges stock lending & borrowing (SLB) mechanism after the board meeting on 11 April. They borrowed the shares at 40-50 paise a share when VI traded at ₹13-14.75 , sold the shares , making a clean ₹1.6-3.25 per share after paying the interest on the same. 

Since retail can bid for up to ₹2 lakh a share , an investor who borrowed around 18,000 shares would have made as much as ₹54,000 through this strategy—selling at, say, ₹14 apiece after getting allotment at ₹11 and then returning the same to the lender .

Interestingly, the pre-open session saw maximum asks at ₹11.80 ahead of the listing of the FPO shares at the same level.

The share was the most actively traded counter on NSE on Thursday. Total volume traded on BSE and NSE was a record 1,055 shares worth ₹13,884 crore. On the derivatives counter of NSE also, it was the top traded counter. The market capitalisation of the company stood at ₹91,747 crore on NSE.