Vodafone Idea FPO day 2: GMP, subscription status to review. Should you subscribe to this ₹18,000 crore issue?

  • Vodafone Idea FPO subscription status was 26% on the first day, with QIBs leading. Retail investors bid for only 6% of shares reserved for them. Arun Kejriwal predicts a surge in retail bids on the third day.

Dhanya Nagasundaram
First Published19 Apr 2024, 09:26 AM IST
Vodafone Idea FPO, which opened for subscription yesterday (Thursday, April 18), will close on Monday, April 22. (Photo: Reuters)
Vodafone Idea FPO, which opened for subscription yesterday (Thursday, April 18), will close on Monday, April 22. (Photo: Reuters)

Vodafone Idea FPO, which opened for subscription yesterday (Thursday, April 18), will close on Monday, April 22. Mostly led by qualified institutional buyers (QIBs) and non-institutional investors, the Vodafone Idea FPO subscription status was 26% on the first day of the share offering.

According to BSE statistics, retail investors only bid for 6% of the shares set aside for them, while the QIB quota had 61% subscriptions at the end of the day and the non-institutional investor category got 28% subscriptions.

Arun Kejriwal, founder of Kejriwal Research and Investment Services explained that QIBs should get subscribed to today itself on the second day. This Saturday is a third Saturday, which is a working day, for the bank, and applications getting submitted on Saturday might get reflected on Monday, and the retail portion might see a sudden spurt on the third day. If we see the applications that have come into retail and divide them by the amount received, we get an indication that large applications are coming in for the retail portion.What I mean is people applying just under 2 lacs. They are not going into the large HNI category; they are going into retail.

Also Read: Vodafone Idea FPO: 10 key things to know about 18,000-crore issue as anchor book opens today

"Today in the morning, they could have some effect because of the geopolitical situation. The Nifty 50 is down sharply, and one does not know how markets will react, including Vodafone Idea shares. Even today, you will see decent numbers coming in overall. If QIB itself is subscribed by today, it sends a positive signal; QIBs never get subscribed on the second day. This being a large issue of 18,000 crore, if QIBs are subscribed on day 2, the optics are very high," added Kejriwal.

At 09:34 IST, on Friday's session, Vodafone Idea share price was trading 1.21% lower at 13.04 apiece on BSE.

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Vodafone Idea FPO details

Vodafone Idea FPO subscription status on day 2 

Of the 1,260 crore shares on offer, 617.46 crore was subscribed on Friday, as per BSE data. The issue was booked 49% on the second day.

QIBs garnered 93% of the 360 crore shares that were set aside for them, whilst NIIs picked up 75% of the 270 crore shares that had been allocated for them. Retail investors, who were given the largest portion of the offer,picked up pace, with 13% of the 630 crore shares being subscribed to.

Also Read: Vodafone Idea FPO: Issue subscribed 49% on day 2, QIBs steal the show; check latest GMP

Vodafone Idea FPO details

Up to 18,000 crore worth of freshly issued equity shares make up the Vodafone Idea FPO's entire offer size. The price band for Vodafone Idea FPO has been fixed in the range ofRs 10 to 11 apiece. Bids can be submitted in multiples of 1,298 equity shares, with a minimum bid limit of 1,298 equity shares.

The nation's third-largest telecom operator plans to fund the following using the net proceeds of the new issue, according the red herring prospectus (RHP): (i) spending 12,750 crore on equipment to expand its network infrastructure; this includes (a) setting up new 4G sites, (b) increasing capacity at both new and existing 4G sites, and (c) setting up new 5G sites; (ii) paying 2,175 crore to the DoT for certain deferred payments for spectrum and the GST thereon; and (v) using the remaining funds for general corporate purposes.

Through its follow-on public offering, Vodafone Idea raised around 5,400 crore from anchor investors, which include Australian Super, GQG Partners, Fidelity Investments, UBS Fund Management, and Jupiter Fund Management.

Also Read: Vodafone Idea FPO opens today. Should you bid? Here's what GMP, experts say about the 18,000-crore issue

Vodafone Idea FPO Review

Swastika Investmart Ltd

As per the brokerage, the main objective of this funding is to strengthen the network infrastructure of Vodafone Idea. In order to better compete with Jio and Airtel, the two market leaders, this involves the installation of new 4G and 5G towers, which are essential for improving network coverage and capacity. Furthermore, a portion of the earnings will be used to pay down debt, which might strengthen Vodafone Idea's finances.

Nonetheless, prospective investors face difficulties due to Vodafone Idea's financial circumstances. In contrast to its competitors, Vodafone Idea has consistently seen a decrease in its subscriber base. In addition, there might be a financial crisis in 2026 due to large spectrum and AGR (Adjusted Gross Revenue) obligations that could total up to $4 billion.

“Even with the alluring 15–17% discount provided by the FPO, VI doesn't seem to have a clear route to recovery in the near future. Consequently, before taking part in the FPO, investors should carefully analyse these concerns, especially VI's financial standing and potential liabilities,” said the brokerage.

Also Read: Vodafone Idea FPO booked 26% on day 1 led by QIBs

Geojit Financial Services Ltd

According to the brokerage, the Indian government, which has a 32% stake in Vodafone Idea, will eventually acquire a 24% holding through a reverse stock offering (FPO). Offering a 14.7% discount from the previous closing price of Rs.12.9 (16 April 2024) at the upper price range of 11, the issue is available.

Vodafone Idea presents a high risk proposition in the short to medium term given the near-term prospects of sustained losses and customer attrition as a result of the lack of development of 4G services in comparison to its peers. Restructuring the debt and increasing 4G and 5G services will determine the long-term picture. For investors that are considered high risk due to their strong parental support, we firmly give the subscribe rating.

Vodafone Idea FPO GMP today

Vodafone Idea FPO GMP or grey market premium is 1.20. The fresh shares being issued under the FPO will likely be listed at 12.2, representing a gain of 10.91% over the upper limit of the price band, according to investorgain.com.

The FPO GMP trend shows no significant change, and is consistent with the previous seven sessions' grey market activities. This pattern is expected to continue until the final day. Grey market premium indicates investors' readiness to pay more than the issue price.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Also Read: Vodafone Idea FPO: Shares jump 4% after rise in GMP. Should you apply?

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

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First Published:19 Apr 2024, 09:26 AM IST
HomeMarketsIPOVodafone Idea FPO day 2: GMP, subscription status to review. Should you subscribe to this ₹18,000 crore issue?

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