Vodafone Idea’s ₹18,000-crore FPO subscribed more than 6 times, led by QIBs

New Delhi: Vodafone Idea’s ₹18,000-crore follow-on public offer, the largest so far by an Indian company, was subscribed more than six times on Monday, the last day of bidding, led by qualified institutional buyers that subscribed 19.3 times the portion reserved for them.

The FPO, which is larger than the ₹15,000-crore FPO by Yes Bank in 2020, had opened for anchor investors on 16 April and retail investors on 18 April, closed on Monday. The FPO shares will be listed on the bourses on 25 April.

According to data on the BSE, the country's third-largest telecom operator, which plans to use the FPO proceeds to launch 5G services and upgrade existing 2G customers to 4G, was able to get the maximum oversubscription from foreign institutional investors, followed by mutual funds and domestic financial institutions, among the qualified institutional buyers. This portion of shares drew bids of nearly ₹88,000 crore.

The portion of shares kept for non-institutional investors was subscribed 4.54 times, while that for retail investors was fully subscribed, as per BSE data as of 7 pm.

The company has already raised ₹5,400 crore from anchor investors including GQG Partners, Fidelity Investments, UBS Fund Management, Jupiter Fund Management, Australian Super, besides domestic investors India Infoline, Motilal Oswal, HDFC Mutual Fund, SBI General Insurance, and Quant.

The carrier had finalised allocation of 4.9 billion shares to anchor investors at ₹11 apiece last week. US-based GQG Partners has been allocated the highest number of shares, worth ₹1,345 crore, while Fidelity Investments has invested about ₹772 crore in the FPO.

Brokerage house Ambit Capital Research termed the response from the markets to the fund-raise as ‘unexpected’, noting the heightened interest of QIBs to the issue. It also placed under review its stance of ‘Sell’ on the stock.

The firm’s analysts, however, noted that the current funding and tariffs weren’t adequate for the carrier to tide over spectrum or adjusted gross revenue payments beyond September 2025, when the government-backed moratorium on payments due for spectrum bought in 2022 and related payments end, but QIBs appear to believe that they don’t have much to lose but can gain disproportionately if the carrier thrives.

VI’s current debt stands at ₹2.1 trillion, including more than ₹1.3 trillion for spectrum and another ₹65,000 crore as part of a revenue-sharing mechanism that it owes the government.

“VI appears to have succeeded with its current equity fund-raise with the backing of a wide gamut of QIBs,” it said. “With government backing, Mr. Birla’s return to the company’s board and equity funding, banks too will likely lend money. This will allow VI to succeed with its ₹45,000 crore total fund-raise. This is unexpected, so we place our SELL stance on VI and Indus Towers Under Review,” Ambit added.

Vodafone Idea’s stock closed 0.23% lower at ₹12.89 on the BSE on Monday. The telco intends to raise the remaining ₹25,000 crore from banks through credit lines for which it has begun discussions.

“VI now has funding to expand 4G and roll out 5G services and improve its market competitiveness. New site rollouts will also help Indus Towers, whose network will get higher utilisation,” the brokerage said.

The debt-laden firm will use ₹12,750 crore for network expansion till FY26, of which ₹5,720 crore will be for setting up 22,000 5G sites and the rest for 26,000 new 4G sites, upgrading existing 4G sites, and for other general corporate purposes. The telco plans to roll out 5G services in six-nine months, focusing on geographies that account for about 40% of its revenue.

After the FPO and a preferential allotment of shares worth ₹2,075 crore to promoters, promoter shareholding will be about 38%, government shareholding at 24%, and the remaining 38% will be held by the public.

Last week, chief executive officer Akshaya Moondra told Mint that it would prioritise payments to vendors from its equity fundraise. It owes an estimated ₹10,000 crore to vendors, including its tower and network equipment providers.

The telco, which does not have 5G services yet, has also been facing consistent subscriber decline over several quarters, and intends to arrest that fall by providing better coverage of 4G services in areas where it is already present and introducing 4G coverage in areas where it is only providing 2G services. This upgrade from 2G to 4G would help it raise its average revenue per user or ARPU.

Moondra backed the overall requirement of raising tariffs even as he said that ARPU uptick would also come from OTT content aggregation, which was contingent on digital distribution being provided by telecom carriers.