Investors flock to Vodafone Idea share sale

Investors clearly see an opportunity in Vodafone Idea, the Indian mobile operator's high-profile equity raising attracting offers for more than six times the number of shares it made available.

Mary Lennighan

April 23, 2024

2 Min Read

The troubled telco's share price reflected the positivity around the follow-on public offering (FPO), India's largest to date, which has dominated headlines in recent days. At the time of writing on Tuesday, Vodafone Idea was trading at well over 14 rupees (US$0.17) on the BSE, up from below INR13 ahead of the offer period.

Having secured the support of anchor investors ahead of time, Vodafone Idea ran an offer period from 18 April-22 April with a view to selling INR180 billion ($2.16 billion) worth of new shares in total, the aim being to raise money to fund the build-out of a 5G network, amongst other things. The anchor investors – including big names such as US-based investment firm GQG Partners, Fidelity and Australian Super, to name a few – committed $646 million to the offer and it seems Vodafone Idea picked up the remainder with little difficulty.

Vodafone Idea issued a formal announcement on Tuesday confirming that it had secured all the required approvals from its board of directors, but it did not share much information about the offer process.

However, reports in the Indian press indicate that the FPO went very well indeed.

According the Economic Times, the FPO "sailed through" on the final day of the offer period, the company receiving offers for 6.5 times the number of available shares.

The shares sold under the FPO are expected to list on Thursday.

While it's tempting to view the FPO as the answer to Vodafone Idea's troubles, the situation is more complicated than that. Analysts are expecting a share price hike in the short term – Live Mint indicates as much – but there will be no quick turnaround for the mobile operator.

Vodafone Idea desperately needs the funds to be able to build a 5G network and therefore compete on a more level playing field with its larger rivals, Reliance Jio Infocomm and Bharti Airtel. But the build will take some time; Vodafone Idea recently indicated that it aims to extend 5G coverage to 40% of its revenue base in two or more years. And market watchers have repeatedly stated that they do not expect the telco to pick up any meaningful market share in the coming years. Meanwhile, Vodafone Idea still has other dues to pay.

The successful outcome of the FPO is good news for Vodafone Idea; without it, it would have been in serious financial difficulty and we would have once again been questioning its ability to continue as a going concern. But while the equity raising is a good start, the operator still has something of a mountain to climb.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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