Vodafone Idea FPO likely to open next week

New Delhi/Mumbai: Vodafone Idea (Vi) is likely to open a Rs 20,000-crore follow-on public offer next week in a move expected to bring in desperately needed capital that is critical for the cash-strapped telco’s survival. New investors will likely get the shares cheaper than the price at which preference stock was recently earmarked for a promoter entity.

According to banking sources, the company is likely to file its red herring prospectus (RHP) with the Registrar of Companies (ROC) this week, with plans to launch its follow-on public offer next week.

The offer is likely to be priced at a “significant discount” to the Rs14.87 a share that was set for the preferential issue to one of the promoters, a person familiar with the matter said.

The Vodafone Idea stock ended 0.2% higher at Rs12.93 on the BSE Wednesday.

The person added that the anchor investor portion, or the portion reserve for qualified institutional buyers (QIB), of the FPO has been fully subscribed to already. 50% of the book in an FPO is usually reserved for QIB, 35% for retail investors and the rest for high- networth individuals (HNIs).

Jefferies, SBI Capital, and JM Financials have been appointed as the bankers for the public offer.

Brokerage CLSA said last month it has observed keen interest from foreign institutional investors in the UK on Vi's equity-raise plan.

“The debt funding of around Rs25,000 crore will follow shortly after he FPO closes,” the person said.

The company couldn’t be immediately reached for comment.

The board of the loss-making telco has already approved a preferential share issue to raise Rs 2,075 crore from an Aditya Birla Group (ABG) entity, which set the stage for a wider funding programme critical to the revival of the cash-strapped telco.

Birla Stake Pricing

The shares to the ABG entity - Oriana Investments Pte Ltd. - will be issued at Rs 14.87 apiece, Vodafone Idea had said on Saturday. The stock issuance was at a premium to the closing price of Rs13.32 on the BSE last Friday.

Vodafone Idea was formed by the merger of ABG’s Idea Cellular and the India unit of Vodafone Plc in 2018. 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 rescue plan.

The promoter’s capital infusion is part of Vi’s broader two-part fundraising plan totalling Rs 45,000 crore through a mix of equity and debt. The carrier is looking to first raise Rs20,000 crore via equity by June end, and then Rs25,000 crore from lenders. Equity funding worth Rs20,000 crore would mean a dilution of around 26%, according to analysts.

The cash-strapped telco aims to use the money to repay vendors, strengthen its 4G network and fund the launch of 5G services to help compete with bigger--and profitable--rivals Reliance Jio and Bharti Airtel.

Goldman Sachs recently estimated that in the absence of headline rate increases, Vi would require $8-10 billion (Rs 65,000-83,000 crore) of fresh capital over the next two years to build a mobile broadband that can compete with Airtel and Jio, which have completed 5G rollouts across India.

Vi’s net debt widened to Rs 2.14 lakh crore in the fiscal third quarter and cash and cash equivalents were at Rs 318.9 crore. Its bank debt currently stands at less than Rs 4,500 crore. It’s also staring at debt payments of nearly Rs 70,000 crore for adjusted gross revenue (AGR) dues, once the moratorium on spectrum payments ends in FY26.

Its gross mobile user base shrank further by another 1.02 million to 2220.5 million at the end of February, hurt also by the lack of 5G services. By contrast, market leader Jio added 3.59 million and Airtel gained 1.53 million users to end December with 467.48 million and 384.01 million subscribers, respectively.