In Wednesday’s intraday trading, Vodafone Idea’s (Vi) shares fell 9% to Rs 13.09 on the BSE ahead of the listing of new shares allocated in the company’s further public offer (FPO).
Vi Faces Share Price Volatility Ahead of FPO Listing
On Thursday, the shares allotted under the FPO are anticipated to list. Due to a robust response from overseas investors to the FPO, the stock had increased by 12% on Tuesday. As of 02:58 PM, Vodafone Idea was down 8.9% at Rs 13.12 on the BSE, while the S&P BSE Sensex was up 0.17 percent. On the NSE and BSE, 1,664 million equity shares have exchanged hands in total.
At a meeting on Tuesday, April 23, 2024, the board of Vodafone Idea approved the allotment of 16,364 million equity shares at an offer price of Rs 11 per equity share, for a total of Rs 18,000 crore.
In terms of subscribers, Vodafone Idea is the third-biggest telecom service provider in India. The company’s FPO is well-positioned to handle two important goals: closing the gap in network coverage and somewhat boosting competitiveness. In addition, a significant decrease in Vodafone Idea’s bank debt is expected to open the door for obtaining more bank funding.
Analyzing Vi’s Strategic Fund Raise and Market Position Amidst 5G Rollout
According to analysts, Vodafone Idea’s massive fund raise is significant because it allows the company to prepare a war chest for the much-delayed 5G rollout and strengthen 4G services.
Among the major economies, India has the lowest average revenue per user, or ARPU, at $2.1 per month. The telecom industries have raised the cost of data plans, suggesting that there is more room for ARPU improvement to yield a respectable return on investment. Enhancing teledensity will also support future business expansion, according to an FPO note from SBI Securities.
Also Read: Price of Vi Share Rises by 10%; Attention Drawn to FPO Allocation and Listing Date
Although this capital infusion is anticipated to support Vodafone Idea’s near-term prospects, significant increases in market share relative to competitors are not anticipated. Concerns about a large possible equity dilution from the conversion of government dues—which could result in more than 80% government ownership—remain. According to a note from Ventura Securities, such a scenario might limit meaningful upside for Vodafone Idea’s minority investors.
Vodafone Idea’s Strategic Equity Infusion and Potential ARPU Growth
Vodafone Idea is expected to receive funding of Rs 45,000 crore from the infusion of equity, which should help the company close the gap with its peers in terms of 4G coverage and capacity. In addition to stopping subscription losses, this would speed up the transition of 2G users to 4G.
Analysts at IIFL Securities predict that direct tariff increases combined with this upgrade will cause Vodafone Idea’s ARPU to increase from Rs 145 in Q3FY24 to Rs 241 in FY27.
