Everything You Wanted to Know About Vodafone Idea FPO

Key Highlights

• Vodafone FPO opens for subscription on 18th April and closes on 22nd April
• The FPO’s issue size is Rs 18,000 crores with a price band of Rs 10-11 per equity share
• You can bid for a minimum of 1,298 equity shares and in multiples thereof

In a market brimming with initial public offerings (IPOs), a follow-on public offer (FPO) often fails to make a buzz. But not when it’s India’s largest FPO. Telecom major Vodafone Idea is here with its FPO. This blog covers the essential aspects of this FPO that will help you understand it better. Let’s start.

About Vodafone Idea

Vodafone Idea is India's third-largest telecommunications service provider in terms of subscriber base. It provides data, enterprise, voice, value-added, and digital services across the country using 2G, 3G, and 4G technologies. Globally, the company is the sixth largest cellular operator in terms of the number of subscribers in a single country.

To know more, watch this quick video: https://www.youtube.com/watch?v=ihLh5rLn2Jg

FPO Details

The table captures the key details of this FPO:

The FPO consists entirely of fresh issues of shares. 50% of the FPO is reserved for qualified institutional buyers, 15% is for non-institutional investors, and 35% is reserved for retail investors.

FPO Objectives

The company plans to use Rs 12,750 crores of the total proceeds received to augment its equipment and expand its network infrastructure by setting up new 4G sites. The company also plans to use the proceeds to expand the capacity of its existing 4G and 5G sites. It also plans to use Rs 2,175 crores to pay the Department of Telecommunications (DoT) for spectrum and GST. The rest of the money will be used for general corporate purposes.

Strengths and Weaknesses

As an investor, it's essential for you to know a company's strengths and weaknesses before subscribing to its shares. The company's strengths include:

• Large subscriber base

Vodafone India has India's third-largest subscriber base. As of December 31, 2023, it had more than 223 million subscribers and a 19.3% market share.

• Long-standing relationship with enterprise customers

The company enjoys a long-standing relationship with enterprise customers. It caters to a range of clients, including government organisations, SMEs, global enterprises, offices, homes, and startups. The comprehensive services provided by the company have earned them several accolades over the years.

• Strong brand proposition

The company has a strong brand proposition with its innovative branding campaigns. Allowing customers to choose and customise benefits as per their needs has strengthened its trust among subscribers.

The following are the weaknesses of the company:

• The company faces the risk of losing its competitiveness, which can hurt its business, cash flows, and operations if it fails to upgrade and adapt to changing customer preferences.
• Failure to obtain the required capital to fund its capital expenditure and working capital requirements may negatively impact its financial condition and cash flow.
• Over the years, the company has incurred significant indebtedness. Additionally, it hasn't complied with certain covenants and if it fails to meet the obligations, the same could affect its business.

Should You Subscribe?

The Indian telecommunication market is extremely competitive, and though Vodafone Idea is the third-largest player in the segment, its revenue performance in recent years has been lacklustre. Based on the revenue trends during the first nine months of FY24, the company is poised to experience only marginal growth. Amid competition from its peers, Vodafone Idea has steadily witnessed a decline in its subscriber base and carries substantial debt.

While the FPO is expected to bring funds for the company and may get oversubscribed, as an investor, you should avoid taking a blind call. Go through the company’s red herring prospectus for a comprehensive overview and analyse your risk tolerance before engaging with this FPO.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions.