The stock had rallied 12 per cent on Tuesday on strong foreign investor’s response for FPO
Shares of Vodafone Idea slipped 9 per cent to Rs 13.09 on the BSE in Wednesday’s intra-day trade ahead of listing of fresh shares allotted in the company’s further public offer (FPO).
The shares allotted in FPO are expected to list on Thursday. The stock had rallied 12 per cent, on Tuesday, on strong foreign investor’s response for FPO.
Vodafone Idea’s board at its meeting held on Tuesday, April 23, 2024, approved the allotment of 16,364 million equity shares at the offer price of Rs 11 per equity share, aggregating to Rs 18,000 crore.
Vodafone Idea is the third largest telecommunications service provider in India based on subscriber base. The company’s FPO is poised to address two critical objectives, bridging the network coverage gap, and enhancing competitiveness to some extent. Furthermore, a notable reduction in Vodafone Idea’s bank debt is anticipated to pave the way for securing additional funding from banks.
The mega fundraise by Vodafone Idea is significant as it enables the company to ready a war chest for the much-delayed 5G rollout and strengthening 4G services, according to analysts.
While this capital injection is expected to bolster Vodafone Idea’s immediate outlook, substantial market share gains vis-à-vis peers are not on the horizon. The concerns remain regarding potential significant equity dilution resulting from the conversion of government dues, potentially leading to over 80 per cent government ownership. Such a scenario could limit meaningful upside for Vodafone Idea’s minority investors, Ventura Securities said in note.
About FPO
FPO (Follow on Public Offer) is a process by which a company, which is already listed on an exchange, issues new shares to the investors or the existing shareholders, usually the promoters. FPO is used by companies to diversify their equity base.
company uses FPO after it has gone through the process of an IPO and decides to make more of its shares available to the public or to raise capital to expand or pay off debt.
