Vodafone Idea's Rs 18,000 crore FPO: Capital infusion a welcome move, but is this enough? The jury is out

Vodafone Idea share price, Vodafone Idea FPO: Vodafone Idea shares slipped as much as 3.35 per cent to Rs 12.51 apiece on the BSE in the opening deals on Friday, April 12, after the company informed exchanges that it has received approval to launch a Rs 18,000 crore follow-on public offer (FPO). The shareholders can bid for the FPO between April 18 and 22. The roadshow for the FPO will begin on April 15.

Further, on April 12, the company said in its filing that the Capital Raising Committee has approved and recommended the following to the Independent Directors of the Company, who in turn have also approved the same in a separate meeting held on the same date:

• Approving the floor price of the offer to be Rs 10 per equity share;
• Approving the cap price of the offer to be Rs 11 per equity share; and
• A minimum bid lot of 1,298 equity shares and in the multiples of 1,298 equity shares thereafter.

Further, "please note that the company shall be participating in road shows and interacting with investors/analysts that will be held in various cities across India from April 15, 2024, up to the bid closing date," the filing added.

In February, billionaire industrialist and Aditya Birla Group Chairman Kumar Mangalam Birla underlined the group's firm commitment to the cash-strapped telco Vodafone Idea. The chairman asserted that efforts are on to rope in external investors. 

Birla said, "We remain very committed to Vodafone Idea, and as we have said in the public domain, efforts are on to get outside investors."

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What experts say on capital infusion

G Chokkalingam, Founder of Equinomics Research, said that such an infusion of capital would be good for the company as it would enable it to sustain business and protect employment. "However, it is unlikely to benefit shareholders as earnings on a diluted equity base would be too low and make the stock extremely expensive at the current price," the expert added.

Ajay Bodke, an independent market analyst, shares similar views. "The capital infusion is indeed a welcome move, and it will alleviate, to an extent, concerns around business sustainability; however, whether it is enough is a big question mark," Bodke said.

The question of whether this capital infusion will ensure that the business is extremely well capitalised and take on cash-rich companies such as Jio or Bharti Airtel is up in the air, the analyst told Zeebiz.com.

This capital infusion is just the beginning of the long-term plan to restore the business to its old glory, Bodke added.

Fundraising History 

On February 27, 2024, the company received a nod to raise Rs 20,000 crore via equity and Rs 25,000 crore via debt. On April 6, 2024, the promoter group received approval to issue preferential shares worth Rs 2,075 crore. 

Nod to fund-raising

Total funds raised

In the March 2022 board meeting, the company raised Rs 4,500 crore from three investors. Then in June 2022, the company raised Rs 436 crore and then in October 2021, the company raised Rs 1,600 crore. 

With inputs from Zee Business Research