Shares of troubled telecom service provider Vodafone Idea will be closely watched on April 22 as its follow-on offer (FPO) approaches its closing. With two days of bidding for the Rs 18,000-crore issue, the FPO has received a respectable response from investors, being subscribed 49 times.
The retail segment of the FPO witnessed 13 percent participation, the NII segment saw a subscription of 75 percent, while the QIB portion was subscribed 0.93 times. The price band for the Vodafone Idea FPO was set at Rs 10-11 per equity share. In the grey market, the issue is trading at a premium of Rs 1.40 per share. In the previous session on April 19, the company’s shares closed at Rs 12.85 apiece, up Rs 1.85 from the upper price band. Despite weakness in the secondary market, market observers note that the Grey Market Premium (GMP) remained positive.
Considering whether to apply for the Vodafone Idea FPO, Kotak analysts express concerns about the company’s cash EBITDA and the potential difficulty in meeting government dues. The conversion of government dues into equity may ease financial burdens but could lead to significant equity dilution, which may not bode well for existing investors.
Some fund managers caution against the FPO, citing uncertainties surrounding the company’s future and the potential negative impact of significant government stake in a private entity. Retail investors may find it challenging to profit from the stock given the level of uncertainty. Experts advise caution and suggest consulting certified professionals before making any investment decisions.
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