Vodafone Idea witnessed a surge in its share price by over 3% on April 4 following its announcement that the board would consider issuing equity or convertible securities amounting to Rs 2,075 crore to one or more promoter group entities later in the week.
Previously in February, the heavily indebted company’s board had greenlit a plan to raise Rs 20,000 crore through equity-linked instruments. Shareholders gave their nod to this proposal on April 3.
According to Vodafone Idea’s regulatory filing, an overwhelming majority of both public and non-public institutions voted in favor of the fundraising initiative.
The infusion of funds is intended to facilitate the expansion of Vodafone Idea’s 4G network and the rollout of 5G services. Analysts anticipate that these strategic moves could enhance the company’s competitive position by providing a superior user experience.
There are indications that the fundraising efforts may culminate in a follow-on public offer (FPO) within a week or two, as reported by CNBC Awaaz, citing insider sources.
The company aims to raise approximately Rs 15,000-20,000 crore through the FPO, as approved by the board in February, to finance the delayed 5G rollout and fortify its 4G offerings.
Reports from March 1 had suggested that Vodafone Idea was exploring various fundraising structures with investment banks, including rights issue, preferential allotment, or an FPO, to ensure efficient capitalization.
With insufficient funding, there’s a risk of losing its customer base, underscoring the significance of this development as the company seeks to boost average revenue per user (ARPU).
While analysts acknowledge the potential benefits of these initiatives in enhancing competitiveness and user experience, they caution that the fundraising amount may not be sufficient to significantly impact market share or debt levels.
The board has approved only a portion of the initially planned Rs 45,000 crore fundraising target.
Vodafone Idea shares closed 1.1% higher at Rs 13.60 on the National Stock Exchange (NSE) on April 3. Although the stock has shown significant growth over the past year, it has declined by 20% year-to-date.
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