Vodafone Idea (Vi), India’s third-largest telecom operator, is looking to raise an astonishing Rs 18,000 crore through a Follow-on Public Offering (FPO) – the largest FPO in the country. This critical decision comes after significant financial challenges for Vi and holds immense weight for the future of India’s telecom landscape. 

Financials and Industry Landscape 

Vi has been struggling with a heavy debt burden and a shrinking subscriber base compared to rivals Reliance Jio and Bharti Airtel. This FPO is a crucial attempt to bridge the financial gap, aiming to fund network expansion (including 5G rollout), settle outstanding dues, and potentially improve their competitive footing. 

Key details of the FPO: 

ParticularsDates and Numbers
Total Offer SizeRs 18,000 Cr.
Bidding DatesApril 18 – April 22, 2024
Price BandRs 10 – Rs 11
Fresh Issue1,636.6 Crore Shares
Min. Shares to Bid1,298 Shares
Investment Amount Required in a BandRs 14,278 – Rs 12,980
Listing Date25th April 2024

Vi plans to raise Rs 45,000 crore, including a Rs 20,000 crore equity infusion through a mix of equity and debt approved by shareholders and board. Proceeds from FPO are proposed: Rs 12,750 crore will be allocated for equipment purchase, while Rs 2,175 crore will cover deferred spectrum payments and GST and remaining funds will be used for general purposes.  

The FPO is a fresh issue offer, 50% for qualified institutions, 15% for non-institutional investors and 35% for retail investors. 

The book running lead managers are Jefferies, Axis Capital and SBI Capital Markets, while Link Intime is the registar. 

Financials: 

For the nine months ending December 31, 2023, Vodafone Idea reported a loss of Rs 23,564 crore despite revenue climbing to Rs 32,045 crore. Average Revenue Per User (ARPU) reached Rs 145. However, the company’s net worth rose to negative Rs 97,932 crore. By December 31, 2023, the group’s total debt, including accrued interest, hit Rs 2.15 lakh crore. By 31st December 2024, the existing debt payable amounts to Rs 5,385.4 crore. 

Competitive Landscape: 

Vi aims to launch converged offerings to compete with Reliance Jio and Bharti Airtel. Collaborating with You Broadband, Vi introduces Vi One, a unified offering encompassing mobility, broadband, and content, initially available in 12 cities with plans for further expansion. Additionally, Vi plans to enhance its data and service portfolio to rival Airtel and Jio. Introducing four Vi Max plans ranging from Rs 401, Rs501, Rs 701 and up to Rs1101, replacing older plans starting from Rs 399, signifies the company’s strategic shift towards offering more competitive and comprehensive services. 

Risk: 

As of December 31, 2023, Vi faces substantial outstanding dues to vendors, especially tower vendors and equipment suppliers. Recent periods of losses raise doubts about future profitability. Additionally, the company shoulders a high debt load. 

Conclusion: 

Investors should understand their risk appetite and invest accordingly, considering the risk and return associated with the company.