GQG, Fidelity, HDFC MF, Quant MF to invest in Vodafone Idea’s Rs 18,000 cr FPO

Foreign institutional investors such as Rajiv Jain-led GQG Partners, Fidelity, and several domestic institutional investors, including HDFC Mutual Fund, Motilal Oswal Mutual Fund and Quant Mutual Fund, are amongst a host of investors that are looking to participate in the mega Rs 18,000 crore follow-on public offering (FPO) of Vodafone Idea Ltd, people aware of the developments said.

These investors are likely to participate in the anchor book allocation of the FPO, the biggest such share sale by an Indian company to date and may also bid for shares in the main book of the FPO, which opens for subscription on April 18, the people said.

The anchor book allocation for the FPO will be announced later on Tuesday. This portion, offered to institutional investors on a discretionary basis, opens a day before the launch of the share sale and acts as an indicator of institutional investor interest.

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“There is strong demand from domestic mutual funds as well as foreign institutions, and the overall book is well covered,” said one of the people.

Emails sent to spokespeople for Vodafone Idea, GQG, Fidelity, HDFC Mutual Fund and Motilal Oswal did not elicit a response till press time. A spokesperson for Quant MF declined to comment.

The Vodafone Idea FPO will open for subscription on April 18 and close on April 22. The company has fixed a price band of Rs 10-11 per share for the FPO. The minimum bid lot for subscription has been fixed at 1,298 equity shares.

Of the total FPO proceeds, the telco proposes to use Rs 12,750 crore for purchase of equipment for the expansion of its network infrastructure by setting up new 4G sites; expanding the capacity of existing 4G sites and also for setting up new 5G sites, as per the offer document filed by the telco.

The telco will spend Rs 5,720 crore of the Rs 12,750 crore earmarked for network expansion on setting up its 5G network.

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In a press conference on Monday, Vodafone Idea’s management said that it intends to cover subscribers accounting for 40% of its revenue with 5G services in the next 24-30 months, adding that orders for 5G network equipment will start once it secures funding. It expects to roll out 5G services in select pockets within 6-9 months of the issue.

It plans to utilise Rs 2,175.31 crore from the FPO proceeds for deferred payments for spectrum to the Department of Telecom and for GST.

The rest of the FPO proceeds will be used by the company to meet working capital requirements, strengthen marketing capabilities, and conduct brand-building exercises and strategic initiatives.

Analysts believe that the Rs 18,000 crore fundraising will improve Vodafone Idea’s competitiveness with rival telecom operators to some extent and lead to a sharp reduction in bank debt, allowing it to secure further funding from banks.

However, they cautioned they don’t expect Vodafone Idea to gain any meaningful market share from its peers.

As of January, Vodafone Idea’s market share fell by 20 basis points to 18.6%, while Reliance Jio maintained its lead with a market share of 40.5%. Bharti Airtel saw a 30 bps increase to reach 36.3% share.