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Vodafone Idea Limited is an Aditya Birla Group and Vodafone Group partnership. The Company provides pan India Voice and Data services across 2G, 3G and 4G platform. Vodafone Idea FPO envisages to raise 18,000.00 crores. The issue is entirely a fresh issue of 1636.36 crore shares.

About Vodafone Idea Limited:

• Through their pan India network, they offer voice, data, enterprise and other value-added services, including short messaging services and digital services across 2G, 3G and 4G technologies.
• They also offer connectivity services to enterprise customers. They hold active licenses for national long distance, international long distance, internet service provider and registration for infrastructure provider (IP-1) services.
• They carry inter-service area voice traffic and incoming and outgoing international voice traffic on our network, which is facilitated through interconnections with their active licenses.
• As of 31 December 2023, the company boasted over 223.0 million subscribers, capturing a subscriber market share of 19.3%. Its network facilitated the transmission of 401 billion voice minutes and 6,004 billion megabytes of data.
• Promoters are Kumar Mangalam Birla, Hindalco Industries Limited, Grasim Industries Limited, Birla TMT Holdings Private Limited, Vodafone International Holdings B.V., Al-Amin Investments Limited, Asian Telecommunication Investments (Mauritius) Limited, CCII (Mauritius), Inc., Euro Pacific Securities Ltd, Vodafone Telecommunications (India) Limited, Mobilvest, Prime Metals Ltd, Trans Crystal Ltd, Omega Telecom Holdings Private Limited and Usha Martin Telematics Limited.

Financials: Vodafone Idea Limited

Vodafone Idea FPO: Anchors

• Anchor book demand was between 2x and 3x more than shares on offer..
• A total of 74 schemes received allotments in the anchor category, with US-based GQG Partners subscribing to Rs 1,347 crore worth of shares, nearly a quarter of the available shares in the anchor category. Other large subscribers included Fidelity, Stichting, Redwheel, Motilal Oswal Mutual Fund, and Troo Capital.
• Of the total anchor book, 16.2 per cent was allotted to five domestic mutual funds, HDFC, Motilal Oswal, Quant, Baroda BNP, and 360One, through 11 schemes.

Vodafone Idea FPO: Salient Points

• The Indian government, the single-largest shareholder in Vodafone Idea with a 32% holding. The FPO will see its stake drop to24% .
• The total promoter shareholding could fall to about 38% from 50.3% at present.
• The company had a leading market share in the Kerala and Mumbai service areas and the second largest market share in the Gujarat and Kolkata service areas in Q3 FY 2024.
• Its market share was over 20% in the Maharashtra, Delhi, Uttar Pradesh (West) and Haryana service areas in Q4 FY 2024.
• The company ranks third among telecommunications service providers in India in terms of subscriber base and holds the sixth position globally among cellular operators, measured by the number of subscribers within a single country of operation.
• The company has incurred a loss of Rs 23,564 crore for 9ms ended December 31, 2023, with a small rise in the revenue to Rs 32,045 crore.
• Its Average Revenue Per User (ARPU) rose to Rs 145.
• Its total debt of the group stands at Rs 2.15 lakh crore. The existing debt as payable by December 31, 2024, is Rs 5,385.4 crore.
• Vodaphone will use ₹12750 crore network expansion till FY26. Out of which ₹5,720 crore will be used to set up 22,000 5G sites and the rest for setting up 26,000 new 4G sites, upgrading existing 4G sites and for general corporate purposes.
• It owes ₹2170 crore to the government in FY25 as an installment for spectrum and proceeds of the FPO will be used for this payment as well.
• As of December 31, 2023, the company has a significant amount of outstanding dues which payable to vendors including tower vendors and equipment suppliers.
• Use of FPO net proceeds:

• Predictions of potential tariff hikes in the near term are expected to enhance cash flows for the company.
• despite the company’s intention to utilize the net proceeds from the FPO for expanding network infrastructure and repaying loans, the funds raised will fall considerably short of the amount required to effectively enhance business performance
• In the past performance of the company has been dismal and it was on verge of closure at one time.
• The company has a large spectrum portfolio across different frequency bands. Out of this the 7,975.2 MHz spectrum band has been liberalized and can be used for deployment of any technology including 5G. Further they have mid band 5G spectrum (3300 MHz band) in 17 priority service areas as well as mmWave 5G spectrum (26 GHz band) in 16 service areas.
• The company’s existing network is built on 5G-ready architecture.
• The proceeds of the offer are crucial forVodafone Idea as it intends to roll out 5G services . Right now it is the only private company to not have 5G services unlike Airtel and Reliance Jio.
• On 6h April , 2024 Vodafone Idea’s board approved raising Rs 2,075 crore from an Aditya Birla Group entity through a preferential share issue. Aditya Birla Group’s stake is likely to remain the same at nearly 10%, as it will infuse Rs 2,075 crore at Rs 14.87 a share.
• Bharti Hexacom Limited another telecom operator has attracted good interest.
• As scrip is in F&O it may help to prevent significant downturn if any on listing of FPO shares to some extent
• I am likely to apply for Vodafone Idea FPO despite concerns on its past performance and road ahead . This is based on reasons stated above though due to precarious financial condition , it is bit risky based on fundamentals. To me overall it looks to be positive risk reward proposition. A good anchor response is a +ve for the company’s FPO and even as issue size is large, I expect it to sail through accompanied by reasonable QIB demand. A big risk remains of possible developments in Israel-Iran conflict.
• Please note that I have been proved wrong many times in the past on such expectations in some IPOs.
• GMP as reported on social media has been Rs. 1.5.
• Please take a decision based on your risk appetite.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.