Vodafone Idea FPO: Anchor Allocation at 30%

The stock of Vodafone Idea FPO has a face value of ₹10 per share and the price band for the book building FPO (follow-on public offer) has been set in the range of ₹10 to ₹11 per share. Vodafone Idea FPO will entirely a fresh issue of shares with no offer for sale (OFS) component. The fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership, and hence the OFS is neither equity dilutive nor is it EPS dilutive. The fresh issue portion of the Vodafone Idea FPO comprises the issue of 1,636.36 crore shares which at the upper price band of ₹11 per share will translate into a fresh issue size of ₹18,000 crore.

Since there is no offer for sale (OFS) component, the fresh issue size will also double as the overall size of the FPO. Therefore, the total FPO of Vodafone Idea Ltd will comprise of a fresh issue of 1,636.36 crore shares which at the upper end of the price band of ₹11 per share aggregates to total issue size of ₹18,000 crore. The FPO of Vodafone Idea Ltd will be listed on the NSE and the BSE on the FPO mainboard; since it is already a listed company. The fresh funds will be used to purchase equipment for expansion of the network infrastructure and to pay deferred payments for spectrum to the Department of Telecom (DOT). Promoters currently hold 48.75% in the company, which will get diluted post the FPO to 36.87%. The FPO will be lead managed by Axis Capital, Jefferies India, and SBI Capital Markets, while Link Intime India Private Ltd will be the registrar to the FPO.

Read more about Vodafone Idea FPO

A brief on the anchor allocation of Vodafone Idea FPO

The anchor issue of Vodafone Idea FPO saw a relatively strong response on 16th April 2024 with 30% of the FPO size getting absorbed by the anchors. Out of 1,636.36 crore shares on offer, the anchors picked up 490.91 crore shares accounting for 30% of the total FPO size. The anchor placement reporting was made to the BSE late on Tuesday, 16th April 2024; one working day ahead of the FPO opening on Thursday, 18th April 2024, since 17th April 2024 happens to be a trading and clearing holiday.

The entire anchor allocation was made at the upper price band of ₹11 per share. This includes the face value of ₹10 per share plus a share premium of ₹1 per share, taking the anchor allocation price to ₹11 per share. Let us focus on the anchor allotment portion ahead of the Vodafone Idea Ltd FPO, which saw the anchor bidding opening and also closing on 16th April 2024. Post the anchor allocation, here is how the overall allocation looked.

Here it must be noted that the 490.91 crore shares issued to the anchor investors on 16th April 2024, were actually reduced from the original QIB quota; and only the residual amount would be available to QIBs in the FPO. That change has been reflected in the table above, with the QIB FPO portion reduced to the extent of the anchor allocation. As a result, the QIB FPO quota has reduced from 50% before the anchor allocation to 20% after the anchor allocation. The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted has been deducted from the QIB quota for the purpose of the public issue.

Finer points of anchor allocation process

Before we go into the details of the actual anchor allotment, a quick word on the process of anchor placement. The anchor placement ahead of an FPO is different from a pre-FPO placement in that the anchor allocation has a lock-in period of just one month, although under the new rules, part of the anchor portion will be locked in for 3 months. It is just to give confidence to investors that the issue is backed by large established institutions. It is the presence of institutional investors like mutual funds and foreign portfolio investors (FPIs) that gives confidence to the retail investors. Here are details of the anchor lock-in for the issue of Vodafone Idea Ltd.

However, the anchor investors cannot be allotted shares at a discount to the FPO price. This is explicitly stated in the SEBI revised regulations as under, “As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2018, as amended, in case the Offer Price discovered through book building process is higher than the Anchor Investor Allocation Price, then the Anchor investors will be required to pay the difference by the pay-in as specified in the revised CAN.

An anchor investor in an FPO is normally a qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company or a sovereign fund which invests before the FPO is made available to the public as per SEBI regulations. Anchor portion is part of the public issue, so the FPO portion to the public (QIB portion) is reduced to that extent. As initial investors, these anchors make the FPO process more attractive for investors, and instil confidence in them. Anchor investors also largely aid in price discovery of the FPO

Anchor allocation investors in Vodafone Idea FPO

On 16th April 2024, Vodafone Idea Ltd completed the bidding for its anchor allocation. There was a strong and robust response as the anchor investors participated through the process of book building. A total of 490.91 crore shares were allotted to a total of 74 anchor investors. The allocation was done at the upper FPO price band of ₹11 per share (including premium of ₹1 per share) which resulted in an overall anchor allocation of ₹5,400 crore. The anchors have already absorbed 30% of the total issue size of ₹18,000 crore, which is indicative of fairly robust institutional demand.

Listed below are the 24 anchor investors who, have been allotted 1% or more of the anchor allocation done ahead of the FPO of Vodafone Idea Ltd. The entire anchor allocation of ₹5,400 crore was spread across a total of 74 anchor investors, with only 24 anchor investors getting more than 1% each out of the anchor allocation quota. While there were 74 anchor investors in all, only the 24 anchor investors who got allocated 1% or more each of the anchor quota are listed in the table below. These 24 anchor investors accounted for 80.53% of the total anchor collection of  ₹5,400 crore. The detailed allocation is captured in the table below, indexed descending on size of anchor allocation.

Data Source: BSE Filings (Value Allocated in ₹ in Crore)

The above list only includes the set of 24 anchor investors who got allotted shares of 1% or above each of the anchor portion done ahead of the Vodafone Idea Ltd FPO. In fact, there were 74 anchor investor in all; with only the anchor investors getting more than 1% each of the anchor quota being mentioned in the list above. The detailed and comprehensive report on the anchor allocation with the mutual fund portion separated can be accessed by clicking on the link below.

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240417-1&attachedId=52d26784-6af1-418b-8581-c00d7b3994ff

The detailed report is available in PDF format and can be downloaded by clicking on the link above. Alternatively, readers can also opt to cut this link and paste in their browser, in case the link is not directly clickable. The details of the anchor allocation can also be accessed in the Notices section of the BSE on its website www.bseindia.com.

Overall, the anchors absorbed 30% of the total issue size. The QIB portion in the FPO has already been reduced to the extent of the anchor placement done above. Only the balance amount will be available for QIB allocation as part of the regular FPO. The general norm is that, in anchor placements, smaller issues find it hard to get FPIs interested while larger issues do not interest mutual funds. Vodafone Idea Ltd saw a good deal of buying interest from all category of anchors viz. FPIs, participatory notes routed through ODIs, domestic mutual funds, AIFs, and insurance companies. Let us finally look at the sub-category of mutual fund participation in the anchor allocation ahead of the Vodafone Idea Ltd FPO.

The anchor response normally sets the tone for the retail participation in the FPO and the anchor response has been fairly steady this time around. Out of the 490.91 crore shares allocated to the anchors in the FPO, a total of 79.52 crore shares were allocated to domestic mutual funds registered with SEBI. This allocation was spread across 11 mutual fund schemes belonging to 5 asset management company (AMCs). The mutual fund allocation in the anchor portion amounted to 16.20% of the total anchor size.

Key dates for Vodafone Idea FPO and how to apply?

The issue opens for subscription on 18th April 2024 and closes for subscription on 22nd April 2024 (both days inclusive). The basis of allotment will be finalized on 23rd April 2024 and the refunds will be initiated on 24th April 2024. In addition, the demat credits are expected to also happen on 24th April 2024 and the stock will list on 25th April 2024 on the NSE and the BSE. Vodafone Idea Ltd will test the appetite for a deeply loss making telecom company in India, but anchor response has been quite good. The credits to the demat account to the extent of shares allotted will happen by the close of 24th April 2024 under ISIN (INE669E01016)