Vodafone Idea FPO Subscribed 6.36 times

About the Vodafone Idea FPO

The stock of Vodafone Idea Ltd 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. The FPO of Vodafone Idea Ltd will entirely be 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 FPO of Vodafone Idea Ltd comprises the issue of 1,750.91 crore shares which at the upper price band of ₹11 per share will translate into a fresh issue size of ₹19,260 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 1,750.91 crore shares which at the upper end of the price band of ₹11 per share aggregates to total issue size of ₹19,260 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.

How subscriptions evolved in the FPO period?

While the QIB portion and the HNI / NII portion picked up traction on the last day, the overall journey was quite tepid for the retail investors. In fact, the QIB portion got fully subscribed only late on the second day of the FPO while the HNI / NII portion got fully subscribed only on the last day of the FPO. Retail subscriptions fell just short of full subscription at the close of the IPO. The overall FPO also saw the subscription book filling up only on the last day of the FPO. The FPO was kept open for a total period of 3 trading days. While the retail portion did start off strong, the eventual traction slowed in the subsequent days, and it could not even complete 1 time subscription, while the HNI portion and QIB portion gathered momentum on the last day of the FPO. Here is the day-wise progress in FPO subscription of the total available quota. The available over subscription in the table below represents the oversubscription; net of the anchor allocation of shares, done on the day prior to the opening of the FPO.

Data Source: BSE

As can be seen from the above table, the overall FPO got 6.36 times subscribed at the close of the third and final day of the FPO on 22nd April 2024. Here is a quick look at how the various categories saw traction on the last day of the FPO.

• The QIB portion got 0.67 times subscribed at the end of the first day of the FPO. However, on the last day of the FPO, the subscription moved from 1.03X to 17.56X.
   
• The HNI / NII portion got 0.31 times subscribed at the end of the first day of the FPO. However, on the last day of the FPO, the subscription moved from 0.83X to 4.13X.
   
• Retail portion got 0.07 times subscribed at the end of the first day of the FPO. However, on the third and final day of the FPO, the subscription moved from 0.14X to 0.91X.
   
• The overall FPO got 0.9 times subscribed at the end of the first day of the FPO. However, on third and final day of the FPO, overall subscription moved from 0.54X to 6.36X.

The subscription must be seen in the context of the size of the issue at ₹19,260 crore.

Rapid update on the overall FPO response

The FPO saw fairly tepid response on the Day-1 and Day-2, with most of the action visible only on Day-3 of the FPO, as is normally the case. However, the FPO did close with relatively healthy subscription numbers at the close of Day-3, especially if you consider the mega size of the IPO. In fact, the FPO of Vodafone Idea Ltd got fully subscribed only on the third and final day of the FPO. As per the combined bid details put out by the BSE at the close of Day-3, Vodafone Idea Ltd FPO was subscribed 6.36X overall, with best demand coming from the QIB Segment, followed by the HNI / NII segment and the Retail segment falling short.

In fact, the institutional QIB segment and the HNI / NII segments saw some very good traction on the last day. The HNI portion did do well and a lot of the surge of funding applications and corporate applications did come in on the last day of the FPO. Retail portion was relatively less aggressive on the last day, and eventually fell short of full subscription at the close of the FPO. Firstly, let us look at the details of overall allocation of shares to various categories of investors. It may be noted that in the final allocation of shares, minor variations are normal as part of intra-segment adjustments. These, however, do not impact the total number of shares materially.

Data Source: BSE

Having understood the allocation of shares across various categories, Let us look at how the subscription data played out for the FPO at an overall level and at a more granular level.

As of close of 22nd April 2024, out of the 1,260 crore shares on offer in the FPO, Vodafone Idea Ltd saw bids for 8,011.83 crore shares. This implies an overall subscription of 6.36X at a macro level. The granular break-up of subscriptions was in favour of the QIB segment followed by the HNI / NII investors and the Retail investors in that order; although the retail portion fell short of 1-time subscription. QIB bids and NII bids typically gather most of the momentum on the last day, and that was the case in this issue also in the case of QIB bids. Both the QIB and the NII bids picked momentum on the last day and added to its heft of the previous days. Here are the details of the category-wise subscription.

Data Source: BSE

Subscription status of QIB Portion

On 16th April 2024, Vodafone Idea Ltd completed the bidding for its anchor allocation. There was a robust response as the anchor investors participated through the process of book building. A total of 490.91 crore shares were allotted to the 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 allocation of ₹₹5,400 crore. The anchors absorbed 28.04% of the total issue size of ₹19,260 crore.  It may be noted that half the anchor portion is locked for 1 month from the date of allotment i.e. up to May 23rd, 2024. The other 50% is locked for 3 months from the date of allotment i.e., up to July 22nd 2024.

The residual QIB portion (net of anchor allocation as explained above) had a quota of 360 crore shares of which it has got bids for 6,321.05 crore shares at the close of Day-3, implying a subscription ratio of 17.56X for QIBs at the close of Day-3. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the Vodafone Idea Ltd FPO subscription overall, the actual demand did turn to be quite robust for the FPO.

Subscription status of HNI / NII Portion

The HNI portion got subscribed 4.13X (getting applications for 1,114.39 crore shares against the quota of 270.00 crore shares). That is a relatively strong response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day, and also considering the size of the FPO. Bulk of the funded applications and corporate applications, come in on the last day of the FPO, and that was visible as the overall HNI / NII portion added to its heft on the last day of the FPO. Apart from the QIB portion, even HNIs saw good traction on the last day.

Now the NII/HNI portion is reported in two parts viz. bids below ₹10 lakhs (S-HNI) and bids above ₹10 lakhs (B-HNI). The bids above the ₹10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above ₹10 lakh bid category got subscribed 5.49X while the below ₹10 lakh bid category (S-HNIs) got subscribed 1.41X. This is just in the form of additional information and is already part of the overall HNI bids explained in the previous paragraph.

Subscription status of Retail Individuals

The retail portion was subscribed a rather tepid 0.91X at the close of Day-3, showing relatively weak appetite. It must be noted that retail allocation is 35% in this FPO. For retail investors; out of the 630.00 crore shares on offer, valid bids were received for 576.39 crore shares, which included bids for 429.75 crore shares at the cut-off price. The FPO is priced in the band of (₹10 to ₹11 per share) and has closed for subscription as of the close of Monday, 22nd April 2024.

Next Steps in the Vodafone Idea FPO

The issue opened for subscription on 18th April 2024 and closed 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, as has been the subscription considering the size of the FPO. The credits to the demat account to the extent of shares allotted will happen by the close of 24th April 2024 under ISIN (INE669E01016).