Vodafone Idea Right Issue Oversubscribed – Personally surprised but excited !

Access to new funding will mean the Indian telecom supremacy game will continue in foreseeable future though long term leadership, sustainability and profitability remains to be seen

As per a news report today, Vodafone Idea’s rights issue of Rs 25,000 crore has been oversubscribed.

This is to remind our readers that of Rs 25,000 crore of the issue, Rs 18,250 crore was to be subscribed by the promoters with balance Rs 6,750 crore offered to the public shareholders. The promoters were also open and had reserved the right to subscribe for any unsubscribed portion.

The oversubscription is due to good response from the public shareholders, wherein the bids have been estimated to be put in for Rs 8,700 crore i.e., oversubscription of almost 29%.

Enthusiasm from public shareholders seem to be primarily due to the offered price of Rs 12.5 per share as against the prevailing market price of Rs 16.3 – Rs 17.15 during the issue period i.e., a discount of about 25%

Key personal takeaways from this event –

  • Market seems to be factoring in a stability in this sector assuming that onslaught from Jio has ended
  • Retail seems to have gone for an averaging strategy assuming that “aur kitna girega” especially given the strength and reputation of the promoters (Vodafone, Aditya Birla Group)
  • Airtel must be deriving a lot of courage from this given their upcoming Rights issue

This event means that Jio, Vodafone-idea and Airtel (with rights issue), all will have significant funds to play in the short term.

Mr Ambani, GoI and Banks, all would be currently having a grin on their face for different reasons.

  • Banks – for reduced leverage in the short term. Plus ability to further lend to this sector and hence increase in the corporate lending book
  • GoI – for now being hopeful of getting significant sums from spectrum sale
  • Mr Ambani – for strategizing the next round of slaught on the competition
Will I invest in Vodafone-Idea? I will not be making any investment into Indian telecom space in the foreseeable future. People I think are getting too excited too soon in calling peace and assuming that the worse of telecom is over. For me, Jio is currently in the 20-40 overs of an ODI, where lot of consolidation is happening underneath. Fund raises, divestments, acquisitions, test product rollouts are all happening with unbelievable speed. Last 10 overs might be the most exciting time for the Indian telecom market !

Check Vodafone-Idea’s latest share price here

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About the author

Nitin Jain

A finance professional with around 20 years of investing experience in Indian markets both on buy and sell side, equity and debt, private and public with some of the best organizations globally including Goldman Sachs, ICICI Group, ICRA and others. He is a All India Silver Medalist CA by qualification.

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