FII and HNIs provide a powerful signal enhancer for Vi’s FPO

On the last day of the subscription on Monday, Vodafone Idea’s Rs 18,000 crore follow-on public offer (FPO) saw a surge in retail participation and strong interest from foreign institutional investors (FIIs) and high net worth individuals.

Based on information from the exchanges, the FPO got 80.12 billion bids, 6.36 times more than the total number of shares available. This is predicated on the lower end of the company’s pricing range of Rs 10–11 per share. The issue was subscribed to seven times at the top end of the price range, the merchant bankers said.

Based on information from the markets, FIIs submitted almost 65% of all offers for Vodafone Idea’s FPO. There were 19.31 times more offers than there were shares available for the fraction reserved for qualified institutional buyers (QIBs), which comprises mutual funds, local financial institutions, and foreign institutional investors.

4.54x offers were received from non-institutional investors, which includes wealthy people and corporations. The interest in the retail investors section increased on Monday after it had not attracted much attention on the previous two days of the offering. Merchant bankers said the retail component was completely subscribed.

50% of the offer was reserved by the firm for QIBs, 15% for non-institutional investors, and the remaining portion was for individual investors. On April 25, the shares will be listed on the exchanges.

These figures do not include the Rs 5,400 crore that the business raised at 11 rupees per share from anchor investors prior to the FPO. The company’s shares, which dropped more than 6% during intraday trading on Monday, regained the bulk of those losses and closed 0.2% down at Rs 12.89 after an unexpectedly positive reaction to the secondary share sale.

Some brokerage companies have upgraded or reevaluated their rating for Vodafone Idea’s shares because to the robust reaction from anchor investors during the first two days of the issuance. Ambit Capital said that in light of the “unexpectedly” positive reaction to the FPO, it was reviewing its “sell” recommendation for Vodafone Idea. After the FPO was announced, IIFL Securities raised its recommendation on Vodafone Idea to “add.”

“VI seems to have achieved success with its current equity fund-raise, supported by a diverse range of QIBs. QIBs seem to think that they stand to benefit disproportionately from VI’s success even if the company lacks the cash and tariffs necessary to sustain spectrum/AGR payments beyond the September 25 embargo, according to Ambit Capital’s analysis.

When considering several previous FPOs and initial public offerings (IPOs) of comparable magnitude that have taken place over the last few years, the market’s reaction to Vodafone Idea’s FPO was far greater. For example, in July 2020, YES Bank’s Rs 15,000 crore FPO garnered 0.93 times the subscription.

Aside from this, 2.95x and 1.89x subscriptions were received for the first public offerings (IPOs) of Life Insurance Corp of India and One97 Communications, the two biggest public issues to hit the Indian market. The parent company of Paytm had an issue amount of Rs 18,300 crore, while LIC had an issue size of around Rs 20,500 crore.