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FPO lock-in expiry: Vodafone Idea share price to gain focus today as anchor investors’

Vodafone Idea’s (Vi) 18,000-crore follow-on public offering’s (FPO) anchor 30-day lock-in period is likely to expire today (Monday, May 27). In the past, there has been selling pressure on company share prices near the end of the anchor lock-in. Vodafone Idea share price, which ended Friday’s BSE trading session 7.54% higher at 15.11 per share, may face selling pressure on Monday’s trade.

As per the monthly charts, the Vodafone Idea share price has been forming a base around the 10.50–11.75 level and is also seen to be breaking out above its important resistance mark of 14.05, successfully managing to close above the same. Overhead resistance lies near 18.40 and 20.00–22.00 levels, which should be the potential targets for the stock within the next 1 year. Any pullback down towards 14–14.50 should offer a good buying opportunity now on the stock, said Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities. 

Also Read: Ericsson looks to increase share in India, aims for orders from Vodafone Idea

Vodafone Idea FPO share price opened with a 7.27% premium at 11.80 on NSE. On BSE, Vodafone Idea FPO shares debuted at 12 apiece, up 9% from the issue price of 11. Vodafone Idea share price has gained over 9% since its FPO shares listing.

“On listing, it generated healthy returns for all the investors. The post-FPO success of Vi is in the limelight, as they got what they needed to improve operation as well as launch 4G services and get into competition with peers,” said Tapse. 

Vodafone Idea FPO anchor investors 

Through its FPO, Vodafone Idea raised about 5,400 crore from anchor investors on April 17, which included Australian Super, GQG Partners, Fidelity Investments, UBS Fund Management, and Jupiter Fund Management. SBI General Insurance, Motilal Oswal, Indian Infoline, HDFC Mutual Fund, and Quant were among the domestic investors in the FPO.

The US-based GQG Partners has been allotted the most number of shares, valued at 1,345 crore, whilst Fidelity Investments has contributed around 772 crore to Vodafone Idea’s FPO.

Out of all the shares, five domestic mutual funds were allocated 16.20%, or 874 crore, of which 500 crore was invested by Motilal Oswal Midcap Fund.

Also Read: Vodafone Idea share price jumps over 4% as UBS upgrades stock to ‘buy’

Here’s what experts predict about Vodafone Idea stock performance:

Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities

Prashanth said that while the one-month anchor lock-in is about to open, we are not expecting any large selling pressure despite generating 39% return on investment (ROI) for FPO investors, as the FPO money has come into the books of Vodafone Idea for a longer growth story and not for short term returns. 

With continued government backing, Mr Birla’s showing more interest via preferential equity funding, followed by banks likely lending more money, which would allow Vi to revive and get into peer’s competition.  Post FPO success and the long-term telecom growth story in the telecom sector, we have an optimistic view that can generate healthy ROIs in next one year, added Tapse.

Mohit Gulati, CIO & Managing Partner of ITI Growth Opportunities Fund

According to Gulati, Vodafone Idea’s stock is bolstered by a solid anchor list of long-term investors, which significantly reduces selling pressure. With a clear 12 rupee bottom, it’s not far-fetched to anticipate Vi reaching the 18–20 levels in the near future. 

Vinit Bolinjkar, Head of Research, Ventura Securities Ltd

Bolinjkar believes that if the market can absorb large selling volumes from FPO subscribers, it would indicate positive sentiment about Vi’s potential to overcome these hurdles, suggesting potential upside for the company.

Also Read: Vodafone Idea share price jumps 17% to 52-week high; gives over 94% return this year

Vodafone Idea- Road Ahead

For Vodafone Idea, Mohit Gulati modified a quote by Peter Kreeft to “We live and die; Vodafone Idea died and lived!”

Gulati said that the company has resurrected from near-death to walk into the perfect blue sky scenario where a 15-20% tariff hike is imminent across all industry players, pending adjusted gross revenue (AGR) resolution is a given. Lastly, there is still a massive brand recall with customers who’ve stood by the company despite being the only telecom with no 5G!

“It is my fundamental belief that a country as large as India needs more than two telecos, and GoI will do all it takes to make this one fit rather than go back to the ventilator!,” added Mohit.

However, Vinit Bolinjkar highlighted that the company faces several challenges, despite the success of the FPO: a declining subscriber base (down 2.6 million QoQ to 213 million), high net debt of Rs. 2,074 billion, low revenue growth (down 0.6% QoQ), ARPU growth reliant on tariff hikes, flat average data usage (15.4GB/month), substantial capex requirements ( 500-550 billion over three years), and dependence on external funding ( 250 billion in discussions with banks). 

Further, Bolinjkar said that the competitive pressures from Airtel and Reliance Jio also necessitate significant network improvements. Vi has clarified that it is in talks with Ericsson and other vendors for 5G network gear.

Also Read: Vodafone Idea allots shares worth 2,075 cr to group entity

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.

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Published: 26 May 2024, 11:02 AM IST

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