Vodafone Idea shares at Rs 14? Stock jumps 4% as FPO kicks off

Shares of Vodafone Idea Ltd climbed 4 per cent in Thursday's trade as the telecom operator's Rs 18,000 crore follow-on public offer (FPO) kicked off. The FPO price band has ben fixed in the Rs 10-11 price range and bids can be made for a minimum of 1,298 shares and in multiples of 1,298 shares thereafter.

Following the development, Vodafone Idea shares advanced 4.33 per cent to hit a high of Rs 13.48 on BSE. IIFL Securities has upgraded Vodafone Idea a price target of Rs 14, as it recommended subscribing to the FPO. IIFL Securities said it sees two rounds of tariff increase in the next three years, which will benefit all three telcos.

It believes that the equity infusion in Vodafone Idea will be followed by debt-raising, which may result in Rs 45,000 crore in total funding, which should enable the telecom operator to narrow the 4G coverage/capacity gap with peers.

"This would not only arrest subscriber losses but also enable faster upgrade of 2G users to 4G. Direct tariff hikes, coupled with this upgrade, should drive Vi’s ARPU from Rs145 in 3QFY24 to Rs 241 in FY27," it said.

IIFL said there is a decent chance of a favourable verdict in the AGR curative petition. Factoring in Rs 35,000 crore of government dues getting converted into equity, it suggested a June 2025 target of comes to Rs 14 per share. There is a limited downside risk from the FPO price, it said.

"There is a decent chance of a reduction in AGR liability, a positive for Bharti and Vi," it said.

Vodafone Idea has proposed to utilise net proceeds from fresh issue towards funding equipment for the expansion of its network infrastructure amounting to Rs 12,750 crore, which includes setting up new 4G sites; expanding the capacity of existing 4G sites and new 4G sites and setting up new 5G sites.

It intends to pay certain deferred payments for spectrum to the DoT and the GST thereon amounting to Rs 2,175 crore and the balance amount for general corporate purposes.