The Rs 18,000 crore share sale is expected to attract some marquee investors including GQG Partners, Morgan Stanley Investment Management, AustralianSuper, Fidelity among others.
Bloomberg reported that GQG will place bids for equity worth at least $300 million and as much as $400 million, which might come as a shot in the arm for the telco.
Despite the backing of big funds, analysts are quite cautious about retail investors putting their money into the FPO, the largest on D-Street so far.
Even though the offer might be a step in the right direction and alleviate some of the company’s concerns, one cannot be sure on how long it will take for the company to show some profitability and reduce debt significantly. The telco hasn’t reported an annual profit since 2016.
Analysts further said given the size of the FPO, investors are selling shares in the secondary market and planning to apply in the primary market.”The FPO will bring big funds and it will get oversubscribed. But, investors must not expect major listing gains and avoid taking a blind call. Its a loss making company and cant see them being profitable in the next 12-18 months,” said Avinash Gorakshakar of Profitmart Securities.VI is the third largest telco in India based on subscriber base. The company is raising funds for capex purposes of increasing its network infrastructure by expanding the capacity of the existing 4G sites and setting up new 4G and 5G infrastructure as well.
The company said it expects to roll out 5G services in select pockets in 6-9 months of the issue. The 5G rollout will cover 40% of the company’s overall revenue base in the next 24-30 months.
VI has not been able to roll out 5G services because of lack of funds. It can be noted that both its rivals Bharti Airtel and Reliance Jio — to whom it has ceded market share — have been active on 5G for some months now.
“India’s ARPU ($2.1 per month) is the lowest amongst the major economies, an increase in the cost of data plans by the telecom industries indicates a higher scope for ARPU improvement to generate a reasonable return on investment. Improving teledensity will also help the company’s growth in the future,” said SBI Securities.
While the fund-raise should improve the company’s near-term fortunes, analysts don’t expect the company to gain any meaningful market share from peers and remain concerned about potential large equity dilution.
“Potentially, the government could own an 80%+ stake in Vi on a fully diluted basis in the worst case, which would limit any meaningful upside for Vi’s minority investors,” said Kotak Institutional Equities.
However, the issue should help bridge the network coverage gap and improve competitiveness versus peers.
The company has set a price band of Rs 10-11 per equity share.
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