Vodafone Thought plans to spend the Rs 18,000-crore capital raised from its FPO to arrange new 5G websites, increase its 4G community, and defer spectrum funds.

Vodafone Thought’s Observe-on Public Providing (FPO) value Rs 18,000 crore will enhance its competitiveness with rival telecom operators to some extent and result in a pointy discount in financial institution debt, which can permit it to safe additional funding from banks, analysts stated.

“Vi’s FPO is a step in the precise path albeit a lot delayed and may assist bridge the community protection hole and enhance competitiveness versus friends (to some extent). Additional, with a pointy discount in Vi’s financial institution debt, we imagine Vi will be capable to safe additional funding from banks,” analysts at Kotak Institutional Equities stated in a observe.

Whereas the fund-raise ought to enhance Vi’s near-term fortunes, analysts stated they don’t anticipate Vodafone Thought to realize any significant market share from its friends.

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“We stay involved about potential giant fairness dilution on the conversion of Authorities of India (GoI) dues. Doubtlessly, the GoI may personal an 80%+ stake in Vi on a completely diluted foundation within the worst case, which might restrict any significant upside for Vi’s minority traders,” Kotak stated in a observe.

Vodafone Thought plans to spend the Rs 18,000-crore capital raised from its FPO to arrange new 5G websites, increase its 4G community, and defer spectrum funds, the telco stated in its crimson herring prospectus (RHP) filed.

Of the overall FPO proceeds, the telco proposes to make use of Rs 12,750 crore to buy gear for increasing its community infrastructure by establishing new 4G websites, increasing the capability of present 4G websites, and establishing new 5G websites. It would spend Rs 5,720 crore of the Rs 12,750 crore earmarked for community growth on establishing its 5G community with 22,000 new websites.

The Vodafone Thought FPO will open for subscription on April 18 and shut on April 22. The corporate has fastened a value band of Rs 10-11 per share for the FPO.

“Additional, with a pointy discount in financial institution debt (~Rs45 billion at end-Feb 2024), we imagine Vi will be capable to safe additional funding from banks,” Kotak stated. “We imagine that elevated 4G protection will assist arrest market share losses on 4G within the close to time period.”

The telco additionally not too long ago raised $250 million by a preferential share subject to a promoter entity led by the Aditya Birla Group.

“Our sensitivity evaluation signifies that the promoter shareholding may fall to 38% vs. 50.3% now if VIL raises Rs 180 billion on the introduced value band of Rs 10-11/ share,” BofA Securities stated in a separate observe.

Analysts at BofA Securities stated the supposed capex will assist the telco’s protection to doubtlessly enhance, which may doubtless result in the telco dropping none to some customers and, therefore, incremental market share achieve for opponents slowing.

“We imagine that Bharti Airtel was a much bigger beneficiary prior to now of mid-to-high-end VIL customers churning out. Nonetheless, Bharti and Jio are more likely to achieve share, given their investments in 5G and higher aggressive positioning within the 5G market. We additionally see upside dangers to Bharti/Jio capex (though marginally) in the event that they reply to VIL’s enhancing positioning.

BofA analysts stated that potential tariff hikes, doubtless in 3-6 months, are anticipated to additional assist enhance cash-flows of Vodafone Thought.

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