MUMBAI: Vodafone Idea’s Rs 25,000 crore rights issue opened on Wednesday, with commitment from promoters Vodafone as well as Aditya Birla Group to subscribe to their rights component fully. The issue is open till April 24 and will test the investment appetite for telecom stocks. The telecom major’s rights issue is priced at Rs 12.50 per share, at a discount to the market price. Vodafone Idea shares closed 3.25 per cent lower at Rs 16.35 on BSE on Wednesday.
“Investors should subscribe to the rights issue as it is attractively priced. Also, not subscribing will entail a substantial dilution of value for investors,” said Naveen Kulkarni, head of research, Reliance Securities.
Vodafone Idea chief executive officer Balesh Sharma said the rights issue proceeds, as well as the monetisation of Indus Towers stake, will provide the company with required investments in the business to achieve strategic goals.
Brokerage firm Motilal Oswal, in a report based on interaction with Sharma, said the shareholders and promoters felt that at this point, the company needs to raise sufficient capital and hence the size of Rs 25,000 crore was fixed. “In October 2018, when the company decided on this plan, it started with a cash balance of Rs 13,600 crore on balance sheet, the equity raise will bring in Rs 25,000 crore,” the report said.
The rights proceeds, along with the Indus Tower sale, will make Rs 44,000-45,000 crore cash available, giving the company adequate funding. Vodafone Idea’s rival, telecom firm Bharti Airtel, is also close to launching its Rs 25,000 crore rights, part of its overall fundraising plans of Rs 32,000 crore.