The board of directors of India’s largest telecom operator Vodafone Idea on Wednesday cleared the planned Rs 25,000-crore rights issue at a price of Rs 12.50 per equity share, a steep 61 per cent discount to the prevailing market rate.
In a regulatory filing, the company said that the rights entitlement ratio has been fixed at 87 equity shares for every 38 equity shares held by eligible shareholders of the company on the record date, that is April 2, 2019. The issue opening date has been fixed for April 10 while the closing date has been set for April 24, 2019, the filing said.
The issue price of Rs 12.50 per equity share (including a premium of Rs 2.50 per equity share) is at a massive 61 per cent discount to the previous closing of Rs 32 per share.
Earlier this year, the board of directors of Vodafone Idea had approved Rs 25,000 crore fund-raising plan by way of rights issue to the existing eligible equity shareholders, following which the company received cabinet nod for foreign direct investment (FDI) infusion in February.
The promoter shareholders Vodafone Group and Aditya Birla Group have told the board that they intend to contribute up to Rs 11,000 crore and up to Rs 7,250 crore, respectively, as part of such rights issue. The promoter shareholders have also said that in case the rights issue is under-subscribed, each of the promoter shareholders reserves the right to take up part or whole of the unsubscribed portion, subject to stipulated norms.
Vodafone Idea’s board has previously authorised the Capital Raising Committee to decide the nuances of the rights issue, issue price, rights entitlement ratio, record date, timing of the issue and other matters. The proposed rights issue will arm Vodafone Idea with the firepower to take on market competition intensified by Reliance Jio, that has sustained an aggressive tariff war in the telecom sector.
British telecom major Vodafone holds 45.1 stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group controls 26 per cent and Idea shareholders own 28.9 per cent. The mega merger was announced a few months after the entry of the deep-pocketed Reliance Jio, whose aggressive pricing and freebies impacted the financials of the entire industry, which has even seen bankruptcies and asset sell-offs.
After Wednesday's news, Vodafone Idea stock fell as much as 7.6 per cent to Rs 29.60, its steepest intraday fall in almost two months. At 2.40 pm, the stock was trading lower by 0.31 per cent at Rs 31.90
($1 = 68.8700 Indian rupees)