The spectre of a duopoly that hung over the telecom industry over the past few years appears to have been exorcised.

The spectacular success of the Rs 18,000 crore Vodafone Idea follow-on public issue — which saw institutional investors scrambling to place the chips on a bet with a potentially strong payback — has stoked hopes that the telecom troika will survive the heat of intense competition and the acute pangs of legacy debts.

On Tuesday, the burst of optimism around Vodafone Idea’s future engulfed the markets with the stock leaping almost 12 per cent as investors and analysts reckoned that the FPO will give the beleaguered telecom entity enough firepower to hunker down and fight in the market, shovel money to build its 4G infrastructure, roll out a 5G service and hopefully stem the steady, nation-wide loss of subscribers who have been disenchanted with the overall Vi experience.

Investors also believe that the big vote of confidence by qualified institutional buyers (QIBs) signals a revival in the telco’s fortunes even though Vodafone Idea is still a long way from turning profitable.

Marquee investors like Rajiv Jain-led GQG Capital had not only participated in the round meant for anchor investors but also reportedly bid for VIL’s shares in the FPO.

A note from Ambit Capital said that VIL’s plan to raise Rs 45,000 crore through equity and debt could help it challenge the near-duopoly in the telecom sector. Apart from the FPO, the board of VIL had earlier approved the allotment of shares worth Rs 2,075 crore to an Aditya Birla group entity.

The brokerage, which placed its sell call on the VIL stock under review, added: “With government backing, Kumar Mangalam Birla’s return to the company’s board and equity funding, banks too will likely lend money. This will allow VIL to succeed with its Rs 45,000 crore total fund-raise. This is unexpected, so we place our SELL stance on VIL… under review’’.

The Vodafone Idea board set the issue price for the largest-ever FPO at Rs 11 per share — which means investors were sitting on huge notional returns of over 30 per cent as the stock closed at Rs 14.39 on the Bombay Stock Exchange.

Prior to this, the largest FPO in the domestic market was the Rs 15,000 crore share sale by Yes Bank in 2020.

On Monday, investors in Vodafone Idea had bid for as many as 8011.29 crore shares, which was 6.99 times the issue size. Market circles said the rally in the VIL stock was largely on account of the strong response shown by institutional investors to the FPO.

There are signs that the telecom companies plan to raise tariffs after the general elections as they seek to crank up their average revenues per user (ARPU).

The VIL share jumped as much as 14.42 per cent during intra-day trades to touch Rs 14.75 on the BSE. The stock closed with gains of 11.64 per cent over Monday’s close of Rs 12.89. The telco’s market capitalisation rose by Rs 7,517.98 crore to Rs 72,122.42 crore.

On the NSE, the VIL scrip ended at Rs 14.35, an increase of 11.24 per cent over the previous close after hitting an intra-day high of Rs 14.75.

The shareholding structure at Vodafone Idea post the FPO and the preferential allotment of equity to the Aditya Birla group will be known in the next few days. However, it is estimated that the combined promoters holding (Aditya Birla group and Vodafone plc) will come down to around 38 per cent from 48.91 per cent while the government’s stake will shrink to 25 per cent from 32.19 per cent at the end of the quarter ended March 31.