The Government will control a 35.8 per cent stake in Vodafone Idea as the company’s board has approved the conversion of dues into equity. Debt-ridden Vodafone Idea (VIL) has decided to opt for converting about Rs 16,000 crore interest dues liability payable to the government into equity which will amount to around 35.8 per cent stake in the company, as per a regulatory filing of the telecom firm. The development is good news for the company and its consumers.
“…the board of directors, at its meeting held on 10th January 2022, has approved the conversion of the full amount of such interest related to spectrum auction instalments and AGR dues into equity. The Net Present Value (NPV) of this interest is expected to be about Rs 16,000 crore as per the company’s best estimates, subject to confirmation by the DoT. Since the average price of the Company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs 10/- per share, subject to final confirmation by the DoT,” Vodafone Idea said in a regulatory filing.
VIL said that since the average price of the company’s shares at the relevant date of August 14, 2021, was below par value, the equity shares will be issued to the government at a par value of Rs 10 per share, subject to final confirmation by the DoT.
“The conversion will therefore result in dilution to all the existing shareholders of the company, including the promoters. Following conversion, it is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company and that the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and around 17.8 per cent (Aditya Birla Group), respectively,” the filing said.
The union cabinet on September 15 approved a slew of measures to support the cash-strapped telecom firms. The relief measures include a four-year moratorium on payment of spectrum and AGR dues. The telecom firms have also been given the option to pay the interest amount arising due to the deferment of payments by way of issuing equity to the government.
Following the government’s announcement, Bharti Airtel and Vodafone Idea opted for the four-year moratorium.
However, Bharti Airtel recently decided to pay the interest amount to the government instead of issuing the equity.
Vodafone Idea is a combination of the India unit of Britain’s Vodafone Group and Idea Cellular.