- Vodafone Idea has opted for converting Rs. 16,000 crore interest dues to the government into equity at a par value of Rs. 10 per share.
- This will make the government one of the biggest shareholders of Vi, with 35.8% holding.
- Vi’s business has suffered a lot, especially after it started to lose customers to bigger rivals like Reliance Jio that quickly gained market share after waging a price war in 2016.
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.
If the plan goes through, then the government will become one of the biggest shareholders in the company which is reeling under a debt burden of about Rs 1.95 lakh crore. It is estimated that Vodafone-Idea had AGR dues worth Rs 50,400 crore.
“…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,” Vodafone Idea said in a regulatory filing.
The government has given telecom operators an option of paying interest for the 4 years of deferment on the deferred spectrum instalments and adjusted gross revenue (AGR) dues by way of conversion into equity of the NPV of such interest amount.
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.
Earlier, VI had accepted the four-year moratorium that was announced by the government in September, which would help it to save Rs. 1 lakh crores cumulatively, in the next four years. Now it has accepted equity conversion as well. Bharti Airtel opted for the moratorium, but not for the conversion, whereas Reliance Jio opted for neither. However, Vi opted for both. It is trying to raise Rs. 25,000 crores from global investors as well since two years, and it was expected to withdraw its fundraising needs after accepting the relief measures.
Vi’s business has suffered a lot, especially after it started to lose customers to bigger rivals like Reliance Jio that quickly gained market share after waging a price war in 2016.
Nitin Soni, Senior Director, Corporates at Fitch Ratings, told CNBC TV18 that this reform by the government will provide some cash flow relief to the company, and help them to expand their 4G spectrum. He said that the company is not investing enough in Capex and it needs fresh equity investments.
Shares of VIL were trading at Rs 12.55 apiece, down by 15.49 per cent compared to the previous, at the BSE in the morning hours. According to Bloomberg data, of the 20 analysts tracking the company, six maintain a ‘hold’ and 14 recommend a ‘sell’.
