If the Securities and Exchange Board of India (SEBI) permits, the Union government will soon have a commanding share in the ailing telecom company, Vodafone Idea Limited (Vi).
The Centre plans to convert the telecom company’s accrued interest liability on deferred dues into equity, thus helping the debt-ridden company to fulfil its fund-raising target. The company’s total debt stands at ₹1,97,878.2 crore as on March 31, 2022.
The Centre will then enjoy around 33 per cent in the company, while British company Vodafone and Aditya Birla Group will hold 50%. Public will hold the rest of the shares.
The Centre has proposed to convert Vi’s interest liability of ₹16,133 crore into equities, in accordance with Section 62 (4) of Companies Act, 2013.
As per media reports, the Union government may prefer to have a public ownership stake and not opt for the promoter’s category. Sources say the government will not have any representative on the board of directors of Vodafone Idea.
A day before, Vi stated that the company wants to raise ₹436 crore from its promoter group Vodafone and has sought shareholders’ nod for the same.
In January this year, Vi had decided to opt for converting about ₹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 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 ₹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 had then given telecom operators an option of paying interest for the 4 years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount.
Vodafone Idea’s total gross debt, excluding lease liabilities and including interest accrued but not due, as of September 30, 2021 stood at ₹ 1,94,780 crore. The amount comprises deferred spectrum payment obligations of ₹1,08,610 crore, AGR liability of ₹63,400 crore that are due to the government and debt from banks and financial institutions of ₹22,770 crore.
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 par value of ₹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.