In a huge relief to Vodafone Idea, the government on Friday finally decided to convert the company’s accrued interest worth Rs 16,133 crore on account of deferment of AGR and spectrum dues into equity. The government said that the Aditya Birla Group — one of the promoters — has given a commitment to bring in additional funds.
“We had sought a firm commitment that the Aditya Birla Group would run the company and bring in necessary investments. Hence, we have agreed to convert. We want India to be a three-player market plus BSNL and ensure healthy competition for consumers,” communications minister Ashwini Vaishnaw said in a statement.
Earlier, Vodafone Idea said: “The government has directed the company to convert the net present value of the interest related to deferment of spectrum auction instalments and AGR dues into equity shares to be issued to the government of India…The company will take all necessary actions forthwith to undertake the aforesaid issuance.”
The company has been directed to issue 161.3 million equity shares of the face value of Rs 10 each at an issue price of Rs 10 each.
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On Friday, Vodafone Idea’s shares closed down 1.03% at Rs 6.89 on the BSE.
Upon conversion, the government would become the single-largest shareholder in the company with around 33% stake, while the promoters’ holding would come down from 74.99% to 50%. The government has, however, made it clear that it won’t be part of the company’s management and will neither have any representative on the board.
The government’s approval to convert the accrued interest comes a little over a year after the telco opted to avail this option provided as part of the government’s relief package to telecom service providers announced on September 15, 2021.
While Bharti Airtel has also opted for the four-year deferment of the adjusted gross revenue and spectrum dues, Vodafone Idea is the only company to have opted for the government converting the debt into equity.
Last month, Vaishnaw had said that equity conversion will happen once the promoters infuse fresh capital into the company.
The company had said that it needed to raise a total of Rs 25,000 crore to tide over the financial crisis. Out of the total amount, the promoters have already put in Rs 4,900 crore and the company hopes that the conversion of debt into equity by the government would aid it in raising the balance Rs 20,000 crore, as investors would get some comfort.
According to analyst estimate, the company would need to raise around Rs 40,000-45,000 crore to meet network capex as well as vendor dues and other statutory payments.
At the end of the July-September quarter, Vodafone Idea’s gross debt (excluding lease liabilities and including interest accrued but not due) was at Rs 2.20 trillion, comprising deferred spectrum payment obligations of Rs 1.36 trillion, AGR liabilities of Rs 68,590 crore that are due to the government, and debt from banks and financial institutions of Rs 15,080 crore.
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Vodafone Idea’s net loss stood at Rs 7,595.5 crore during the July-September quarter.
According to the company, Rs 9,600 crore of debt is payable by September 2023, while its gross cash balance as of September 2022 is Rs 200 crore. Analysts have estimated that the company will have a cash shortfall of Rs 6,400 crore by September 2023, assuming that all debt is repayable.
Due to funds crunch, the company has not been able to launch the 5G services which its peers, Reliance Jio and Bharti Airtel, have been doing.