Relief package: Vodafone Idea opts for AGR moratorium

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October 30, 2021 4:15 AM

The DoT has said that conversion of the accrued interest component into equity will be done by invoking Section 62 (4) of the Companies Act and the amount will be treated as a loan until the conversion is completed. The relevant date will be August 14, a month before Cabinet approval.

The companies were required to send their preferences by Friday regarding the moratorium following the government’s revival package for the sector which involves deferring the payment of spectrum instalments and AGR dues with the net present value intact.The companies were required to send their preferences by Friday regarding the moratorium following the government’s revival package for the sector which involves deferring the payment of spectrum instalments and AGR dues with the net present value intact.

Vodafone Idea on Friday informed the Department of Telecommunications (DoT) about its acceptance of the four-year moratorium for payment of its adjusted gross revenue (AGR) dues.

It had last week already given its acceptance for availing the offer to defer its spectrum dues for the same period. Apart from Vodafone Idea, Bharti Airtel has also opted for deferring its spectrum and AGR dues. Reliance Jio, however, has not opted for the moratorium.

The companies were required to send their preferences by Friday regarding the moratorium following the government’s revival package for the sector which involves deferring the payment of spectrum instalments and AGR dues with the net present value intact.

Vodafone Idea said its board will consider the other option in the revival package like offering equity to the government in lieu of interest accrued, and confirm its acceptance within the stipulated time frame. It now has a timeframe of 90 days for confirming payment of interest accrued by way of offering equity to the government.

“The board of directors has approved the exercise of the option of deferment of the company’s AGR-related dues by a period of 4 years with immediate effect, in accordance with the notification dated October 14 issued by DoT to the company,” it said in a regulatory filing.

The DoT has said that conversion of the accrued interest component into equity will be done by invoking Section 62 (4) of the Companies Act and the amount will be treated as a loan until the conversion is completed. The relevant date will be August 14, a month before Cabinet approval.

“For the valuation of shares or equity, it will be equal to higher of the average of weekly high and low of the volume – weighted average price of the equity shares during the last 26 weeks preceding the relevant date, subject to the provision under Section 53 of the Companies Act (ie shares cannot be less than par value),” the DoT has said.

The equity shares will be issued by the company, to the government, on a preferential basis. Further, details of the interest amount will be furnished by the company and certified by DoT. “The net present value (NPV) of the interest amount will be calculated as on the date of exercise of option. This interest amount will continue to be treated as a loan to the company till the completion of the equity infusion process,” the DoT has said.

Earlier in an interview with FE, Vodafone Idea CEO and managing director, Ravinder Takkar had indicated the company’s interest in taking the option of paying the interest component by offering equity to the government. “After the guidelines are announced, we would know exactly what the conversion would look like. But I think our understanding so far is that the interest associated with the delay is the choice that we can make and convert into equity. I would need to see the details and need approval from the board but I would imagine that is something we would be open to exercise,” Takkar had said.

In the case of Vodafone Idea, the annual AGR and spectrum deferred amount comes to Rs 23,000 crore. This means that the overall deferred amount for the four year period comes to Rs 92,000 crore.

Further, the government has provided additional funding headroom by way of which the company can fund its annual licence fee and spectrum usage charges of around Rs 4,000 crore at MCLR + 2% now without any penalty.

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