Indus Towers has said that the conversion of Vodafone Idea‘s dues into equity by the government is stuck as the stock price of the cash-strapped telecom operator has been trading below the par value of Rs 10.
As part of the government’s revival package for the telecom sector in September last year, Vodafone Idea had availed the option of deferring its spectrum payment and adjusted gross revenue dues for a period of four years. It also opted for the provision wherein the interest component of this deferral worth Rs 16,130 crore gets converted by the government into equity.
“As per the Company law provisions, any equity infusion cannot be below par value (Rs 10), and hence the equity conversion would only be decided once the stock price stabilises above Rs 10,” Indus Towers said in its quarterly report for the September quarter. Post the equity conversion, the government will become the single-largest shareholder in Vodafone Idea with a 33% stake.
On Friday, shares of the company closed 0.6% lower at Rs 8.55 on the National Stock Exchange.
In September 2022, the finance ministry cleared the proposal to convert Vodafone Idea’s dues into equity, and now the department of telecommunications (DoT) needs to finalise the transaction, the tower company said.
Recently, DoT had asked the company to present its fundraising plan before conversion of dues into equity. Government’s stake conversion in Vodafone Idea is crucial for the company and its vendors like Indus Towers as that will give confidence to investors and lenders to infuse funds in Vodafone Idea.
The telecom operator solely owes about Rs 7,000 crore to Indus Towers, which has also started facing cash flow constraints largely due to pile up of dues from Vodafone Idea. Vodafone Idea leases several towers and rooftop locations from Indus Towers to run its network.
For the quarter ended September, Indus Towers trade receivables rose 4% quarter-on-quarter to Rs 6,499 crore.
The tower company has also accepted Vodafone Idea’s proposal for softer payment terms, under which the telecom operator would pay part of the monthly billing till December 31, and 100% of the amounts billed thereafter. The remaining dues outstanding till December 31 will be paid by Vodafone Idea between January and July 2023, Indus Towers said.
In its post-quarter earnings call, the tower company told analysts that it is confident that the new payment will work out with Vodafone Idea on the basis of which the towers company expects the trade receivables to come down from January.