The Securities and Exchange Board of India has approved the government’s proposal to convert the regulatory dues worth Rs 16,000 crore of the company into equity, news agency Reuters reported, citing sources. As part of the government’s reforms for the telecom sector in September last year, the company had availed the option to convert its interest dues into government equity in January along with defering its spectrum and adjusted gross revenue for a period of four years. Upon conversion of interest dues into equity, the government will become the single largest shareholder in the cash-strapped telecom operator with a 33% stake.
In May, SEBI had exempted the government to make open offer to the shareholders to acquire shares in Vodafone Idea. According to the regulation, any company which wishes to acquire a 25% or more stake in a listed company will have to make a mandatory open offer to the shareholders, according to the regulations. Since an open offer will also give the benefit to existing shareholders to exit the company, it will result in cash outflow by the government and defeat the purpose of the relief granted to the telecom operator.
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While exempting the government from making the open offer, the market regulator had also approved the classification of government’s holding in the company as public shareholding. “Moreover, GoI has no intent to participate in the management or the Board of the VIL and there is going to be no change in control of the VIL. Further, such holding shall be classified as public shareholding,” SEBI had said in its order.
According to people aware of the matter, the Department of Telecommunications recently asked Vodafone Idea to give details on its fundraising plans before it converts its dues into equity.
The telecom operator has been struggling to raise external funding for a long time now. In 2020, the company’s board had approved a plan to raise Rs 25,000 crore, but the company has so far only been able to raise close to Rs 5,000 crore from promoters. According to the company, potential investors, both strategic as well as financial, are waiting for the government to convert its debt into equity.
At the end of the April-June quarter, VIL’s gross debt, excluding lease liabilities and including interest accrued but not due, stood at Rs 1.99 trillion, comprising deferred spectrum payment obligations of Rs 1.16 trillion, AGR dues of Rs 67,270 crore, and debt from banks and financial institutions of Rs 15,200 crore.