The Central government is set to become the largest shareholder of Vodafone Idea (Vi) as it has opted to convert interest on deferred spectrum and adjusted gross revenue dues into equity.
The Centre in its telecom reforms package in October 2021 granted telecom companies a four-year moratorium on spectrum and AGR dues. The companies were also granted an option to convert interest on deferred liabilities into equity.
Recently, the telecom company’s board decided to exercise the option and approved the conversion of full amount of interest (with a net present value of around Rs 16,000 crore) into equity. The shares will be allotted to the government at a par value of Rs 10 per share since the average price of the company’s share was below the par value on the relevant date that was fixed by the government under the reforms package.
While the government may become the largest shareholder, it may not get involved in running the company.
While the four-year moratorium will enable Vi to conserve around Rs 60,000 crore, it will need to raise funds to pay its bank loans, improve and expand its network and acquire spectrum for 5G service that will be rolled in 2022.
As of September-end 2021, Vi had gross debt of Rs 1.94 trillion comprising deferred spectrum obligation of Rs 1.08 trillion, AGR liability of 63,400 crore and bank debt of Rs 22,770 crore.
The promoters have also decided to amend shareholder agreement and articles of association to protect their governing rights. This amendment is necessitated following dilution of promoter shareholding.