The Board of Vodafone Idea Limited has approved the conversion of the interest towards deferred adjusted-gross revenue payments and its spectrum dues, that it owes to the government, into equity, the company said in an exchange filing. This will make the government the largest shareholder in the debt-ridden telecom company.
The net present value of these dues is about ₹16,000 crores and the equity shares will be issued to the government at ₹10 per share
The move will dilute the stake of all shareholders, including the promoters. Following this move, its expected that the government will own 35.8% of the company, United Kingdom-based Vodafone will own 28.5% and the Aditya Birla Group the remaining 17.8%.
The Department of Telecommunication had given the company 90 days to exercise this conversion option, under which the government would get shares on a preferential basis, with the date of share pricing as on August 14, 2021. It would be held through the Unit Trust of India (SUUTI) or any other trustee-type authority under the government.
The option to convert interest on deferred spectrum and AGR dues was not exercised by its rival, Airtel.
Vodafone Idea is facing cashflow issues, with its problems stemming from a 2019 Supreme Court decision that ruled the definition of AGR would include non-telecom revenues too. This move led to a pile of dues on existing telecom players already reeling under pricing pressure following Jio's 2016 into the sector.
Vodafone Idea has the largest pile of AGR dues, totalling nearly ₹58,000 crores followed by Airtel with nearly ₹45,356 crores. Overall, Vodafone Idea's debt is nearly at ₹1.9 lakh crore.
In September 2020, the Supreme Court permitted telecom companies to repay their dues over a 10-year period. In September last year, the government unveiled a rescue package to grant respite to the sector. It gave a four-year moratorium on the payment of AGR dues to telecom companies, rationalised the AGR definition and permitted more foreign direct investment in the sector.
The share price of Vodafone Idea Limited fell nearly 12%. It is now trading at ₹12.90 on the National Stock Exchange (NSE) at 11:40 am IST
Read the release here.