Home / Companies / News /  Govt to become largest shareholder in Vi post conversion of AGR dues to equities for 16,133 cr

The government has passed an order to convert adjusted gross revenue (AGR) dues of telecom services provider, Vodafone Idea into equities for nearly 16,133.2 crore. This conversion of AGR dues into equities is likely to make the Centre the largest shareholder in the loss-making telecom services provider.

Vodafone Idea shares closed in the green on Friday at 6.89 apiece up by 1.03% on BSE. The stock has rallied for second consecutive day. Its market cap is around 22,129.89 crore on the Dalal Street. 

Makarand Joshi, founding partner, of MMJC and Associates – a corporate compliance firm said, "Though the government stake in Vodafone Idea will rise to 33 percent, which is over and above the 26 percent mark that triggers an open offer under SEBI regulations, the capital market regulator had in May 2022 itself had exempted the government from making an open offer."

At present, the promoter and promoter group in Vodafone Idea holds a 74.99% stake, while public shareholding is at 25.01% as of December 31, 2022. Post this transaction, the promoter's shareholding will trim down to 50%.

Joshi added, "Classifying the proposed stake by the government as public shareholding, the regulator in its then order, had stated that the acquisition by the government is proposed with the sole intent of saving the larger public interest without any objective of taking control of the telecom operator."

On Saturday, Finance Minister Nirmala Sitharaman in a press conference explained that the government is not bearing Vodafone Idea's debt. The telco is not in a position to pay it due to the government, and hence, they are taking its equity shares. She added that this means the Centre is the shareholder in the company, and when it will gain profit so will they.

In its regulatory filing on Friday, Vodafone Idea said, "Ministry of Communications, Government of India has, in line with the Reforms and Support Package for Telecom Sector communicated earlier and the conversion option exercised by the Company as provided for therein, passed an order..., directing the Company to convert the NPV of the interest related to deferment of spectrum auction instalments and AGR Dues into equity shares to be issued to the Government of India."

It added, "The total amount to be converted into equity shares is 16133,18,48,990. The Company has been directed to issue 1613,31,84,899 equity shares of the face value of 10 each at an issue price of Rs. 10 each."

Earlier, in March, Vodafone Group and Aditya Birla Group, promoters of the cash-trapped telco infused 4,500 crore – which is part of the proposed 25,000 crore fundraising from investors - followed by another equity investment of 436 crore in July by Euro Pacific Securities, a Vodafone Group Plc entity.

Vodafone Idea has a whopping debt of 2.2 trillion as of September 31, 2022. The company has been struggling to raise funding to the tune of 20,000 crore in a combination fo equity and debt since 2021.

Last week, on January 31st, Vodafone Idea's board approved the preferantial issuance of upto 16,000 Indian Rupee denominated optionally convertible, unsecured, unrated, and unlisted debentures, to ATC, a non-promoter of the company, for 1,600 crore. The OCDs will be issued in one or more tranches, and will carry a coupon rate of 11.2% per annum that will be payable semi-annually during its term.

The funds raised through preferential issue will be used to pay amounts that Vodafone Idea owed to ATC under the master lease agreements and, to the extent of the remainder, for general corporate purposes.

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