Industry
Centre wants Voda Idea promoters to pump in more equity
Summary
- Additional equity from promoters could help arrest the downward trend in the Vodafone Idea stock.
NEW DELHI : Promoters of Vodafone Idea Ltd must infuse more funds into India’s third-largest telecom operator before the government converts the interest on spectrum dues of ₹16,000 crore into equity, two officials aware of the development said. Company executives were also told about the new condition at a recent meeting.
Vodafone Idea has been trying to raise ₹20,000 crore in debt and equity from external investors since 2020, and the latest government move follows the telco’s inability to secure such funding.
“The promoters have to be as committed as us; they have to be equal partners... they have to bring in more money right away. We have asked them, and they have to come back to us," one of the two officials cited above said on the condition of anonymity.
Under the option taken by the telco in January, the government would take up about 33% equity in Vodafone Idea following the conversion of interest on the adjusted gross revenue, or AGR, dues, payments of which have been deferred by four years.
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Queries sent to a spokesperson for Vodafone Idea remained unanswered till press time.
Promoters Vodafone Group Plc and Aditya Birla Group own a combined 74.9% stake from 72.05% earlier, after they infused ₹4,500 crore as equity in March. Vodafone Group brought in ₹3,375 crore, while Aditya Birla Group invested ₹1,125 crore. After the equity conversion, this shareholding is expected to drop to 50%, and a proportionate reduction will take place for the publicly held shares.
A second official said the change in the plan does not mean the equity conversion proposal, on the whole, has been junked.
“It’s still in the works; there are some technical issues that are being resolved," the official said.
According to company law provisions, the conversion has to be done above the ₹10 par value of the stock.
A telecom industry expert said on the condition of anonymity that additional equity from promoters could help arrest the downward trend in the Vodafone Idea stock and, in turn, aid the conversion of interest on dues into equity.
The Vodafone Idea stock has remained under ₹10 since April. On Wednesday, it fell 0.93% to ₹8.56.
However, according to Vodafone Idea, no rule prevents the equity conversion below par value.
“We wish to clarify that there is no such guideline that prohibits the government from taking equity if the company’s current share value is less than par value," the company said in a statement on Monday, which came after its vendor Indus Towers mentioned so in its quarterly report, before withdrawing it later.
The option to defer payment of dues and conversion of interest on the AGR (adjusted gross revenue) dues till FY17 to equity to be owned by the government was part of the relief package offered by the government in September 2021, at a time the company was on the verge of bankruptcy.
The package aimed to improve the financial health of the telecom sector, which was battered by high debt and low tariffs leading to higher losses and limited revenue generation.
In September, the money-losing carrier decided against converting the ₹8,837 crore interest on deferred AGR dues for FY18 and FY19 into equity to be owned by the government.
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