DoT to soon okay equity conversion of Vodafone-Idea
2 min read 15 Jul 2022, 11:30 PM ISTThe government gave Vodafone Idea the option of a moratorium on payment of dues of ₹16,000 crore as part of the relief package announced in September.
PremiumNEW DELHI : The government took a step closer to converting interest dues of Vodafone Idea Ltd into equity, with the finance ministry informing the telecom department that it could proceed with the transaction.
According to an official aware of the matter, the finance ministry’s department of investment and public asset management (DIPAM) approved the proposal in which the government will end up taking equity proportionate to the interest on dues owed by the No. 3 telco.
“The final equity holding will be determined shortly, but we have been given the go-ahead," a second official said, adding the communication of the approval will be sent to Vodafone Idea within a week. Both officials spoke on the condition of anonymity.
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The Aditya Birla Group promoted telco is awaiting conversion of interest on dues related to adjusted gross revenues (AGR) for financial years up to FY17 amounting to ₹16,000 crore into equity, after which the government will own about 33% in the carrier, becoming its largest shareholder. The promoter equity will reduce to 50% from almost 75% at present.
The government gave Vodafone Idea the option of a moratorium on payment of dues of ₹16,000 crore as part of the relief package announced in September.
The telecom department has also given the company an option to convert ₹8,837 crore worth of interest on dues into equity. The opportunity to convert the dues was offered to the company last month and will remain valid till 15 September.
Emails sent to spokespeople for Vodafone Idea and the ministry of finance remained unanswered till Friday evening.
The equity holding structure may change following additional equity of ₹436 crore being put in by Euro Pacific Securities, a Vodafone Group Plc entity.
The carrier held a special shareholders’ meeting on 15 July seeking approval for the same from shareholders.
Promoters Vodafone Group and Aditya Birla Group together pumped in ₹4,500 crore in March this year. The promoter equity infusion could make it easier for the company to raise additional capital of about ₹20,000 crore in debt and equity from external investors, which has been a tough challenge so far.
Ravinder Takkar, chief executive officer of Vodafone Idea, had earlier said the company was closer than ever to securing funding from investors and that promoters were willing to put in more equity if needed.
The company has been under financial duress over the past few years, despite the government’s September rescue package, which offered the struggling telco a moratorium on the deferred spectrum and other payments for four years and the option to convert the interest during the moratorium period into equity.
The carrier has narrowed its losses to ₹6,563 crore in the March quarter from ₹7,230 crore in the preceding three months but still had a massive debt of ₹1.96 trillion as of 31 March. The debt comprises deferred spectrum payment obligations of ₹1.13 trillion, AGR liability of ₹65,950 crore due to the government and debt from banks and financial institutions at ₹18,070 crore.
