The company informed telecom department that it would opt for converting the interest on spectrum and AGR dues into government equity
New Delhi: The government is likely to become the single largest shareholder in Vodafone Idea (Vi) Ltd, India's third largest telecom service provider, as the Vi board on Tuesday approved conversion of about Rs 16,000-crore interest dues payable to the government into equity.
The company informed the telecom department that it would opt for converting the interest on spectrum and adjusted gross revenue (AGR) dues into government equity, as permitted under the October 2021 relief package.
In the package, the government has given telecom operators an option of paying interest for the four years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the net present value (NPV) of such interest amount.
The conversion will lead to dilution of the holdings of all the existing shareholders of the firm, including the promoters. Post-conversion, it is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company, and that the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and 17.8 per cent (Aditya Birla Group), respectively.
"The net present value (NPV) of this interest is expected to be about Rs 16,000 crore as per the company's best estimates, subject to confirmation by the DoT. Since the average price of the company's shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the government at par value of Rs 10/- per share, subject to final confirmation by the DoT. The conversion will therefore result in dilution to all the existing shareholders of the company, including the promoters," Vi said in a regulatory filing.
"As a part of relief package in October 2021, the Department of Telecommunications (DoT) had laid out various options regarding the telecom reforms package. The board had opted for deferment of spectrum auction instalments due up to four years; and deferment of AGR related dues by four years in the meetings held on October 18 and October 27 last year. However, the telecom companies were also required to pay interest on these dues during the moratorium period," it said.
Analysts are of view that the equity conversion could be a bad news for the company, its consumers and shareholders. After the board's approval to conversion of interest on spectrum and AGR dues, the share market reacted negatively where Vodafone Idea shares tanked 20.54 per cent to Rs 11.80 on the BSE.