June30 , 2022

Govt to Soon Become Biggest Shareholder of Vodafone Idea; Close to Holding 33% Stake

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The Union government is all set to become the biggest shareholder of Vodafone Idea Limited (Vi) soon. The government will hold around 33 per cent in the company after converting the telco’s accrued interest liability on deferred dues into equity. According to Section 62 (4) of Companies Act, 2013, the government will convert telecom company’s interest liability of Rs 16,133 crore into equities. This move will help the debt-ridden telecom giant to reach its fund-raising target.

“The government is close to holding 33 per cent stake in Vodafone Idea. The conversion of dues will be completed soon,” a government official told CNBC-TV18.

After conversion into equities, the Union government will hold around 33 per cent in the company while telco’s promoters — United Kingdom’s Vodafone Plc and India’s Aditya Birla Group (ABG) will collectively hold around 50 per cent in the company. Public would hold the rest of the shares in the company. Securities and Exchange Board of India (SEBI) is yet to give its final nod, the official added.

The company will account for the changes in the shareholding pattern after the equity conversion.The Union government will hold stake in the company as a part of a public ownership, not in a promoter category. It will have no presence in the board of the telecom operator, the official told CNBC-TV18.

Earlier in January, Vodafone Idea chief executive officer Ravinder Takkar said that the company had opted for converting government dues into equity as part of the telecom reforms package. However, the government’s shareholding will be less than 35.8 per cent, the figure mentioned by the company earlier. Earlier in March, Vodafone Group Plc and Aditya Birla Group, pumped in Rs 4,500 crore as equity, raising their combined stake to 74.9 per cent from 72.05 per cent earlier.

Vodafone Idea has opted to pay adjusted gross revenue (AGR) related dues amounting to Rs 8,837 crore for FY18 and FY19 in six equal annual instalments starting March 31, 2026. The company’s board, approved the “exercise of the option of deferment of the AGR related dues by a period of four years with immediate effect,” Vodafone Idea said.

Ahead of the auction of 5G spectrum airwaves, Vodafone Group Plc will infuse an additional Rs 436 crore into Vodafone Idea through equity shares or warrants. This was the second capital raise by the company in two months. Vodafone Idea will issue 42.7 million shares or warrants to a promoter group entity at an issue price of Rs 10.20 per share, aggregating to Rs 436.21 crore, the company said in a notification.

Once the equity conversion is complete, the company has to raise external funding. The government is confident that the country’s third-largest telco will turn itself around. “The Union government will dilute its equity stake in Vodafone Idea once its balance sheet improves,” the official further mentioned.

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