Vodafone Idea (Vi) will have to give the Indian govt equity shares before it can give optionally convertible debentures (OCDs) to the American Tower Corporation. The telco's board decided to give ATC 16000 OCDs to raise Rs 1600 crore. The company has now announced an Extraordinary General Meeting (AGM) of shareholders on November 21 to approve the plan. The investors of the telco shouldn't have any issue with this. The conditions that are mentioned in the EGM notice of Vi suggest that the telco will have to convert Rs 16,133 crore of interest on adjusted gross revenue (AGR) dues into equity for the government.
According to a Business Standard report, the notice also mentions that Vi has the right to convert over 8000 of the OCDs into shares if the share price of the company is equal to or crosses a certain threshold. The price for the said conversion has been set at Rs 10 per share. The American Tower Company will also have the right to request Vi to convert the remaining 8000 OCDs into shares.
In case ATC doesn't request the telco to convert the OCDs into shares, then Vi will have to find a buyer for those or will have to redeem them itself. The telco will redeem the remaining OCDs by no later than June 30, 2023. Vodafone Idea needs to raise a ton of capital in the coming months and years.
The telco needs money to pay off existing dues; then it also needs free cash flow to aid with the 5G rollout. Further, Vi can't ignore its 4G business either. The delay from the government's side in converting the interest dues into equity is also hampering the process of fundraising for Vi. Once govt has converted the dues into a stake for itself, outside investors will be able to make better decisions on the outlook of the company.