An official source talking to PTI claims that the government will buy a stake in the heavily indebted Vodafone Idea once its stock price stabilises at Rs 10 or more. The board of Vodafone Idea (VIL) has proposed a stake at par value of Rs 10 per share to the government. The acquisition must occur at par value, according to a SEBI standard. According to the PTI report, DoT will approve the acquisition if VIL shares stabilise at Rs 10 or more.
Since April 19, VIL shares have been trading below Rs 10. On Thursday, the stock fell 1.02% to close at Rs. 9.68 on the BSE. The request to buy a share in VIL had been approved by the finance ministry in July.
Further Details on This Case
The heavily indebted Vodafone Idea (VIL) has chosen to convert approximately Rs 16,000 crore of interest liabilities owing to the government into equity, amounting to about a 33% ownership in the company, while promoters' holding will drop from 74.99% to 50%.
The government had provided telecom operators with the choice of paying the interest for the deferred spectrum payments and AGR (adjusted gross revenue) obligations over a four-year period by converting the NPV of such interest amount into equity. As of September 30, 2021, the total gross debt of the company—excluding lease obligations and including accrued but unpaid interest—was Rs 1,94,780 crore.
The sum consists of Rs 1,08,610 crore in postponed spectrum payment commitments, Rs 63,400 crore in government-owed AGR liabilities, and Rs 22,770 crore in debt owed to banks and other financial institutions as of January 11, 2022, the date it offered to convert interest liability into equity. At the end of the April–June 2022 quarter, VIL had total gross debt of Rs 1,99,080 crore (excluding lease liabilities and including interest accrued but not due), which included deferred spectrum payment obligations of Rs 1,16,600 crore, AGR liabilities of Rs 67,270 crore that are owed to the government, and debt from banks and financial institutions of Rs 15,200 crore.
Update: Vodafone Idea has given clarification that the report from PTI is incorrect, and the government has not been given any such guideline which prohibits it from taking equity in the company. "We understand that prior to the announcement of the landmark Telecom Reforms in September 2021, all due diligence was done by government and relevant ministries in this matter," said Vi.