Vodafone Idea stock has dipped by as much as 10% in the early market session on Tuesday. If you are wondering why this is because of Kumar Mangalam Birla’s willingness to sell his group’s stake in the company. According to a Business Standard report that surfaced yesterday, Kumar Mangalam Birla, Chairman of Aditya Birla Group, wrote a letter to the Union Cabinet Secretary, Rajiv Gauba, on June 7 that his group’s promoter stake in Vodafone Idea Limited (VIL) can be sold to the government for keeping the company alive.
Vodafone Idea’s Rising Debt Over the Years
Vodafone Idea has a ton of debt on its shoulders. The third-largest telecom operator of the country has to pay the government thousands of crores in adjusted gross revenue (AGR) dues alone. Along with the rising debt of the company, there aren’t any profits coming in either. As of the end of March 2021, VIL has garnered over Rs 1.6 trillion in debt as opposed to Rs 37,000 crore in 2016.
What’s interesting to note here is that Birla wrote to the Union Cabinet Secretary a month before the Supreme Court (SC) had rejected Vi’s plea of reassessing the AGR dues.
Birla said that he is more than willing to sell his stake in the company to any of the government or public sector companies so that the telco can keep going. VIL hasn’t been able to secure any new investors, and with the regulator not enforcing a floor for tariffs, it looks like Vi’s journey in finding a new investor is going to be even harder now.
It will be an interesting event to witness if the government shows interest in buying out Birla’s stake in the company. Vodafone Idea and BSNL merger can also be in the books. Vi desperately needs new investors, or else the company might crumble under the financial pressure it is already in.