The government will own 35.8 percent in Vodafone after its board approved conversion of dues into equity, according to Bloomberg. Vodafone Group Plc will own around 28.5 percent and Aditya Birla Group will have about 17.8 percent in the company, the report said.
Vodafone Idea has approved the conversion of the full amount of interest related to spectrum auction instalments and adjusted gross revenue (AGR) dues into equity, the telecom player said in a regulatory filing on January 11.
"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," Vodafone Idea said.
VIL said that since the average price of the company's shares at the relevant date of August 14, 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. Following conversion, it is expected that the government will hold around 35.8 percent of the total outstanding shares of the company, and that the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and around 17.8 per cent (Aditya Birla Group), respectively,'' the filing said.
Shares of VIL were trading at Rs 12.55 apiece, down by 15.49 per cent compared to the previous, at the BSE in the morning hours.
Tony Verghese, Partner, J Sagar Associates (JSA), said, "The move of conversion to equity, of its debts relating to interest due on spectrum in favour of the Government, by Vodafone Idea is indeed very surprising and unexpected. While the move will definitely keep the company afloat for some time, however, from an overall sustainability perspective of business and expansion, with the current shareholders, the promoter Vodafone plc. and the other significant shareholder Aditya Birla Group now becoming lesser stakeholders in the company, it remains to see how this will improve.
"It is unlikely that the business will sustain a long period, unless the Government comes out with a definitive plan of reviving the business of Vodafone Idea in consultation with the existing shareholders. Whether the Government may contemplate a move of combining the businesses of Vodafone Idea with BSNL, such as a merger and thereafter looking for a purchaser, is something that remains to be seen, given that the BSNL auctions have hit several roadblocks over the last few years," Verghese added.
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