Government to secure 35.8% stake in debt-ridden Vodafone Idea instead of premium liability

Debt-ridden Vodafone Idea (VIL) has decided to opt for the conversion of approximately Rs 16,000 crore of interest payable to the government into equity, which will represent approximately 35.8% of the company’s capital. , according to a regulatory file from the telecommunications company.

If the plan comes to fruition, the government will become the largest shareholder in the company which is under the weight of a debt of around Rs 1.95 lakh crore. … the Board of Directors, at its meeting held on January 10, 2022, approved the conversion of the total amount of such interest related to spectrum auction tranches and AGR contributions into equity. The net present value (NPV) of this interest is expected to be around Rs 16,000 crore according to the company’s best estimate, subject to confirmation by the DoT, ”Vodafone Idea said in a regulatory filing.

The government has given telecom operators the option of paying interest for the 4 years deferral on deferred spectrum bands and AGR contributions by converting the interest amount into NPV equity.

The Company’s total gross debt, excluding rental debt and accrued but unmatured interest, as of September 30, 2021 was Rs.194,780 crore. The amount includes deferred spectrum payment obligations of Rs 1,08610 crore, AGR liability of Rs 63,400 crore which is owed to the government and bank and financial institution debt of Rs 22,770 crore.

VIL said that since the average price of the shares of the company on the relevant date of August 14, 2021 was less than the par value, the equity shares will be issued to the government at the par value of Rs 10 per share, under reservation of the final confirmation of the DoT. . The conversion will therefore result in dilution for all of the company’s existing shareholders, including the Promoters. After the conversion, the government is expected to own around 35.8 percent of the company’s total outstanding shares, and that the promoter’s shareholders would own around 28.5 percent (Vodafone group) and around 17.8 percent. cent (Aditya Birla group), respectively, ” the record reads. Shares of VIL were trading at Rs 12.55 each, down 15.49% from the BSE.

The shares will be issued to the government on a preferential basis and the relevant date for pricing would be August 14, 2021, according to the filing.

The government, in its sole discretion, may convert any portion of this loan into preferred shares instead of equity shares and such preferred shares may be optionally or mandatorily convertible and / or redeemable and / or participatory in nature. The shares can be held through the Statutory Undertaking of the Unit Trust of India (SUUTI) on behalf of the Indian government or by any type of trustee or other suitable arrangement, ”said VIL. The company is managed by shareholders who own at least 21 percent of the entity’s capital in accordance with the shareholders’ agreement (SHA). However, VIL will now amend the shareholders’ agreement in light of the conversion of interest to equity to reduce the threshold for governance rights to 13 percent from 21 percent.

(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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