Vodafone Idea will offer 35.8 percent stake to India government as part of the conversion of AGR dues and spectrum interest into equity.
Vodafone Idea board, at its meeting held on 10 January, 2022, has approved the conversion of the full amount of interest related to spectrum auction installments and AGR Dues into equity, the company announced in a filing to BSE.

Following conversion, India Government will hold around 35.8 percent of the total outstanding shares of the company, while the promoter shareholders Vodafone Group and Aditya Birla Group will hold around 28.5 percent and around 17.8 percent stake in the company respectively.

The net present value of interest is expected to be about Rs 16,000 crore, following final confirmation by the Department of Telecommunications (DoT), the company said. The equity shares will be issued to the government at par value of Rs 10 per share.

This reform by the government to provide an option to monetise interest portion of the AGR and spectrum dues for 4 years was targeted for Vodafone Idea given the company is facing such a cash crunch situation, Nitin Soni, Senior Director, Corporates at Fitch Ratings, told CNBC TV18. This will provide some cash flow relief to the company, and help them to expand their 4G spectrum.

Soni said the company is not investing enough on Capex and it needs fresh equity investments. Soni noted it will be challenging for any new investors to put in money in Vodafone Idea because rivals Bharti Airtel and Reliance Jio have strong balance sheets now.

“In 12-18 months the situation will rapidly change, and the delay at Vodafone Idea to find fresh equity investments will further weaken their competitive market position. Overall, in the short term I don’t see any big investors putting their money in the telcos,” he said.

Bharti Airtel said it will not issue equity to the government and agreed to pay the interest on deferred spectrum and adjusted gross revenue liabilities last week. In October, DOT offered a relief package to telecom firms with various options to the telecom companies to clear their dues.

“Who will be responsible, who will own this company is key. While this ensures survival, a clear promoter is essential in this sector which is still recovering and yet to achieve viable ARPUs,” said Vipula Sharma, Director – Ratings and Head – Infrastructure Ratings: [Brickwork Ratings].