Voda Plc offers Vodafone Idea stake to lenders and BSNL for free

Vi shares plunge 18% after ABG's offer to hand over 27% stake gratis

Vodafone Plc, which owns 45 per cent stake in Vodafone Idea (Vi), is ready to offer its stake for free to Indian banks/financial institutions or to the government-owned Bharat Sanchar Nigam (BSNL), provided they take over the wireless telephony company, said banking sources.

Lenders said if BSNL takes over the company, government dues to be paid by the merged BSNL-Vi entity will be a book entry.  

“We are looking at various options since both promoters — Aditya Birla Group (ABG) and Vodafone Plc — are ready to offer their stake for free to lenders or to BSNL. If BSNL takes over the company, the payment of dues to the Centre by a government entity will be just a book entry,” said a source close to the development.

As on Wednesday, Vi’s market value was Rs 17,327 crore after its shares nose-dived 18.5 per cent on the BSE, following reports of ABG Chairman Kumar Mangalam Birla’s offer of handing over the group’s 27-per cent stake in Vi to any public sector or domestic financial entity for free.

 

Lenders have Rs 25,000-crore exposure to Vi; the company’s other liabilities are government dues like adjusted gross revenue (AGR) payments. The total liabilities of Vi, including bank loans, is Rs 1.8 trillion.  “There is one particular account, where the exposure is large and we are following it up very closely, and all of us are concerned about it. But, by and large, the telecom segment is okay. The bank will take all possible steps to insulate the balance sheet from any potential threat,” said Dinesh Kumar Khara, chairman, State Bank of India, when asked about the stress in Vodafone Idea account.

When contacted, a spokesperson for ABG and Vodafone Plc declined to comment. But both promoters have decided not to infuse additional equity into Vi after the struggling telecom company's financial metrics worsened due to an adverse Supreme Court (SC) ruling on AGR dues in September last year. 

The total AGR dues for Vi aggregated to Rs 58,250 crore (up to 2016-17) on the basis of preliminary assessment by the Department of Telecommunications (DoT). An appeal by Vi for recomputation of AGR dues by DoT in the SC was also rejected last month.

One of the proposals being considered is to have BSNL take over the company and have lenders restructure their loans by converting debt into equity. “With both promoters offering their shares for free, and with the bank loan restructuring, it will be easy for BSNL to take over the company. Vi has 270 million subscribers and a nationwide network. Besides, it is providing livelihood opportunities to several direct and indirect employees,” said the source, quoted earlier.

The company had announced plans of raising an additional Rs 25,000 crore in September last year, but new investors were not forthcoming, in the absence of support measures from the government. The company auditors, too, have flagged concerns about the company’s ability to continue as a going concern due its inability to generate sufficient cash flow.

Vodafone Group Plc merged with Idea Cellular in 2017 in a $23-billion deal. The merger was completed in August 2018. The company has made steady losses since and is fast losing subscribers, despite the ‘mega merger’, due to intense competition from Reliance Jio, Bharti Airtel, and adverse court rulings. 

The high cost of operations of Vi was another reason for the merger's failure.