Vodafone Idea unlikely to convert interest on govt dues to equity: IIFL

Vodafone Idea (Vi) is unlikely to opt for conversion of interest on government dues into equity, brokerage IIFL said in a note today. The telecom company has to take a call on the issue by Wednesday.

“Our calculation suggests that if Vi were to exercise this option, there would be ~52 per cent dilution and the government could end up owning 34 per cent stake. With the recent ~20% tariff hikes and Vi having likely tied up the funding for repaying the non-convertible debentures maturing between December 2021 and February 2022, its prospects have improved. In our view, Vi is likely to continue its fund-raising efforts from its promoters and other investors rather than letting the government acquire a significant stake, “ IIFL said.

Last Friday, Bharti Airtel announced that it  will pay the interest on deferred spectrum and adjusted gross revenue liabilities and will not issue equity to the government.

The company informed the department of telecommunications that it will not avail the option of conversion of the interest on deferred spectrum and AGR dues into equity, it said in a stock exchange notification on Friday.

The government last October announced a slew of measures to protect the financial health of telecom companies. This includes a four year moratorium on the spectrum and AGR dues. Further the companies also have an option to convert the interest amount arising due to the said deferment into equity.