Vodafone Idea tumbles after board OKs conversion of Govt dues into equity

Vodafone Idea slumped 13.13% to Rs 12.90 after the company said the Indian government will own almost 36% in the firm after conversion of dues into equity.

Vodafone Idea on Tuesday informed that the board at its meeting held on Monday has approved the conversion of the full amount of interest related to spectrum auction installments and Adjusted Gross Revenue (AGR) dues into equity.

The conversion will 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% of the total outstanding shares of the company, and that the promoter shareholders would hold around 28.5% (Vodafone Group) and around 17.8% (Aditya Birla Group), respectively.

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 August 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 statement added.

Last year, the Department of Telecommunications (DoT) had provided various options to the company in connection with Telecom Reforms Package. Later, Vodafone Idea's board in October approved deferring payment of spectrum auction installments and AGR dues by four years.

The DoT had also provided a time period of 90 days to the company to exercise the option of converting the interest that would accrue on installment payment during the moratorium period into equity.

The conversion of accrued interest into equity can be done by invoking Section 62 (4) of the Companies Act, and the amount will be treated as a loan until the conversion is completed, the DoT said in reforms announced last year.

Vodafone Idea is an Aditya Birla Group and Vodafone Group partnership. It is amongst India's leading telecom service provider. The company provides pan India Voice and Data services across 2G, 3G and 4G platforms.

On a consolidated basis, Vodafone Idea reported a net loss of Rs 7,132.3 crore in Q2 FY22 as against a net loss of Rs 7,218.2 crore in Q2 FY21. Revenue for Q2 FY22 came at Rs 9,410 crore, an improvement of 2.8% QoQ, aided by pick up in the economic activities and easing of lockdown/restrictions induced by severe second wave of COVID, which impacted Q1 FY22.

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