Sebi grants exemption to govt from open offer in beleaguered Voda Idea

The Securities and Exchange Board of India (Sebi) on Thursday exempted the government from the obligation of an open offer for beleaguered telecom operator Vodafone Idea.

 

Following the decision to convert spectrum dues into equity stake in the company, the shareholding of the government will surge to 48.99 per cent in Vi.

 

The government currently holds 22.6 per cent in the company, and the conversion will lead to an additional acquisition of 34.1 per cent.

 

The Takeover Regulations mandate an open offer to the public if the acquisition leads to holdings over 25 per cent. The government sought an exemption from the market regulator on grounds that an open offer may result in acquisition of further equity shares, leading to cash outflows and potentially increasing the holding above 50 per cent.

 

This could entail ‘control’ of the company, which the government does not intend. Further, the government’s stake will be classified as ‘public shareholding’.

 

“An open offer shall require additional investment for the acquisition of further equity shares by the GoI. Such a requirement renders the conversion of the outstanding dues to equity untenable, as the purpose of this conversion shall be defeated, having a negative impact on the investors of the Target Company and the public at large,” noted the application from the Department of Investment and Public Asset Management (Dipam).

 

The market regulator has granted the exemption considering the public interest and steps taken to ease liquidity and cash flow to help banks having substantial exposure to the telecom sector.