The Indian government will pick up an unspecified equity stake in Tata Teleservices (TTL) and a 9.5 per cent stake in Tata Teleservices Maharashtra after the firms opted for the government’s relief measure of converting the interest on AGR (adjusted gross revenues) dues into equity.
Tata Sons, along with its affiliates, holds around 95.17 per cent stake in Tata Teleservices, which in turn holds 75 per cent stake in BSE-listed Tata Teleservices Maharashtra.
The dilution in Tata Sons’ stake in TTL is not known. An email sent to Tata Sons did not elicit a response.
In a statement to the stock exchanges, Tata Teleservices Maharashtra said the net present value (NPV) of the interest due to the government is expected to be Rs 850 crore, subject to confirmation from the Department of Telecommunications (DoT).
The average price of the company’s shares at the relevant date of August 14, 2021, according to the calculation method provided by the DoT works out to Rs 41.50 per share. “In case of conversion, it will result in dilution of all the existing shareholders of the company, including the promoters. Following conversion, it is expected that the government will hold approx. 9.5 per cent of the total outstanding shares of the company,” Tata Teleservices Maharashtra said.
On Tuesday, TTML shares closed at Rs 291 apiece. The stock has shot up by 561 per cent from Rs 44 in the last six months. The company’s market valuation has gone up to Rs 57,000 crore even though its free float is very less.
On September 1, 2020, the Supreme Court had directed the telecom operators to pay their AGR dues to the Indian government. The combined AGR dues required to be paid for Tata Teleservices was Rs 18,500 crore (including interest on the dues) as on March 31, 2021.
Later, after both Vodafone Idea and the Tatas appealed against it, the government came out with comprehensive relief measures last September. As part of these measures, the DoT issued a communication to TTSL and TTML granting them the opportunity of opting to defer the AGR dues by four years and pay interest amount by converting the same into equity.
On October 29, 2021, both Tata Teleservices and Tata Teleservices Maharashtra informed the DoT that they had decided to opt for deferment of the AGR-related dues by four years. Both also informed the DoT about their decision to convert the interest amount into equity to be conveyed within 90 days from the DoT letter dated October 14 ,2021.
The conversion price for the Indian government in TTML was to be equal to the higher of the average of weekly high and low of the volume weighted average price of the equity shares during the last 26 weeks preceding the relevant date or two weeks preceding the relevant date, subject to provisions of Section 53 of the Companies Act (price cannot be less than par value).
The government, at its sole discretion, may convert any part of such loan to preference shares instead of equity shares and such preference shares may be optionally or compulsorily convertible and/or redeemable instruments.
Telecom has been a big money-losing venture for the Tata group. It infused about Rs 46,600 crore till June 2019 in Tata Teleservices, helping the company repay the debt taken to rollout its mobile telephone services and fund its capital expenditure.
The additional burden of AGR dues of Tata Teleservices will also be paid by Tata Sons after the moratorium ends as the cash and cash equivalents available with the company are low, the source said.