Center agrees to pick up equity in Vodafone Idea after Birla commits to invest

The equity conversion plan culminated more than a year after the government took the initial decision, and serves as a breather for Vodafone Idea with a debt burden 2.2 trillion by September 2022. Loss-making telco struggling to raise funds 20,000 crore fund through debt and equity from 2021. “We had sought a firm commitment that the Aditya Birla Group would run the company and bring in the necessary investments. Birla has agreed and hence we have agreed to convert. Union Telecom Minister Ashwini Vaishnav said in a statement, “We want India to be a three-player market with BSNL ensuring healthy competition for consumers.”

In a stock exchange filing, Vodafone Idea said, “The Ministry of Communications, Government of India, has passed an order today, pursuant to the earlier stated reforms and support package for the telecom sector and as per the conversion option exercised by the company. i.e. on February 3, 2023, under Section 62(4) of the Companies Act, 2013, directing the Company to convert into equity shares the NPV of interest related to deferment of spectrum auction installments and AGR dues to be released to the Government of India Gave. “The Government has directed that 16.13 billion shares of face value 10 each will be issued, and the company will take “all necessary action” for the issue, Vodafone Idea said.

According to an official familiar with the matter, government officials discussed with Vodafone Idea executives the company’s business plan to remain competitive before going ahead with the equity conversion.

“There was a delay; We wanted them to show us a clear business plan. We have discussed with them and they have shared it with us. Discussions were also on to bring bankers on board, said the official on condition of anonymity.

The official said the government had asked telcos to bring in more equity from promoters or outside investors, but the conversion was not contingent on raising funds. Mint was the first to report on November 3 that the government wanted the promoters to go ahead with the equity conversion and use a business plan to revive the firm.

Under the proposed equity conversion plan in January 2022, the government would have become Vodafone Idea’s largest shareholder with a 33% stake, and promoters’ stake would come down to 50% from about 75%. However, it is not clear what the final share of the Center will be, as there have been many changes in the last year.

In March, promoters Vodafone Group and Aditya Birla Group invested 4,500 crores – part of the proposed Raised Rs 25,000 crore from investors – and in July, brought in Euro Pacific Securities, a Vodafone Group Plc unit 436 crores and.

The government had given Vodafone Idea another option to convert the interest on the moratorium on payment of Adjusted Gross Revenue or AGR dues. 8837 crores relating to FY18 and FY19 in equity owned by the Govt. Vodafone Idea decided against it.

The struggling carrier has been unable to make payments to its tower vendors Indus Towers and American Tower Corp (ATC). It has sought easy and staggered payment terms from them while offering optionally convertible debentures 1600 crore to ATC and will use the money to clear pending dues for renting out its properties to tower operators for providing mobile phone services in India. Currently, Vodafone Idea owes more than Rs. 3,000 crore to ATC and an additional estimated 7,000 crore to Indus Towers, the world’s largest tower provider.

The equity conversion was pending since January 2022 when the No. 3 carrier agreed to a government proposal to take up the option as part of a reform package announced in November 2021.