Vi grants 36% ownership to government post equity conversion

The government will now be the single largest share holder in Vodafone Idea (Vi), a joint venture between the Aditya Birla Group and UK based Vodafone, with 36% of its shares. After the financially- troubled communications provider, chose to convert interest on postponed spectrum and adjusted gross revenue (AGR) dues, worth about 16,000 crores into equity, the union government is projected to own almost 36% of  the country's third-largest service provider, Vodafone Idea (Vi).

The shares were sold for Rs.10 each. The conversion will also dilute promoters’ stakes in Vi, with Vodafone group Plc and Aditya Birla Group projected to own roughly 28.5 percent and 17.8 percent, individually, following the conversion. At present Vodafone Plc  and  Aditya Birla Group own 47.61% and 27.38% respectively. The conversion must be approved by the government.

Vodafone Idea took advantage of the telecom reform package, directed at enhancing liquidity and ease of doing business, that was approved by the Union cabinet in October last year, as part of a bailout package that gave carriers a four-year moratorium on delayed spectrum and AGR payments as well as the ability to convert dues deriving from interest payments during the moratorium period into equity.

Meanwhile, the four-year moratorium will save Vi approximately Rs.60,000 crore, it will need to obtain funds to pay off its bank obligations, enhance and extend its network, and purchase spectrum for its 5G service, which will launch this year.

On Vi’s March quarter results call, managing director Ravindra Takkar remarked: “The government will hold around 35.8% of Vi when interest is converted to equity, while the promoters would own  around 50%.”

Vi’s management indicated that the service provider would pay a part of its impending Rs.8,160 crore debt, due in the next 12 months, with cash margins earned from the recent return of bank guarantees (BGs) and approximately Rs 6000 crore from internal  acquirement.