Following an AB Group pledge, the government approves the conversion of Voda Idea’s Rs 16,133 Cr in outstanding debt into equity
- ByStartupStory | February 4, 2023
According to telecom minister Ashwini Vaishnaw, the government approved the conversion of Rs 16,133 crore in interest payments owed by the heavily indebted Vodafone Idea into equity after getting a formal promise from the Aditya Birla Group to continue the business and provide the required funding.
The government has authorized turning over Rs 16,133 crore in interest payments owed by Vodafone Idea into equity, providing a lifeline to the struggling carrier.
With this conversion, the government would likely own 33.14 percent of the losing telecom company, which is drowning in debt totaling more than Rs 2 lakh crore.
The government would get equity shares from Vodafone Idea at a face value of Rs 10 per share.
“The Ministry of Communications passed an order today i.e. 3 February, 2023 directing the company to convert the NPV of the interest related to deferment of spectrum auction installments and AGR dues into equity shares to be issued to the government of India,” the filing said.
The government’s reforms plan, released in September 2021, includes the assistance for the firm.
“The total amount to be converted into equity shares is Rs 16133,18,48,990. The company has been directed to issue 1613,31,84,899 equity shares of the face value of Rs 10 each at an issue price of Rs 10 each,” the filing added.
Earlier, VIL had stated that the government would receive about a 33% interest in the firm with the conversion of debt into equity.
The Department of Telecommunications (DoT) issued the directive after legal advice suggested purchasing shares of VIL even when they were selling below Rs. 10 per share.
With 43 crore mobile subscribers and a 35% market share in 2018, the debt-ridden business fell from being the largest telecom operator after the merging of Vodafone and Idea into a single entity to a distant third telecom operator.
According to the most recent data released by telecom regulator Trai, the business has 24.3 crore mobile users, accounting for a market share of 21.33 percent.
VIL is the sole telecom provider that hasn’t placed any orders for 5G service equipment and has had trouble paying its vendors’ bills.
On view of VIL’s weak balance sheet, Indus Towers made a provision for doubtful debt of Rs 2,298.1 crore last month.
It is in the process of issuing up to Rs 1,600 crore in optionally convertible debentures to seller American Tower Corporation to settle its debts.
The Supreme Court’s ruling in October 2019 requiring telecom operators to pay revenue sharing based on government calculations put VIL on the edge of closure as a result of the company’s increased payment load of Rs 58,254 crore.
The company’s total gross debt, excluding lease obligations and including interest accrued but not payable, was Rs 2,20,320 crore as of September 30 of current year.
Due to the challenging market environment and significant debt on its balance sheet, the firm has made many attempts to acquire funds from investors but has always been unsuccessful.
The government’s telecom reforms package gave the business hope for survival.
The VIL Board approved the option to convert the full amount of interest related to deferred spectrum auction installments and AGR dues to the extent of approximately Rs 16,133 crore into equity at its meeting on January 10, 2022, in accordance with the Telecom Reforms Package announced by the government.
On Friday at the BSE, shares of VIL finished at Rs 6.89 per share, up 1.03 percent from the previous close.
It was filed after market hours.
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