Govt to become the biggest shareholder in debt-ridden Vodafone Idea as firm decides to convert dues liability into equity

New Delhi: After the debt-ridden firm, Vodafone Idea (VIL) has announced converting about Rs 16,000 crore interest dues liability payable to the government into equity, shares of Vodafone Idea (VIL) on Tuesday tumbled nearly 19 per cent.

The stock tanked 18.85 per cent to Rs 12.05 on both the BSE and NSE.

VIL has decided to opt for converting about Rs 16,000 crore interest dues liability payable to the government into equity which will amount to around 35.8 per cent stake in the company, as per a regulatory filing of the telecom firm.

If the plan goes through, then the government will become the biggest shareholder in the company which is reeling under a debt burden of about Rs 1.95 lakh crore.

The government has given telecom operators an option of paying interest for the 4 years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount.

The company's total gross debt, excluding lease liabilities and including interest accrued but not due, as of September 30, 2021, stood at Rs 1,94,780 crore. The amount comprises deferred spectrum payment obligations of Rs 1,08,610 crore, AGR liability of Rs 63,400 crore that is due to the government and debt from banks and financial institutions of Rs 22,770 crore.

VIL said that since the average price of the company's shares at the relevant date of August 14, 2021, was below par value, the equity shares will be issued to the government at a par value of Rs 10 per share, subject to final confirmation by the DoT.

"The conversion will therefore result in dilution to all the existing shareholders of the company, including the promoters. Following conversion, it is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company and that the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and around 17.8 per cent (Aditya Birla Group), respectively," the filing said.

The company is governed by shareholders who hold at least a 21 per cent stake in the entity as per the shareholders agreement (SHA).

However, VIL will now amend the shareholders' agreement in light of the conversion of interest into equity to reduce the threshold level for governing rights to 13 per cent from 21 per cent.