The government will own 35.8 per cent stake in Vodafone Idea(Vi) as the company’s board approves the conversion of the arrears into equity. Vodafone Idea Ltd said on Tuesday that the company’s board had decided to convert the entire interest on the Spectrum auction times and adjusted gross income (AGR) arrears into equity.
Vodafone Idea, a joint venture between the UK-based Vodafone Group and the Kumar Mangalam Birla-led Aditya Birla Group, has opted to shift the interest of the deferred spectrum and adjusted gross revenue (AGR) liabilities to equity. This transition will benefit all existing shareholders of the company, including promoters.
Following the conversion, the Indian government is expected to hold about 35.8 per cent of the total outstanding shares of Vi. In addition, promoter shareholders are expected to hold 28.5 per cent (Vodafone Group) and approximately 17.8 per cent (Aditya Birla Group) respectively. Vodafone Idea said in a statement.
Shares of Vodafone Idea fell after the announcement. Vodafone Idea traded lower at Rs. 13.40 on the Bombay Stock Exchange (BSE) on Tuesday, it had closed at Rs 14.85 last day. Shares of the company fell to Rs. 12.05 in the morning trade, down 18.85 per cent from the previous close.
The company’s share price was later recovered. Vodafone Idea trades at Rs 13 on the Bombay Stock Exchange (BSE) at 11.10 am.
Vi Board of Directors meeting on January 10, 2022, approved the conversion of the full amount of such interest related to spectrum auction instalments and AGR dues into equity.
“According to the DOT’s confirmation, the company’s best estimate puts the total current value (NPV) of this interest at around Rs 16,000 crore. If the relevant date is less than the equivalent value from the average price of the Company’s shares dated 14.08.2021, the Government will issue equity shares at a value of Rs. 10 per share subject to final confirmation by the DoT” . Vodafone Idea said in a regulatory filing for the stock exchanges.
On September 15, the Union Cabinet approved a series of measures to support telecom companies facing cash crunch. Relief measures include a spectrum and a four-year moratorium on the payment of AGR arrears.Telecom companies have also been given the option of paying interest on delays in payments by issuing equity to the government.
Following the government’s announcement, Airtel and Vi imposed a four-year moratorium.However, Airtel has recently decided to pay interest to the government instead of issuing equity.
After the debt is converted into equity, the Government of India will become the largest shareholder in Vi Ltd. This will require changes in the Articles of Association of the Company.
The rights are subject to a minimum of 21% eligibility limit for each promoter group, and in light of the conversion of interest to equity, the promoters agreed with each other to amend the existing SHA to reduce the minimum eligibility threshold from 21% to 13%. Such as the appointment of directors and the appointment of certain key officials to exercise certain administrative powers.
Vi said its board has noted the proposed changes to the existing Shareholders’ Agreement (SHA) and has approved changes to the Articles of Association (AOA) to give effect to the changes in the SHA.
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