Vodafone Idea opted for conversion of interest on deferment of AGR and spectrum instalments dues of about ₹16,000 crore into equity, making government the single largest shareholder at 35.8% in the carrier.
A day after Vodafone Idea Ltd (VIL) decision to convert interest on dues to the government into equity, the Union government will neither take a seat on the board of Vodafone Idea nor will it run or manage the company, the telco’s managing director, and chief executive Ravinder Takkar on Wednesday. VIL Managing Director and CEO Ravindra Takkar said in the online briefing that the current promoters are fully committed to managing and running the company’s operations.
Vodafone Idea Limited (VIL) on Tuesday decided to convert interest arrears of around Rs 16,000 crore to the government into equity, which would amount to about 35.8 percent stake in the company. If this plan is completed, the government will become one of the largest shareholders of the company. The company currently has a debt of about Rs 1.95 lakh crore.
Takkar said the DoT’s letter regarding the option of converting interest on the dues into equity does not contain any condition that seeks to place the government on the board of directors. He added that the existing promoters are fully committed to taking over the management of the company’s operations.
He said that our entire discussion with the government came out in the form of a package. Even after the announcement of the package, the government clearly stated that it does not want to take over the operations of Vodafone Idea Limited. There is no intention of the Government to take over the operations of the Company. It wants that there should be three private companies in the market, the government does not want a monopoly or only two companies to have right over the market.
Takkar said the government has made it clear that it wants the company’s promoters to run it and take it forward. The entire process is expected to be completed in the coming months, he added. “Given that most of the company’s debt liability is towards the government, it was clear to us that converting some of the debt into equity is a good option for the company to reduce its debt burden,” he said.
The company said that upon completion of this plan, the government’s stake in the company would be around 35.8 percent, while that of the promoters would be around 28.5 percent (Vodafone Group) and around 17.8 percent (Aditya Birla Group).
“The company has a significant amount of a debt, we have a stretched balance sheet and anytime there’s an option to convert that debt to equity is considered positive for the company and especially considering that most of the debt is to the Government of India, it was clear to us that actually converting some of that debt into equity it is a perfect option for the company to reduce its debt going forward,” Takkar said.
Vodafone Idea took the four-year moratorium on the spectrum and AGR, which will likely produce significant cashflow savings of about $ 11 billion from FY22 till FY25, analysts at CLSA said in a note on Tuesday. But they pointed to the company’s spectrum burden which was the highest at Rs 1,086 billion, or Rs 14.7 billion, compared to Reliance Jio’s at about Rs 656 billion or Rs 8.9 billion and Bharti Airtel’s at Rs 627 billion or Rs 8.5 billion. Also, Vodafone Idea’s AGR liability stands at a massive Rs 634 billion or Rs 8.7 billion, taking its total debt to over Rs 1.7 lakh crore.
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