In order to support competition in the telecom sector, the government is extending its support to Vodafone Idea’s fund raising through follow on public offering (FPO), Finance Secretary TV Somanathan said on Tuesday. The FPO is opening on April 18.

With over 32 per cent stake, the government is the largest shareholder in the telecom company.

“We are happy to see the company’s capital investment plan which will be funded by the FPO. Government’s shareholding is administered by DIPAM in Ministry of Finance and we supported the decision to raise capital through an FPO,” Somanathan told businessline.

The debt ridden company is planning to raise ₹18,000 crore through FPO. Of this, ₹12,750 crore will be used to purchase equipment for the expansion of its network infrastructure by setting up new 4G and 5G sites.

“One of government’s key policy goals is to support competition in the telecom sector in the interest of consumers, which was reflected in the telecom package of 2021 and the massive capital infusion in BSNL,” Somanathan added.

In 2023, the government directed the company to convert net present value of the interest amount related to deferment of spectrum auction instalments and AGR dues into equity shares to be issued to the Centre.

Accordingly, the company allocated over 1,600 crore shares (of face value of ₹10 each) at an issue price of ₹10, aggregating to over ₹16,000 crore to DIPAM.

Also read: Allow only Indian entities to participate in regulatory sandbox: TRAI

Post FPO, the government’s holding will fall to 24 per cent from the current 32 per cent, and even if one considers that the government’s equity proportion goes up due to one more round of conversion of dues into equity in the near future, it will not go far beyond the current level, a company official said.

The company, which was struggling with high debt in the recent past, has repaid ₹17,000 crore to banks and financial institutions, and the overall debt stood at ₹4,500 crore as of February-end. It has not been able to roll out 5G services because of lack of funds. The 5G rollout will cover 40 per cent of the company’s overall revenue base in the next 24-30 months.