Companies

Kumar Mangalam Birla steps down as non-Executive Director of Vodafone Idea

Ayushi Kar Mumbai | Updated on August 04, 2021

Kumar Mangalan Birla   -  Businessline

Birla will be replaced by Himanshu Kapania who is currently a non-Executive Director

In a clear indication that the 25-year old telecom business is beyond redemption for the Aditya Birla group, Kumar Mangalam Birla has stepped down as the non-Executive Director and Non-Executive Chairman of Vodafone Idea with immediate effect. Birla has been spearheading the group’s telecom business since he took over as chairman of the Aditya Birla Group in 1995, at the age of 28.

The latest move comes after Birla offered to hand over his stake in Vodafone Idea to the Government in exchange for a bailout package as the company is reeling under a massive debt of nearly ₹1.8-lakh crore and a cash balance of only ₹350 crore.

Birla will be replaced by Himanshu Kapania who is currently a Non-Executive Director. Kapania was earlier the Chief Executive Officer of Idea Cellular before it was merged with Vodafone’s India operations.

Industry experts said that Birla’s exit could signal a change in management in the coming days. “Kumar Mangalam Birla’s resignation is not surprising in the light of his recent statement about wanting to part with his group's 27 per cent stakeholding in the entity. The AGR liability of over ₹50,000 crore has made the business nearly unviable. His resignation is aimed at distancing himself from the entity and also putting pressure on the government to step in to prevent another large-scale default,” said Lloyd Mathias, Business Strategist, and investor.

Earlier this week, Birla’s letter to Cabinet Secretary Rajiv Gauba dated June, was made public where he said that he was willing to transfer his 27.66 per cent stake in Vodafone Idea to “any public sector/government/domestic financial entity, or any other the government may consider worthy, - to keep (VIL) going”. Vodafone Group Plc Chief Executive Officer Nick Read also said recently that the UK-based company will not put more equity into India.

Vodafone Idea has been trying to raise funds from investors over the last year but has not been able to close a deal. Telecom analysts said that Birla's exit from the board could further hamper the company’s efforts to raise fresh funds. BK Syngal, former Chairman, VSNL, said, “Kumar Mangalam Birla does not want to be a part of the sinking ship. Birla inspired investor confidence therefore, it is doubtful that VIL will be able to raise sufficient funds without him being at the helm”.

Sources inside the company said that Birla has not given up on the telecom venture yet. “The fact that he has appointed Kapania who is a veteran telecom executive to lead the company indicates that the Birla group will do whatever it can to salvage the situation,” said a company source.

Meanwhile, shares of Vodafone Idea crashed on the bourses on Wednesday. The stock tumbled nearly 20 per cent to record fresh lows. Vodafone Idea closed at a 52-week low of ₹5.94, down ₹1.46 or 19.73 per cent on the BSE.

Published on August 04, 2021

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