KM Birla steps down as director of Vodafone Idea

Ayushi Kar Mumbai | Updated on August 04, 2021

Kumar Mangalam Birla

He will be replaced by Himanshu Kapania, who is currently a non-executive director.

In a clear indication that the telecom business is beyond redemption for the Birla group, Kumar Mangalam Birla has stepped down as the Non-Executive Director and Non-Executive Chairman of Vodafone Idea with immediate effect. This comes after Birla offered to hand over his stake to the Government in exchange for a bailout package.

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 operations.

Read also: Birla offers to give up stake in Vodafone Idea

The Vodafone Idea Board of Directors also appointed Sushil Agarwal, another nominee of the Aditya Birla Group as an Additional Director (Non-Executive and Non-Independent) with effect from 4th of August 2021.

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". Birla warned that the company was in a dire state of collapse without government intervention.

Share price crash

Meanwhile, shares of Vodafone Idea crashed on the bourses on Wednesday, as the debt-ridden company is running out of options to raise fresh funds.

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. It had opened at ₹7.20 as against the previous close of ₹7.40. On the NSE, it closed at ₹6, down ₹1.40 or 18.92 per cent. It hit a 52-week low of ₹5.95.

The company's shares have been under pressure since last month after the Supreme Court dismissed the applications filed by three telecom companies — Bharti Airtel, Vodafone Idea and Tata Teleservices, who had appealed to the apex court to allow them to make staggered AGR payments. They had also sought correction to calculation errors made by the Department of Telecommunication (DoT) in its AGR demand.

The decision has come as a big blow to the cash-strapped Voda Idea, which owes over ₹58,000 crore in AGR dues.

Vodafone Idea has been reeling under a massive debt of nearly ₹1.8-lakh crore and a cash balance of only ₹350 crore.

The group has invested over ₹12,200 crore into the telecom business over the last 20 years. Birla also has indirect control over Vodafone Plc’s 44 per cent in the joint venture company.

Furthermore, in a conference call with investors, Vodafone Group Plc Chief Executive Officer Nick Read said the UK-based company will not put more equity into India.

"We as a group try to provide them as much practical support as we can but I want to make it very clear, we are not putting any additional equity into India," Read said.

The UK-based Vodafone Plc has written off nearly $12 billion in various phases on its Indian investments, both in Vodafone India and after its merger with Idea Cellular.

Vodafone Idea has been trying to raise funds from investors over the last year but has not closed a deal. Birla said foreign investors are keen to partner with Vodafone Idea but want to see a clear government intent to have a three-player telecom market.

The company's future is in limbo without fresh investments as it has also not been able to invest in future network roll-outs.

Published on August 04, 2021

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