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Shares of Vodafone Idea crashed over 11 per cent on Tuesday morning after the company announced that it will offer 35.8 per cent to the government against spectrum and AGR dues. Vodafone Idea shares were trading at ₹13.15 a piece on BSE at 10 AM on Tuesday.
Investors are unhappy because this indicates that the existing promoters of the company are diluting their skin in the game. It also indicates that the company’s efforts to raise funds or bring strategic investor has been delayed. “ If this is accepted by the government then Vodafone Idea will be controlled by the government. This is not a good result at a time when the government itself is divesting stake in PSUs.,” said an indsutry expert
Vodafone Idea’s rivals Airtel and Reliance Jio have not exercised the option to convert interest dues into equity. While Airtel has opted to take the four year moratorium, the operator on Friday said it has confirmed to the Department of Telecommunications (DoT) that it will not avail the option of conversion of the interest on deferred spectrum and adjusted gross revenue (AGR) dues into equity. The company had AGR dues of ₹58,254 crore, of which it had already paid ₹18,004 crore. The four-year moratorium should save it around ₹11,500 crore in annual cash flows.
Market expectation
Vodafone Idea, on the other hand, was expected to fund the interest payments through the recent tariff hikes and fresh equity infusion. “With the recent 20 per cent tariff hikes and Vi having likely tied up the funding for repaying the non-convertible debentures maturing between December 2021 and February 2022, market was expecting Vi to continue its fund-raising efforts from its promoters and other investors, rather than letting the government acquire a significant stake,” said an analyst.
The Department of Telecommunications, on October 142021, had announced a bail out package for the telecom sector under which it allowed operators todefer payment of spectrum auction instalments and AGR dues byupto four years. It also allowed a one-time opportunity to exercise the option of paying interest for the four years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount.
On 18 October 2021 and 27 October 2021,Vodafone Ideahad approved deferment of spectrum auction instalmentsand AGRduesupto four years. On Monday, the company took the decision to avail the option to convert interest dues to equity. The government, at its sole discretion, may convert any part of such loan to preference shares instead of equity shares and such preference shares may be optionally or compulsorily convertible and/or redeemable and/or participating in nature.The shares may be held through the statutory undertaking of the Unit Trust of India (SUUTI) on behalf of the Government of India or by any trustee-type or other suitable arrangement.
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