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New Delhi : The Union government gave the go-ahead for a long-awaited plan to convert over Rs 16,000 crore ($2 billion) in interest dues from cash-strapped telecom company Vodafone Idea (Vi) into equity on Friday.
Why was equity conversion delayed?
Since the government announced a telecom sector relief package in September 2021, Vi had been waiting to convert interest on deferred adjusted gross revenue owed to the government into equity.
The delay in implementing this plan put the troubled telco in a Catch-22: the government was unwilling to move the needle on equity conversion until the telco received additional funding, and investors were waiting for the government to move first.
What changed?
After Vi’s promoters promised to invest more capital, the government approved.
Union Minister of Communications Ashwini Vaishnaw said Friday: “We had sought a firm commitment that the Aditya Birla Group would run the company and bring necessary investments. We converted because Birlas agreed. We want India to have three players plus BSNL and healthy consumer competition.”
Equity conversion—how?
Vodafone Idea stated in a regulatory filing Friday evening: “Ministry of Communications, Government of India has, in line with the Reforms and Support Package for Telecom Sector communicated earlier and the conversion option exercised by the Company as provided for therein, passed an order today i.e. 3 February, 2023 under section 62(4) of the Companies Act, 2013, directing the Company to convert the NPV of the interest related to deferment of spectrum auction instalments.
“Rs. 16133,18,48,990 will be converted into equity shares. “The Company has been directed to issue 1613,31,84,899 equity shares of Rs. 10 each at Rs. 10 each,” it added.
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