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Govt becomes largest shareholder in Vodafone Idea

Updated: Feb 11, 2023

The move comes after Vi received approval to convert Vi's interest dues worth more than Rs 16,000 crore into equity after receiving an assurance from Vi’s promoters that they would infuse additional capital.

What is happening: Recently in the first week of February, the Union government cleared the long-awaited plan to convert Vodafone Idea’s interest dues worth more than Rs 16,000 crore ($2 billion) into equity.

  • Ever since September 2021 when the government announced a relief package for the telecom sector, Vi had been awaiting the move.

Why it matters: The move paves the way to the government becoming the single largest shareholder in the telecommunication company.

  • The amove allows Vi to convert interest on deferred adjusted gross revenue owed to the government into equity.

Backdrop: As of September, Vi had a net debt of around Rs 2.2 lakh crore.

  • The company’s dues to banks and other lenders totaled Rs 15,080 crore.

The big picture: Two years back, Vi had approved plans to raise Rs 25,000 crore, out of which the company could only raise Rs 5,000 crore from the promoters.

  • The understanding is that the government was unwilling to be part of the equity conversion until the telco received additional funding whislt simultaneously, the investors were waiting for the government to move first.

The numbers: Reeling under a debt burden of over Rs 2 lakh crore, Vi had opted to convert more than Rs 16,000 crore of interest liability payable to the government into equity.

  • This will amount to around a 33 percent stake in the company following which the promoters’ holding will come down to 50 percent from 74.99 percent.

What is being said: The Union Minister of Communications Ashwini Vaishnaw stated that

  • “We had sought a firm commitment that the Aditya Birla Group would run the company and bring necessary investments. Birlas have agreed and hence we have agreed to convert. We want India to be a three-player market plus BSNL and ensure healthy competition for consumers.”

Read in short: Finally ending the catch 22 situation, the promoters of Vi agreed to the government's conditions following which the government converted Vis interest dues into shares, paving way for invertors and rebirth of thr debt ridden company.


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