Govt To Own 35.8 Per Cent Stake In Vodafone Idea After Converting Dues

Vodafone Group Plc would control approximately 28.5 per cent of the company, while Aditya Birla Group will own about 17.8 per cent

Mumbai: At a time when the government is divesting stakes in public sector undertakings (PSUs) to mop up funds, it has become the largest shareholder in loss-making private sector telco Vodafone Idea, with a 36 per cent stake.

After Vodafone Idea’s board authorised the conversion of government dues into equity, the Centre will hold nearly 36 per cent of the country’s third-largest wireless phone operator.

This will result in dilution for all existing shareholders of the company, including the founders, according to a stock exchange filing by the unprofitable wireless provider.

Vodafone Group Plc would control approximately 28.5 per cent of the company, while Aditya Birla Group will own about 17.8 per cent.

“The Board of Directors, at its meeting held on January 10, 2022, has approved the conversion of the full amount of such interest related to spectrum auction installments and AGR dues into equity,” said a company statement.

The Net Present Value (NPV) of the spectrum auction and AGR interest is projected to be around Rs 16,000 crore.

The company’s total debt amounted to Rs 1.80 trillion as of March 2021.

This rescue was critical for Vodafone Idea, a joint venture between the Vodafone Group and billionaire Kumar Mangalam Birla’s conglomerate that has been losing subscribers to larger peers.

Its financial condition deteriorated when Reliance Jio Infocomm began a brutal price war in 2016, quickly capturing market share to become the dominant operator.

On Tuesday, Vodafone Idea’s stock fell 19 per cent in early trading to Rs 12.05.

“The governance and other rights of the promoter shareholders are governed by a shareholders agreement (SHA) to which the company is a party and are also incorporated in the Articles of Association of the Company,” Vodafone said in a notice to exchanges.

“The rights are subject to a minimum qualifying threshold of 21 per cent for each promoter group, and in light of the conversion of interest into equity, the promoters have mutually agreed to amend the existing SHA for reducing the minimum qualifying threshold from 21 per cent to 13 per cent for the purpose of exercising certain governing rights such as appointment of directors and relating to appointment of certain key officials, etc.,” the company said.

The Vodafone Idea board has also taken note of the proposed changes to the existing SHA and, accordingly, authorised execution of the same and also recommended changes in the Articles of Association (AoA) to give effect to the changes in the SHA. The amendments to the AoA are subject to the approval of shareholders in the annual general meeting, the company added.