Vodafone Idea Ltd. said the Indian government will own almost 36 per cent of the country’s third-largest wireless phone operator after its board approved the conversion of dues into equity. This will result in dilution for all the existing shareholders of the company, including the founders, the unprofitable wireless carrier said in a stock exchange filing.
Insiders say the financial health deteriorated after Reliance Jio Infocomm Ltd sparked a brutal price war in 2016, and quickly clinched market share to become the top player.
The Centre in its telecom reforms package last October granted telecom companies a four-year moratorium on the spectrum and AGR dues. Companies were also granted an option to convert interest on deferred liabilities into equity.
On Monday, the telecom company’s board decided to exercise the option and approved the conversion of the full amount of interest (with a net present value of around Rs 16,000 crore) into equity. The shares would be allotted to the government at a par value of Rs 10 per share since the average price of the company’s share was below the par value on the relevant date that was fixed by the government under the reforms package.
“The conversion will therefore result in dilution of all existing shareholders of the company including the promoters. Following the conversion, it is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company and the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and around 17.8 per cent (Aditya Birla group) respectively,” the company said in a stock exchange notification.
While the government may become the largest shareholder, it may not get involved in running the company. In an earlier interaction with Business Standard, Vi’s CEO Ravinder Takkar had said that it would be incorrect to state that the company will turn into a public sector undertaking. “The government wants us to run the company efficiently and competitively. In all my conversations with the government, it has clearly said it has no interest in acquiring and running telecom companies in India,” Takkar had said.
