The Indian authorities will personal near 49 per cent of beleaguered telecom firm Vodafone Concept (Vi), after it acquired one other lifeline from the Centre, which has determined to transform a further Rs 36,950 crore value of the corporate’s dues into fairness. Earlier than this infusion, the federal government held practically 23 per cent within the firm.
The corporate has been directed to subject 3,695 crore share with a face worth of Rs 10 per share throughout the subsequent month. It’s value noting that the federal government will purchase these further shares at a premium of greater than 47 per cent, as the corporate’s shares have been valued at Rs 6.8 apiece at market shut on Friday. The federal government is now the single-largest shareholder within the telecom agency.
“The promoters will proceed to have operational management of the corporate,” Vodafone Concept mentioned.
The quantity consists of excellent spectrum public sale dues, together with deferred dues in any other case payable by the corporate after the expiry of the moratorium interval, the telecom operator mentioned in an change submitting.
Why the second lifeline
That is the second lifeline that the federal government has supplied to the struggling telco. As a part of its 2021 reduction bundle for the corporate, the federal government in February 2023 had accredited the conversion of Rs 6,133 crore of Vi’s curiosity dues into fairness. As per the corporate’s share value of Rs 6.8 on the finish of Friday’s session, the federal government’s Rs 16,133 crore funding is at the moment valued at ₹10,970 crore, a lack of 32%.
As on December 2024, Vodafone Concept’s whole debt was round Rs 2.3 lakh crore. Of this, Rs 77,000 crore was AGR (adjusted gross income) legal responsibility and Rs 1.4 lakh crore is the spectrum legal responsibility.
“…it’s hereby knowledgeable that Ministry of Communications, Authorities of India has, in keeping with the September 2021 Reforms and Help Bundle for Telecom Sector has determined to transform the excellent spectrum public sale dues, together with deferred dues repayable after expiry of the moratorium interval, into fairness shares to be issued to the Authorities of India below Part 62(4) of the Corporations Act, 2013. This was communicated to the corporate by way of an order dated 29 March 2025, acquired by the corporate right now, i.e. 30 March 2025,” the corporate mentioned in its submitting.
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It mentioned that the pricing of shares to be allotted at a premium because of sure provisions within the Corporations Act, 2013, which require that shares can’t be issued at lower than the par worth.
“Since its your cash as a taxpayer, you’ll rightfully ask, however hiya, aren’t the shares at Rs. 6.80 out there?… Effectively, in fact, however there’s a rule that you simply can not subject shares under “par” so we’ve got to cough up 50% extra,” Deepak Shenoy, founder and CEO of wealth administration agency Capitalmind mentioned in a put up on X.
Will it assist the corporate?
The fairness conversion has been executed for the corporate to have the ability to pay a part of its spectrum dues to the federal government. With out the transfer, the corporate’s must pay round Rs 40,000 crore as a yearly instalment after the moratorium expires in September this 12 months. Nevertheless, with the federal government changing a few of that into fairness, the corporate may get a runway for one more two years or so, analysts mentioned.
“Vodafone Concept owes the federal government a ridiculous (Rs) 210,000 cr. Of which it’s going to solely cut back the debt by (Rs) 37,000 cr. now. And there’s no contemporary cash coming in. So everyone seems to be getting diluted similar to that… The twig is that after this they will’t convert extra debt to offer govt shares. As a result of then, shareholding crosses 50% and vodafone will grow to be a PSU,” Shenoy added.
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The fairness conversion, although, may assist in elevating some debt, because it has been out there to boost debt of round Rs 25,000 crore. The federal government’s further possession within the firm may give banks extra confidence to lend to the corporate, analysts mentioned.