Government clears conversion of Voda Idea's Rs 16,133 Cr dues into equity after commitment from AB Group

The government cleared conversion of Rs 16,133 crore interest dues of debt-ridden Vodafone Idea into equity after receiving a firm commitment from Aditya Birla Group to run the company and bring necessary investment, telecom minister Ashwini Vaishnaw said on Friday.

Throwing a lifeline to the troubled telco, the government has approved conversion of over Rs 16,133 crore interest dues of Vodafone Idea into equity

With this conversion, the government is expected to become the biggest shareholder in the loss making telecom firm with 33.14% stake.

Vodafone Idea will issue equity shares to the government at face value of Rs 10 each.

"Ministry of Communications...passed an order today i.e. February, 3, 2023... directing the company to convert the NPV of the interest related to deferment of spectrum auction instalments and AGR dues into equity shares to be issued to the government of India," the filing said.

The relief for the company comes as part of the reforms package announced by the government in September 2021.

"The total amount to be converted into equity shares is Rs 16133,18,48,990. The company has been directed to issue 1613,31,84,899 equity shares of the face value of Rs 10 each at an issue price of Rs 10 each," the filing added.

Earlier, VIL had said that with conversion of dues into equity, the government will get around 33% stake in the company.

The order from the Department of Telecommunications (DoT) comes after a legal opinion advised in favour of picking stake in VIL even after the shares are trading below Rs 10.

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From being the biggest telecom operator after merger of Vodafone and Idea into single entity, with 43 crore mobile subscriber base accounting for 35% market share in 2018, the debt-ridden company has slipped to be a distant third telecom operator.

The company has 24.3 crore mobile subscribers accounting for 21.33% market share, as per latest data published by telecom regulator Trai.

VIL is the only telecom operator which is yet to place purchase orders for 5G services equipment and has been struggling to pay dues of its vendors.

Indus Towers last month made provision of doubtful debt worth Rs 2,298.1 crore on account of troubled balance sheet of VIL.

It is in the process of issuing optionally convertible debentures of up to Rs 1,600 crore to vendor American Tower Corporation to clear its dues.

The Supreme Court order in October 2019 directing telecom companies to pay revenue share as calculated by the government brought VIL on the verge of shutting down as it added payment burden of of Rs 58,254 crore on the company.

As on September 30 this year, the company's total gross debt, excluding lease liabilities and including interest accrued but not due, stood at Rs 2,20,320 crore.

The company has made several attempts to raise capital from investors but failed due to the adverse market condition and huge debt on its balance sheet.

The government's telecom reforms package provided hope for the company to stay afloat.

Pursuant to the Telecom Reforms Package announced by the government, VIL Board at its meeting held on January 10, 2022, approved the option to convert the full amount of interest related to deferred spectrum auction instalments and AGR dues to the extent of approximately Rs 16,133 crore into equity.

Shares of VIL closed at Rs 6.89 apiece on Friday at the BSE, up by 1.03% compared to previous close.