Government becomes largest shareholder in Vodafone Idea under new plan
What's the story
Vodafone Idea (Vi) Ltd. has decided to convert its Adjusted Gross Revenue (AGR) dues into government equity.
This means the Indian government will now own a nearly 36% stake in the company, becoming its single-largest shareholder.
Vi, the country's third-largest telecom operator, has AGR dues of Rs. 58,254 crore, of which it has so far paid Rs. 7,854 crore.
Context
Why does this story matter?
The move is a rescue plan for the ailing telecom company.
Vi has been an unprofitable joint venture between the Vodafone Group and Kumar Mangalam Birla's company.
Notably, Indian telcos have been suffering since 2016, when Reliance Jio Infocomm Ltd. launched an unprecedented price war and snatched customers from rivals to become the top player.
Details
Vi's board held meeting yesterday
Vi's board had held a meeting on Monday where the members approved the new plan.
Under the new plan, the amount of interest related to spectrum auction installments and dues to the government for use of airwaves will be converted into government ownership.
Meanwhile, the Vodafone Group will hold around 28.5% and Aditya Birla Group around 17.8%, the company stated.
Information
Interest value estimated at Rs. 16,000 crore
According to Vodafone Idea's estimates, the value of interest dues is around Rs. 16,000 crore. Reportedly, the equity shares will be issued to the government at a par value of Rs. 10 per share, subject to final confirmation by the Department of Telecommunications.
Market
20% fall in Vi's share price
Market experts say the company's decision is not good news for its shareholders.
After the announcement, Vi's share prices dipped nearly 20% on Tuesday.
"The government stake will probably be a stable stake. But it would reduce the float in the stock. Overall, it is going to be a negative for the stock," said TCG AMC Managing Director Chakri Lokapriya told The Economic Times.