Synopsis
At June end, Vi's net debt was over Rs 1.98 lakh-crore, with its deferred spectrum payment dues at over Rs 1.16 lakh-crore and debt from banks and financial institutions at Rs 15,200 crore. Its cash and cash equivalents were at Rs 860 crore.
The finance ministry has cleared a proposal to convert Vodafone Idea's ₹16,130-crore worth of accrued interest on deferred adjusted gross revenue (AGR)-related dues into equity.
The ball is now in the telecom department's court, which has to finalize the transaction as per the package announced earlier.
"It (the equity conversion) has received the finance ministry's nod in line with the approved (telecom relief) package," said an official aware of the developments.
The equity conversion, which was subject to government confirmation, has been pending since January this year. It is vital for Vodafone Idea to conclude its long-pending ₹10,000 crore external fundraise via equity as potential investors want clarity on this issue. The carrier is also talking to banks for another ₹10,000 crore in debt as it needs to invest in its 4G network and roll out 5G to effectively compete with rivals Reliance Jio and Bharti Airtel and stem subscriber losses.
Stock Movement
It also needs cash to clear some of its near Rs 15,000-crore trade payables, comprising dues to tower companies, network gear vendors and other suppliers. At June end, Vi's net debt was over Rs 1.98 lakh-crore, with its deferred spectrum payment dues at over Rs 1.16 lakh-crore and debt from banks and financial institutions at Rs 15,200 crore. Its cash and cash equivalents were at Rs 860 crore.
Once the telecom department finalises the conversion as per the telecom relief package announced last September, the government will own around 33% of Vodafone Idea's equity and become the single largest shareholder in the loss-making entity. The co-promoters - UK's Vodafone Group Plc. and the Aditya Birla Group - together will continue to hold a combined majority stake of 50.1% in the Indian telco. Vodafone will hold 31.8% and ABG, 18.3%, according to brokerage Nomura.
The Rs 16,130-crore liability is the accrued interest on the telco's accumulated licence and spectrum usage charge (SUC) dues levied on AGR and deferred spectrum payments up to FY17. Under the terms of the government's rescue package for the sector, telcos had the option to convert these statutory dues into government equity. Vodafone Idea had opted for the option.
Another senior industry executive familiar with the matter said the conversion has been held up as Vodafone Idea's stock price has been hovering below Rs 10 and as per the company law provisions, any equity infusion cannot be below par value.
When Vodafone Idea opted to convert the accrued interest into equity on January 11, its shares closed at Rs 11.80. The price has remained below Rs 10 for most of the current financial year. But the stock has risen 3.4% between September 2 and 5, shortly after the telco prepaid a near Rs 2,700 crore short-term loan to SBI.
On Wednesday, the operator's shares jumped 6.9% to close at Rs 9.77 on the BSE.
Separately, Vodafone Idea also needs to inform the telecom department by September 16 if it would also opt to convert accrued interest on deferred licence fee dues for FY18 and FY19 into equity.
If the telco opts for the second round of conversion, the government could end up holding an additional 5-7% equity in the telco, apart from the currently expected 33%, say analysts.
The company on June 22 opted for a four-year deferment of licence fee-related dues amounting to Rs 8,837 crore for FY18 and FY19. But it hasn't yet taken a call on converting the accrued interest on these deferred dues into government equity.
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