The government has asked Vodafone Idea to convert interest payments into equity worth Rs 16,133 crore at Rs 10 per share

‘We wanted a strong promise that the Aditya Birla Group will run the company and bring in the necessary investments,’ says Telecom Minister Ashwini Vaishnaw.

The government agreed on Friday to convert Vodafone Idea’s interest dues into equity, according to a stock exchange filing by the telecom operator. On Friday, Vodafone Idea announced that the government has authorized it to issue shares worth Rs 16,133.1 crore at a price of Rs 10 per share.

The operator owes the government money for the usage of airwaves, including interest on payments for spectrum.

The telecom department calculated the net present value (NPV) on spectrum interest and adjusted gross revenue (AGR) on deferred statutory dues at Rs 16,133.1 crore last year.

Previously, VIL stated that with the conversion of dues into equity, the government would receive around 33% of the firm.

“We wanted a strong promise that the Aditya Birla Group would oversee the company and make the necessary investments. Birlas has consented, so we’ve agreed to convert. We want India to be a three-player market, with BSNL as a fourth operator, to maintain healthy competition for customers “Telecom Minister Ashwini Vaishnaw said.

‘The Ministry of Communications…issued an order today, 3 February 2023, requiring the firm to convert the NPV of the interest connected to the postponement of spectrum auction installments and AGR dues into equity shares to be distributed to the government of India,’ according to the document.

The business has been directed to issue 1613,31,84,899 equity shares, each with a face value of Rs 10 and an issue price of Rs 10.

The relief for the corporation is part of the government’s reform package announced in September 2021.

VIL shares finished at Rs 6.89 apiece on the BSE on Friday, up 1.03 percent from the previous close.

The market regulator Sebi approved the conversion of Vodafone Idea dues into equity in October 2022.

The Centre authorized a bailout program for debt-ridden telecom businesses in 2021, allowing them to convert interest on deferred adjusted gross revenue owed to the government into equity. The introduction of Mukesh Ambani’s Reliance Jio into India’s telecom sector interrupted the sector’s woes, which were exacerbated by massive government dues.

In 2020, the Supreme Court granted telecom companies a 10-year extension until 2031 to pay their debts.

Vaishnaw stated last month that Vodafone Idea has numerous criteria, including financial infusion, and that conversations are ongoing.

“Vodafone (Idea) has a number of needs. It has a specific capital requirement. How much capital will be invested, and who will provide it? All of these issues are now being discussed. Capital accountability must come from a variety of sources. The company just does not need conversion. It necessitates investment. “All of it is a complicated subject,” Vaishnaw had remarked.

According to the most recent Trai data, the company has 24.3 crores, of mobile subscribers, representing 21.33 percent of the market.

VIL is the sole telecom operator that has failed to make orders for 5G service equipment and has been struggling to pay its vendors’ dues.

Indus Towers made a provision for doubtful debt worth Rs 2,298.1 last month due to VIL’s weak financial sheet.

To clear its debts, it is in the process of issuing optionally convertible debentures for up to Rs 1,600 crore to seller American Tower Corporation.

The company’s total gross debt, excluding lease liabilities and including interest accrued but not due, amounted to Rs 2,20,320 crore as of September 30 this year.

The company attempted to obtain funds from investors multiple times but failed to owe to the poor market conditions and a massive debt on its balance sheet.