Vodafone Thought’s board on Tuesday knowledgeable the division of telecommunications (DoT) that it’s going to go for changing the curiosity on adjusted gross income (AGR) and spectrum dues into authorities fairness. As soon as the plan goes by way of over a interval of 4 years, the federal government will turn out to be the only largest shareholder within the firm with a stake of 35.8%.
Put up the fairness conversion, the federal government may even turn out to be a creditor for the corporate, which might have some positives in addition to negatives for Vodafone Thought. On the optimistic facet, the corporate could be in a greater monetary place to boost exterior funds and there can be a risk of flexibility in future funds to the federal government. Additional, the federal government would have an curiosity in defending the fairness worth of the corporate.
On the unfavorable facet, potential considerations with regard to administration fashion, governance, capital allocation, and so on, might come up however all this might rely on how a lot the federal government will get concerned within the administration/board of the corporate.
Analysts mentioned that whereas Vodafone Thought’s near-term existential considerations have been addressed by this transfer, the onus remains to be on the corporate to efficiently full its capital increase, speed up community investments and stem subscriber losses. The corporate would additionally have to make extra significant tariff hikes within the days to come back.
“…the board of administrators, at its assembly held on January 10, 2022, has accredited the conversion of the complete quantity of such curiosity associated to spectrum public sale instalments and AGR dues into fairness. The web current worth (NPV) of this curiosity is anticipated to be about `16,000 crore as per the corporate’s finest estimates, topic to affirmation by the DoT,” Vodafone Thought mentioned in a regulatory submitting.
“The conversion will, due to this fact, end in dilution of all the prevailing shareholders of the corporate, together with the promoters. Following conversion, it’s anticipated that the federal government will maintain round 35.8% of the entire excellent shares of the corporate, and that the promoter shareholders would maintain round 28.5% (Vodafone Group) and round 17.8% (Aditya Birla Group), respectively,” the submitting mentioned.
The shares can be issued to the federal government on a preferential foundation and related date for pricing could be August 14, 2021, the submitting mentioned. “The federal government, at its sole discretion, might convert any a part of such mortgage to choice shares as a substitute of fairness shares and such choice shares could also be optionally or compulsorily convertible and/or redeemable and/or taking part in nature. The shares could also be held by way of the statutory enterprise of the Unit Belief of India (SUUTI) on behalf of the federal government of India or by any trustee-type or different appropriate association,” Vodafone Thought mentioned.
For the reason that common value of Vodafone Thought’s shares on the related date of August 14, 2021, was under par worth, the fairness shares can be issued to the federal government at par worth of Rs 10 per share topic to the ultimate affirmation by the DoT.
The federal government has given telecom operators an choice of paying curiosity for the 4 years of deferment on the deferred spectrum instalments and AGR dues by means of conversion into fairness of the NPV of such curiosity quantity.
The loss-making and financially-constrained, Vodafone Thought, which is the nation’s third largest telecom operator, has complete AGR dues of Rs 58,254 crore of which it has paid Rs 7,854 crore.
As is thought, Bharti Airtel has opted for the four-year moratorium on cost of AGR and spectrum dues however not for conversion of curiosity into fairness by the federal government. Reliance Jio has opted for neither of the provisions, which had been a part of the September 15, 2021, package deal supplied by the federal government to the telecom operators.
Annual instalments earlier than the federal government’s aid package deal for Vodafone Thought amounted to Rs 15,000 crore for spectrum and `9,000 crore for AGR, which got here to a complete of Rs 96,000 crore for 4 years. With this quantity now deferred, and curiosity on deferral transformed to fairness, complete curiosity involves Rs 19,500-20,000 crore assuming an 8-9% rate of interest and the current worth of this involves Rs 16,000 crore.