Government to hold 35.8% stake in Vodafone Idea after converting contributions


Bombay: At a time when the government is divesting its stakes in public sector enterprises (PSUs) to mop up funds, it has become the largest shareholder in loss-making private telecommunications company Vodafone Idea, with a 36% stake.

After Vodafone Idea’s board of directors authorized the conversion of government contributions into equity, the Center will own nearly 36% of the country’s third-largest wireless operator.

This will result in dilution for all of the company’s existing shareholders, including the founders, according to a stock market filing from the unprofitable wireless service provider.

Vodafone Group Plc would control around 28.5% of the company, while Aditya Birla Group would own around 17.8%.

“The Board of Directors, at its meeting on January 10, 2022, approved the conversion of the total amount of such interest related to spectrum auction tranches and AGR contributions into equity,” said a company statement.

The Net Present Value (NPV) of the AGR spectrum and interest auction is expected to be around Rs 16,000 crore.

The company’s total debt stood at Rs 1.80 trillion in March 2021.

The rescue was essential for Vodafone Idea, a joint venture between the Vodafone Group and billionaire Kumar Mangalam Birla’s conglomerate which has lost subscribers to its larger peers.

Its financial situation deteriorated when Reliance Jio Infocomm launched a brutal price war in 2016, quickly capturing market share to become the dominant operator.

On Tuesday, the share of Vodafone Idea fell 19% at the start of the session to 12.05 Rs.

“The governance and other rights of the promoter shareholders are governed by a shareholders’ agreement (SHA) to which the company is a party and are also incorporated in the articles of association of the company,” Vodafone said in a stock exchange notice.

“The rights are subject to a minimum eligibility threshold of 21% for each group of promoters, and in light of the conversion of interest into equity, the promoters have mutually agreed to modify the existing SHA to reduce the minimum eligibility threshold of 21%. at 13% in order to exercise certain governance rights such as the appointment of directors and the appointment of certain key managers, etc. The company said.

The Vodafone Idea Board of Directors also took note of the proposed changes to the existing SHA and, accordingly, authorized their execution and also recommended changes to the Articles of Association (AoA) to give effect to the changes to the SHA. Changes to the AoA are subject to shareholder approval at the annual general meeting, the company added.


Comments are closed.