VI to convert interest dues into equity worth Rs 16,133 cr at Rs 10 per share says Govt

New Delhi: The government on Friday agreed to convert Vodafone Idea’s interest into equity, the telecom company said in a stock exchange filing. Vodafone Idea on Friday said the government has directed it to issue shares worth Rs 16,133.1 crore at an issue price of Rs 10 per share. Fees owed by the telco to the government for the use of airwaves, including interest related to spectrum payments.

Last year, the telecom department calculated the net present value (NPV) of spectrum interest and adjusted gross revenue (AGR) from deferred statutory charges at Rs 16,133.1 crore.

VIL has previously said that by converting the fees into equity, the government will acquire an approximately 33% stake in the company.

“We sought a firm commitment that the Aditya Birla Group would lead the company and bring in the necessary investment. The Birlas agreed and hence we agreed to the conversion. We want India to be a three-player market plus BSNL and ensure healthy competition for consumers,” Telecom Minister Ashwini said Vaishnav.

”The Ministry of Communications… has today i.e. February 3, 2023 passed an order… directing the company to convert the NPV of interest related to deferment of spectrum auction and AGR charges into shares to be issued to the Government of India,” the filing said.

The company was directed to issue 1613,31,84,899 equity shares of face value of Rs 10 each at an issue price of Rs 10 each.

The relief for the company comes as part of a package of reforms announced by the government in September 2021.

Shares of VIL closed at Rs 6.89 apiece on the BSE on Friday, up 1.03 percent from the previous close.

In October 2022, market regulator Sebi approved the conversion of Vodafone Idea’s fees into equity.

In 2021, the Center approved a rescue package for debt-constrained telcos that allows them to convert interest on deferred adjusted gross receipts owed to the government into equity. India’s telecom sector has been disrupted by the entry of Mukesh Ambani’s Reliance Jio, and the sector’s woes have also been compounded by heavy dues owed to the government.

In 2020, the Supreme Court gave telecom companies 10 years until 2031 to pay back the fees.

Vaishnaw said last month that Vodafone Idea has various requirements, including capital infusion, and discussions are on.

”Vodafone (Idea) has many demands. It has a special capital requirement. How much capital, who will put in? All of these things are up for debate at the moment. Capital liability must come from a variety of sources. The company simply does not require conversion. It requires capital. All those things are a complex issue,” Vaishnaw said.

According to the latest data released by telecom regulator Trai, the company has 24.3 million mobile subscribers, accounting for 21.33 percent market share.

VIL is the only telecom operator that has yet to place orders for equipment for 5G services and is struggling to pay fees to its vendors.

Last month, Indus Towers provided a doubtful debt of Rs 2,298.1 crore due to VIL’s troubled balance sheet.

It is in the process of issuing optionally convertible bonds of up to Rs 1,600 crore to seller American Tower Corporation to repay its dues.

As of September 30 this year, the company’s total gross debt, excluding lease liabilities and including accrued but unpaid interest, stood at Rs 2,20,320 crore.

The company made several attempts to raise capital from investors, but failed due to adverse market conditions and huge debt on its balance sheet.

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