Government to hold 9.5% stake in TATA Teleservices in lieu of AGR dues of Rs850cr

11 Jan 2022 , 05:28 PM

Shares of Tata Teleservices opened with a surge of about 4% and continued to trade at Rs 290.15 throughout the day.

After Vodafone Idea, the government holds stake in yet another telecommunication company in lieu of conversion of AGR dues. Following such conversion, the government’s stake in the company will be 9.5%, subject to necessary approvals by DoT.

This is based on the AGR dues estimated by the company of Rs 850 crore, and the average issue price of Rs 41.50, calculated as per the government’s instructions, subject to further approval by DoT.

To provide a reference to the above, the DoT has provided a timeline of 90 days to the company to exercise the option of converting the interest that would accrue on instalment payment during the moratorium period into equity if the company opts for paying interest for the 4 years of deferment on the deferred AGR dues by way of conversion.

The government required the company to put front the following:
1. The details of interest payable by the company and thereafter necessary certification from the DoT.
2. To calculate the NPV of interest amount as on the date of exercising the option. This interest amount shall be treated as a loan to the company till the completion of the equity infusion process.
3. The valuation of convertible equity shares shall be done as:

a. An order u/s 62(4) of the Companies Act, 2013 will be issued by the competent authority;

b. The Equity Shares would be issued to the Government on a preferential basis;

c. The price shall be equal to higher of the average of weekly high and low of the volume-weighted average price of the equity shares during the last 26 weeks preceding the relevant date or two weeks preceding the relevant date, subject to provisions of section 53 of the Companies Act (price cannot be less than par value). The relevant date for pricing to be August 14, 2021.

4. The government has the sole discretion to convert any part of such loan to preference shares instead of equity shares, and such preference shares will be compulsorily or optionally convertible.
5. The shares may be held through the statutory undertaking of the Unit Trust of India (SUUTI) on behalf of the Government of India or by any trustee-type or other suitable arrangement.

Considering the option available to the company, it has decided in its Board meeting to convert the entire amount of such interest related to AGR dues into equity subject to conditions laid down by the government.