Govt to hold 35.8% stake in Vodafone Idea due to conversion of AGR dues to equity stake

11 Jan 2022 , 01:20 PM

Shares of Vodafone Idea Limited dipped over 13% following the announcement of the Government’s holding of 35.8% in the company.

In the meeting held on 10th January 2022, the Board of Directors has approved the conversion of the entire amount of such interest related to spectrum auction instalments and AGR dues into Equity. As per the Company, the NPV of such interest stands at Rs 16000 crore, which is subject to confirmation by the DoT. Further, the average price of the company’s shares as of 14.08.2021 was below the par value, the shares will be issued at the par value of Rs 10 each, subject to DoTs confirmation.

The said conversion will therefore result in dilution of all existing shareholders of the Company, including promoters. Following conversion, it is anticipated that the government will hold a major stake of about 35.8% in the company. While, the promoter shareholders will hold around 28.5% (Vodafone group) and 17.8% (Aditya Birla Group), respectively.

This holding is a result of the following options provided to Vi Ltd.:
1. Defer payment of Spectrum Auction Instalments due up to 4 years with immediate effect, excluding the instalments due in respect of Spectrum Auction 2021.
2. One-time opportunity to opt for deferment of AGR-related dues as determined by Hon’ble Supreme Court in the AGR case, by a period of 4 years with immediate effect.
3. One-time opportunity to exercise the option of paying interest for the 4 years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount.

The Board of Directors of the Company, at its meetings, held on 18 October 2021 and 27 October 2021, had approved: (a) deferment of Spectrum Auction Instalments due up to 4 years; and (b) deferment of AGR related dues by 4 years, and duly communicated the same to the stock exchanges by the Company.

Further, DoT has provided a time period of 90 days to exercise the option to convert interest that would accrue on instalment payment during the moratorium period into equity. The company shall abide by the following:

1. The company shall furnish the interest amount, which is to be certified by the DoT.

2. NPV of the interest to be calculated as on the date of exercising the option.

3. The valuation of shares to be issued in pursuance of such option shall be done as under:

• An order u/s 62(4) of the Companies Act, 2013 will be issued by the competent authority;
• The Equity Shares would be issued to the Government on a preferential basis;
• The relevant date for pricing would be 14.08.2021; and
• 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).

4. The government will have the discretion to convert any part of such loan to preference shares instead of equity shares and such preference shares may be compulsorily or optionally convertible and/or redeemable and/or participating in nature.

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.

The rights of Promoter shareholders are subject to a minimum Qualifying Threshold of 21% for each Promoter group, and in light of the conversion of interest into equity, the Promoters have mutually agreed to amend the existing SHA for reducing the minimum Qualifying Threshold from 21% to 13% for the purpose of exercising certain governing rights e.g. appointment of directors and relating to appointment of certain key officials etc.