Vi equity conversion ‘complex’, discussions on, says Vaishnaw

“Vodafone Idea has many requirements. It has a particular requirement of capital. How much capital, who will infuse? All those things are under discussion at this point,” Vaishnaw said on the sidelines of the 5G launch in Odisha. “The responsibility of the capital will have to come from various sources… All those are complex issues.”

This is the minister’s first official comment on the conversion of Vi’s debts into government equity. Reeling under a debt burden of over Rs 2 lakh crore, Vi has opted to convert around Rs 16,000 crore of interest liability payable to the government into equity, which will amount to around a 33 per cent stake in the company. The promoters’ holding will come down to 50 per cent from 74.99 per cent.

In September 2021, the government had announced a support package for telecom companies. At the heart of the rescue was the desire to keep Vi alive to prevent a telecom duopoly.

Vi has offered a stake to the government at a par value of Rs 10 per share. The government is waiting for the company’s shares to stabilise at Rs 10 apiece. Officials, however,  are understood to be unhappy over the fact that Vi’s promoters — UK-based Vodafone Plc and Aditya Birla Group — are unwilling to infuse more capital in the company, which the government internally hopes should between Rs 40,000 crore and Rs 50,000 crore.

Two years back, Vodafone Idea had approved plans to raise Rs 25,000 crore. Of this approved amount, the company has been able to raise Rs 5,000 crore from the promoters.

The government’s inaction over the conversion of Vi’s dues into equity has also triggered a prominent trade body to seek help from the Indian High Commissioner in the UK. The UK-India Business Council, in a recent letter to Vikram K Doraiswami, is learnt to have said that the delay is hurting Vi’s business in India and preventing investors from investing in the company.

As of September, Vi had a net debt of around Rs 2.2 lakh crore. The company’s dues to banks and other lenders totalled Rs 15,080 crore.

The delay is hurting Vi’s other deals that have the potential to help the company with much needed cash. For instance, Vi’s proposal to settle dues of Rs 1,600 crore with equipment vendor ATC Telecom Infrastructure through the issue of equity-convertible debt bonds has already lapsed once. This was because the issuance of bonds to ATC was subject to conversion of interest dues into equity by the government. The two have agreed to extend the last date of subscription of the debentures to February 28.

Last November, Vi received approval from its shareholders for issuing up to 16,000 optionally convertible debentures, with a face value of Rs 10 lakh each, in one or more tranches. The amount, if unpaid in 18 months, would give an option to ATC to convert the dues into equity at a price of Rs 10 per share. One of the conditions set by ATC before taking Vi’s proposal was the government’s conversion of the interest dues from deferment of adjusted gross revenue and spectrum dues into equity shares of the company.