Government to hold 35.8% stake in Vodafone Idea, single largest stakeholder

Vodafone idea has finally communicated to the department of telecommunication and the exchanges of how it will be paying the interest on its liability and the Adjusted Gross Revenue (AGR) dues. They will be doing so in equity.
The company had both the options of paying it in cash or equity and they have chosen equity as an option. The company chose a four-year moratorium on the spectrum liability and AGR dues that was offered in the telecom reform package.
Now, according to the company, the interest amount that the company will have to pay will be close to 16,000cr Rs., yet to be confirmed by the DoR and the conversation of this amount will happen at the cost of Rs10 per share which is the face value of the company as the average price of the Company’s shares at the relevant date of 14.08.2021 was below par value. And hence, the dilution is very high. The shares of the company slumped by 14.81% to Rs 12.65 on early trading hours.
According to the company, the government of India will hold close to a 35.8% stake in Vodafone Idea post the conversation and will be the single largest shareholder in the company. Even the promoter groups, Vodaphone (28.5%), and Aditya Birla circulatory (17.8%) will not hold that much amount of a stake in the company.
The combined promoter holding would come down to 46.3% from the current 72.1%. Last week Bharti Airtel also came out with a similar announcement but the company didn’t say that they will be paying this interest amount in cash and not in equity.
Vodafone idea choosing equity as an option is at expected lines but this also means that the company is not confident of generating enough amount of cash flows going forward despite the reform package announcement and the recent tariff.

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