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Vodafone Idea CEO says any equity conversion by govt will be in line with the rules, promoters to support fundraising plans

Vodafone Idea Limited is waiting for the government to spell out the final guidelines for the telecom relief package it announced earlier this month. The government allowed a four-year moratorium on the spectrum and adjusted gross revenue (AGR) dues and an option to pay principal and interest by way of equity.

September 29, 2021 / 08:18 PM IST

Vodafone Idea Limited, the biggest beneficiary of the telecom relief package announced by the government this month, said any payment in the form of equity towards the principal or interest it owes the government will be in line with the rules of the market regulator SEBI.

Such payment will not constitute a special arrangement that would discriminate against any other investors, managing director and chief executive officer Ravinder Takker told Moneycontrol.

Takker said the government, like anyone else, was expected to follow the rules of the land.

“So in many ways, you cannot have a situation where the government will follow different rules (compared to other investors)...it's been very clear from the government, that is their intent to follow certain rules so there will be no special arrangement, which says that the government can do our investment in this company in (line with) rules that are different than what any other investor would be allowed to, or what is based on the company rules and the SEBI regulations that exist.”

Vodafone Idea's total net debt stands at Rs 1.9 lakh crore and the total AGR dues as assessed by DOTs is estimated at Rs 58,254 crore.

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The clarity offered by Takker would offer a modicum of comfort to investors whom the company may reach out to for an infusion of funds for survival.

Equity fund infusion is critical for the company to make its business viable. Despite the moratorium, most analysts say the package may provide a degree of relief to the company, but it is not yet out of the woods.

Dilution key to investment

Takker added: “Some of those guidelines and details of exactly what that cabinet package will be are expected any day now from the various ministries. I can tell you, you know, in a more subjective manner in all my discussions with the government, the government, and I've had several discussions as you can imagine, over the past few months, the government is not interested in owning control running any telecom company.”

An offer of equity to the government even after the end of the four-year moratorium is an important metric on which investors will make a decision on betting on Vodafone Idea, industry executives said. “Dilution aspect is very important for investors to get clarity as their investments will be at stake if the government buys (equity) at a lower price,” one executive said on condition of anonymity.

Equity fundraising

When asked about the amount of capital Vodafone Idea would require to improve its performance by switching and upgrading its network, Takker said the management was waiting for more details of the relief package to emerge.

“We will then update our business plan accordingly and as you can imagine, this package makes a significant change to our business plans,” he added.

Reports suggest that the government expects Rs 10,000 crore of fund infusion by the promoters of Vodafone Idea, Vodafone Group Plc & Aditya Birla Group.

"I am saying that the promoters have been supportive of the fundraising process..,” Takker said. “The amount itself and the (extent of their participation)... is completely up to them. And it's a question really for them, I think, you know, it's difficult for me and impossible for me to answer that question, but all I can say to you is that they will continue to support the fundraising process.”

In a recent statement, UK-based telecom giant Vodafone, which has written off its India investments, said: “Just to confirm our position, there will be no new equity infusion from Vodafone Group.”

Aditya Birla Group has been silent on the matter. In the past, Chairman Kumar Mangalam Birla had stated that the group would not infuse any more funds in Vodafone Idea because the telecom industry is confronting a tough environment.

Vodafone Idea had taken shareholders’ approval to raise Rs 25,000 crore but struggled to raise the funds.

“Equity investors in the past have burnt their fingers and will wait for some performance from the company before they can bet on it again in a changed telecom environment,” one member of the investor community said.
Nisha Poddar is an Editor-M&A, CNBC-TV18
first published: Sep 29, 2021 08:16 pm

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