Vodafone Ideas converting debt into equity makes the government the largest shareholder with 36 percent

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The Indian government is expected to become Vodafone Idea’s largest shareholder, at 35.8 percent, as the company’s board of directors has approved the conversion of interest on deferred frequencies and adjusted gross income (AGR) into equity, Vodafone Idea said on Tuesday.

Vodafone Idea, a joint venture of the British Vodafone Group and the Aditya Birla Group led by Kumar Mangalam Birla, has chosen to convert interest on accrued spectrum and liabilities from adjusted gross sales (AGR) into equity.

The conversion will dilute all of the company’s existing shareholders, including the promoters.

Following the conversion, it is expected that the government will hold approximately 35.8 percent of the company’s total outstanding shares and that the promoter’s shareholders will hold approximately 28.5 percent (Vodafone Group) and approximately 17.8 percent (Aditya Birla Group), respectively be, Vodafone Idea said in a statement.

Vodafone Idea’s share price collapsed after the announcement. Trading in Vodafone Idea started sharply down at Rs. 1.40pm on the Bombay Stock Exchange (BSE) on Tuesday versus the previous day’s closing price at Rs. 14.85. The company’s share price plunged to a low of Rs. 12:05 p.m. in morning trading, 18.85 percent lower than the previous day’s closing price.

The company’s share price rallied later in the day. At 11:10 a.m., Vodafone Idea stock traded on the Bombay Stock Exchange (BSE) at Rs. 13.

At its meeting on January 10, 2022, the Board of Directors of Vodafone Idea approved the conversion of the full amount of this interest in relation to frequency auction rates and AGR contributions into equity.

“The net present value (NPV) of this interest is expected to be approximately Rs. 16,000 crore based on the Company’s best estimates and subject to confirmation by the DoT. the shares will be issued to the government at a par value of Rs. 10 per share, subject to final approval by the DoT, “Vodafone Idea said in a regulatory filing with the exchanges.

On September 15, the Union’s cabinet approved a series of measures in support of the ailing telecommunications companies. The aid measures include a four-year moratorium on the payment of frequency and AGR contributions. The telecommunications companies were also given the opportunity to pay the interest amount resulting from the deferral of payments by issuing equity to the state.

Following the government’s announcement, Bharti Airtel and Vodafone Idea opted for the four-year moratorium.

However, Bharti Airtel recently decided to pay the interest amount to the government instead of issuing the equity.

After the contributions are converted into equity, the Indian government will become the largest shareholder in Vodafone Idea. This requires changes to the company’s articles of association.

“The governance and other rights of the promoter shareholders are regulated by a Shareholders Agreement (SHA) to which the company is a party and are also anchored in the company’s articles of association,” said Vodafone Idea.

The rights are subject to a minimum qualifying threshold of 21 percent for each promoter group, and in view of the conversion of shares into equity, the promoters have mutually agreed to amend the existing SHA to lower the minimum qualifying threshold from 21 percent to 13 percent for the purpose of exercising certain executive rights, e.g. B. Appointment of directors and in relation to the appointment of certain key officials, etc.

Vodafone Idea said its board of directors had also taken note of the proposed changes to the existing Shareholder Agreement (SHA) and accordingly approved the implementation of the same and also recommended changes to the Articles of Association (AoA) to implement the changes in the SHA.

The change of the AoA requires the approval of the shareholders at the general meeting for which the board of directors has authorized officials of the company, the date of the shareholders meeting according to the terms of the change of the existing SHA as announced by the board of the company the company.

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