Shares of Vodafone Idea surged 10 per cent on Tuesday following the announcement that the government’s stake in the company will more than double to 48.99 per cent. This move comes as the government plans to acquire shares worth Rs 36,950 crore in exchange for outstanding spectrum auction dues.
The stock hit its upper circuit limit, rising 9.99 per cent to Rs 7.49 on the BSE, while on the NSE, it climbed 10 per cent to Rs 7.48, reaching the maximum permissible trading limit for the day.
Currently, the government is the largest single shareholder in the debt-ridden telecom firm with a 22.6 per cent stake. The fresh acquisition will elevate its holding to a level surpassing the combined stakes of Vodafone and Aditya Birla Group, the company’s promoters.
As of now, Vodafone holds a 14.76 per cent stake, and Aditya Birla Group holds 22.56 per cent in Vodafone Idea.
“The Ministry of Communications… in line with the September 2021 Reforms and Support Package for Telecom Sector, has decided to convert the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, into equity shares to be issued to the Government of India. The total amount to be converted into equity shares is Rs 36,950 crore,” a filing from the company said on Sunday.
Vodafone Idea (VIL) announced that it has been instructed to issue 3,695 crore equity shares, each with a face value of Rs 10, at an issue price of Rs 10 per share. This issuance is to be completed within 30 days of receiving the necessary approval from relevant authorities, including the Securities and Exchange Board of India (SEBI).
Govt Share In Vodafone Idea
“Post the aforesaid issuance of equity shares, the Government of India shareholding in the company will increase from existing 22.60 per cent to approximately 48.99 per cent. The promoters will continue to have operational control of the company,” the filing said.
The government’s move to convert Rs 36,950 crore of Vodafone Idea’s dues into equity is a “significant” and “timely” demonstration of support, expected to provide substantial cash flow relief to the telecom company over the next three years and assist in completing its long-delayed bank debt raise, according to a report by brokerage firm Citi on Monday.
“Overall, we see this as a major and timely gesture of support from the government, which should offer considerable cash flow relief to VIL in the coming three years and facilitate the completion of its bank debt raise,” the brokerage stated in its latest report.
