Vodafone Idea, the long struggling yet third largest Indian telecom player, has gotten a major relief from the government â itâs second in 5 years â and one which could well be called the largest ever in Indiaâs long, controversial telecom history. The government on Saturday late evening, approved conversion of Vodafone Ideaâs dues to equity stake worth âč36,950 crores, taking Indian Governmentâs stake to nearly 49%.
The allocation will involve issuing 3,695 crore equity shares with a face value of âč10 each at an issue price of âč10 per share. The pricing has been determined based on the higher of the volume-weighted price over the last 90 trading days or the last 10 trading days before February 26, 2025, in accordance with Section 53 of the Companies Act, which prohibits issuing shares below their par value.
This is the second time that the Indian government has provided a significant financial relief to the embattled carrier. Back in 2021, as a part of an overall COVID relief package for the telecom sector, Vodafone idea received nearly $2billion in relief by conversion if outstanding dues to equity. That investment from the government, going by the last closing price of âč6.8, is already at a 32% loss. These buyouts, many believe, are governmentâs way of preventing the telecom market from becoming a duopoly between Reliance Jio and Airtel, considering how government operator BSNL is still only coming back on itâs feet.
Despite the government now becoming the single largest shareholder, the company assured that its promoters would continue to have operational control. âThe company will take all necessary steps to execute the share issuance upon receipt of requisite approvals,â Vodafone Idea stated.
The duesâ conversion notice was issued late Saturday, and notified to SEBI yesterday. This wad a long standing demand from Vodafone Idea, which has had a struggled financial past in the country, ever since the UK based telecom operator set foot in India in a joint venture with Indiaâs Idea. Vodafone had sold itâs entire stake to itâs Indian partner Idea, though the branding as âViâ still continues.
No immediate impact on the stock price was visible, considering Indian equity markets are closed for the day in account of Eid. Major brokers and analysts expect sharp recovery though, considering these dues were a major roadblock for Vi to even continue as a going concern. Vodafone Idea stock has one of the highest trading volumes on a daily basis, globally.
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