The Vodafone Idea board of directors has approved converting the entire interest against deferred spectrum auction instalments and AGR dues into equity, handing over 35.8% of its total outstanding shares to the government. With this share allotment, the government has become the largest shareholder in the embattled telecom operator that has been struggling for survival.
“The Board of Directors, at its meeting held on January 10, 2022, has approved the conversion of the full amount of such interest related to spectrum auction instalments and AGR Dues into equity. The Net Present Value (NPV) of this interest is expected to be about ₹16,000 crore as per the company's best estimates, subject to confirmation by the DoT,” Vodafone Idea informed the exchanges on Tuesday.
This conversion of payment obligations to equity will lead to dilution to all the existing shareholders of the company, including the promoters. As per the new shareholding pattern, promoter shareholders Vodafone Group and Aditya Birla Group will hold 28.5% and 17.8%, respectively, while the rest will be held by the public.
The minimum qualification threshold for promoters group, as enshrined in the shareholders' agreement (SHA) and articles of association (AoA) of the company, have been amended to 13% from earlier 21% “for the purpose of exercising certain governing rights e.g. appointment of directors and relating to appointment of certain key officials, etc.”
The board has granted its approval to the changes in SHA and recommended changes in Vodafone Idea’s AoA to give effect to the same. The amendment to the AoA is subject to the approval of shareholders in the next general meeting, for which the Board has authorised officials of the Company to decide the date of shareholders meeting.
In its meetings on October 18, 2021, and October 27, 2021, the Vodafone Idea board had approved two proposals received from the DoT on October 14, 2021 – deferment of spectrum auction instalments due up to 4 years; and deferment of AGR related dues by 4 years.
The DoT communication had also offered a one-time opportunity of paying the interest for the four years that the spectrum instalments and AGR dues would be deferred by converting the NPV of such interest amount into equity. The DoT has provided a time of 90 days to Vodafone Idea to exercise this option.
The telecom department had also listed the manner in which this option can be exercised. Under these stipulations, the details of interest amount were to be furnished by Vodafone Idea, and subsequently certified by the DoT. The NPV of the interest amount was to be calculated as on the date of exercise of option.
For valuation of the equity shares under the conversion, an order under Section 62(4) of the Companies Act, 2013, was to be issued by the competent authority. In this regard, the equity shares were supposed to be issued to the government on a preferential basis and the relevant date for pricing was pegged at October 14, 2021.
The DoT had mandated that price shall be equal to higher of the average of weekly high and low of the volume weighted average price of the equity shares during the last 26 weeks preceding the relevant date, or two weeks preceding the relevant date, subject to provisions of section 53 of the Companies Act, as it cannot be less than par value.
Since the average price of Vodafone Idea shares at the relevant date of October 14, 2021 was below par value, the equity shares will be issued to the government at par value of ₹10 per share, the telco stated. This value is subject to confirmation by the Department of Telecommunications (DoT).
“Government, at its sole discretion, may convert any part of such loan to preference shares instead of equity shares and such preference shares may be optionally or compulsorily convertible and/or redeemable and/or participating in nature,” the DoT had said. “The shares may be held through the statutory undertaking of the Unit Trust of India (SUUTI) on behalf of the Government of India or by any trustee-type or other suitable arrangement.”
