Move as per scheme offered by DoT for settlement of dues.
The Board of Directors of Vodafone Idea Ltd, at a meeting held on January 10, approved the conversion of the full amount of interest related to spectrum auction instalments and AGR [adjusted gross revenue] dues to the government into equity, which would make the government 35.8% owner of the company.
This is as per a scheme offered by the Department of Telecommunications (DoT) for settlement of dues.
“The Net Present Value (NPV) of this [spectrum auction instalments and AGR dues] interest is expected to be about ₹16,000 crore as per the company’s best estimates, subject to confirmation by the DoT,” Vodafone Idea Ltd said in a filing with stock exchanges.
“Since the average price of the company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the government at par value of ₹10 per share, subject to final confirmation by the DoT,” the statement added.
The conversion will, therefore, result in dilution to all the existing shareholders of the company, including the promoters, the company said.
“Following conversion, it is expected that the government will hold around 35.8% of the total outstanding shares of the company, and that the promoter shareholders would hold around 28.5% (Vodafone Group) and around 17.8% (Aditya Birla Group), respectively,” the statement added.
The company said the governance and other rights of the promoter shareholders are governed by a Shareholders Agreement (SHA) to which the company is a party and are also incorporated in the Articles of Association of the company.
“The rights are subject to a minimum Qualifying Threshold of 21% for each promoter group, and in light of the conversion of interest into equity, the promoters have mutually agreed to amend the existing SHA for reducing the minimum Qualifying Threshold from 21% to 13% for the purpose of exercising certain governing rights, e.g. appointment of directors and relating to appointment of certain key officials etc,” the statement said.
The Board has also taken note of the proposed changes to the existing SHA, and accordingly authorised execution of the same and also recommended changes in the Articles of Association (AoA) to give effect to the changes in the SHA, it added.
The amendment to the AoA shall be subject to the approval of shareholders in a general meeting.
Earlier, the DoT had, vide a communication dated 14 October, 2021, provided various options to the company in connection with Telecom Reforms Package.
The options that were made available to the company included deferring payment of Spectrum Auction Instalments due up to four years with immediate effect, excluding the instalments due in respect of Spectrum Auction 2021; one-time opportunity to opt for deferment of AGR related dues as determined by the Supreme Court in the AGR case, by a period of four years with immediate effect; one-time opportunity to exercise the option of paying interest for the four years of deferment on the deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV of such interest amount.
The company’s board, at its meetings held on 18 October, 2021, and 27 October, 2021, had approved deferment of Spectrum Auction Instalments due up to four years; and deferment of AGR-related dues by four years.
The DoT had also provided 90 days to the company to exercise the option of converting the interest that would accrue on instalment payment during the moratorium period into equity in a specified manner, which the company has exercised.