Centre to Convert ₹36,950 Crore Spectrum Dues into Equity; Market Reacts Positively
New Delhi, April 1 — Shares of Vodafone Idea Ltd (VIL) rallied 10% on Tuesday, hitting the upper circuit limit, after the company announced that the Government of India will acquire equity worth ₹36,950 crore in lieu of outstanding spectrum auction dues. This move will significantly increase the Centre’s stake in the debt-laden telecom operator from 22.6% to approximately 48.99%.On the Bombay Stock Exchange (BSE), the stock surged 9.99% to close at ₹7.49, while it jumped 10% to ₹7.48 on the National Stock Exchange (NSE), hitting the maximum trading limit allowed for the day.
Government Stake to Surpass Promoters
Following the equity conversion, the government's shareholding will surpass the combined stake of promoter groups Vodafone Group and Aditya Birla Group, who currently hold 14.76% and 22.56% respectively. Despite the increased stake, operational control of the company will remain with the promoters.Equity Conversion Aligned with 2021 Telecom Reform Package
In an official filing made on Sunday, Vodafone Idea stated that the Ministry of Communications had approved the equity conversion in accordance with the Telecom Reforms and Support Package announced in September 2021."The total amount to be converted into equity shares is ₹36,950 crore," the filing noted, adding that the company has been directed to issue 3,695 crore equity shares of face value ₹10 each, at an issue price of ₹10 per share, within 30 days of regulatory clearance including from SEBI.
Citi Sees Relief and Funding Boost
Brokerage firm Citi described the move as a “major display of support” by the government, terming it both "timely" and strategic. According to Citi, the conversion will bring substantial cash flow relief to Vodafone Idea over the next three years and pave the way for the telco to raise long-pending bank debt.The announcement and subsequent market rally signal growing investor optimism around Vodafone Idea’s turnaround, backed by robust government support.“This should provide significant cash flow relief to VIL in the next three years and help it complete its bank debt raise,” Citi noted in its latest report.
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