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Low stock price hampering Vi equity conversion plans

31 Oct 2022

Plans for the conversion of dues owed by cellco Vodafone Idea (Vi) to the Indian state into a government stake have been delayed by the operator’s low share price, the Economic Times writes, citing a filing from infrastructure operator Indus Towers. Under the plan, Vi will convert around INR161.3 billion (USD1.96 billion) of accrued interest on deferred spectrum and licence dues into equity, giving the government a stake of around 33% in the company. The conversion has been pending for almost a year, however: as previously reported by TeleGeography’s CommsUpdate, in January this year Vi accepted proposals to exchange debt for equity as part of the government’s sector reform plans. The agreement was finally greenlit by the finance ministry in September and is awaiting final approval from the Department of Telecommunications (DoT). According to Indus, though, the process cannot proceed until Vi’s stock price consistently exceeds INR10: ‘any equity infusion cannot be below par value (INR10), and hence the equity conversion would only be decided once the stock price stabilises above INR10’.

Troublingly for Vi, the delayed conversion is only one of several financial challenges facing the company. The operator is attempting to complete fundraising of INR200 billion via a mix of debt and equity and urgently needs to clear outstanding dues totalling an estimated INR160 billion with its vendor and infrastructure partners. Vi’s board approved a plan earlier this month to raise INR16 billion via the issue of optionally convertible debentures (OCDs) to American Tower Corporation (ATC) to pay pending dues to ATC. For its part, Indus says it will stick to a payment plan proposed by Vi and recently approved by the tower company’s board. Vi’s outstanding dues with the towerco total around INR70 billion. Under the plan, the operator will pay the majority of its billed amount until end-December 2022, and 100% of the billed amount and outstanding dues between January and July 2023.

India, Department of Telecommunications (DoT), Indus Towers, Vi (Vodafone Idea Limited, VIL)

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