Timely support by govt; will offer cash flow relief to telco: Citi on VIL dues to equity conversion

Relief came by method of several steps, including a four-year government halt on spectrum and AGR repayments (that provided product capital relief), while the conclusion of the long-delayed equity raise ensured sufficient capital for the telco to plough right into network and reduce a yawning gap with two bigger peers on 4G coverage and 5G rollouts.

“Post the aforementioned issuance of equity shares, the Federal government of India shareholding in the business will increase from existing 22.60 per cent to approx. 48.99 per cent. The promoters will certainly continue to have operational control of the business,” VIL had actually said.

Throwing a lifeline to the struggling telecommunications driver, the federal government has determined to transform Rs 36,950 crore of VIL’s exceptional range public auction fees into equity, under the stipulations of the September 2021 telecom reforms bundle.

“Government has, according to the September 2021 reforms and assistance plan for telecom industry has actually decided to transform the impressive range auction fees, consisting of delayed fees repayable after expiration of the moratorium duration, into equity shares to be provided to the Federal government of India …,” VIL said in an exchange filing on Sunday.

The federal government’s decision to transform Rs 36,950 crore fees of Vodafone Idea (VIL) right into equity is a “major” and “prompt” display of support that will offer significant cash flow alleviation to the telco in the next three years and aid it total long-delayed bank debt raise, Citi stated on Monday. The action likewise raises problems on tower companies like Indus Towers.

The federal government has decided to convert Rs 36,950 crore worth of Vodafone Idea’s (VIL) spectrum charges right into equity, increasing its shareholding to 48.99%. This move supplies significant cash flow alleviation to VIL, assisting it manage debt and enhance financial stability over the following 3 years.

The business has been guided to release 3,695 crore equity shares of the stated value of Rs 10 each at a concern cost of Rs 10 each within a period of 1 month after issuance of needed order from pertinent authorities, consisting of from Securities and Exchange Board of India.

“Generally, we see this as a major display screen of assistance by the government in a really timely manner, which must provide considerable capital relief to VIL in the following 3 years and help it complete its bank debt raising,” the brokerage firm said in its newest report.

On Sunday, VIL informed the stock market that the government has determined to transform Rs 36,950 crore of spectrum dues into equity– an action that would make the Centre the biggest investor in the telco, although the marketers– Vodafone and Aditya Birla Team will certainly remain to hold functional reins (control) of the telco.