Vodafone Idea shares hit 25% upper circuit after govt agrees to convert ₹16,133 cr dues into equity

• Vodafone Idea’s shares zoomed on Monday after the government agreed to convert interest dues worth ₹16,133 crore into equity.
• The equity conversion will make the government the largest shareholder of Vodafone Idea, with a 33% stake.
• The government will remain a passive investor, leaving the Aditya Birla Group and Vodafone Plc as the primary decision makers of the telco.

Vodafone Idea’s shares zoomed by 25% on Monday hitting an upper circuit, after the government agreed to convert interest dues worth ₹16,133 crore into equity.

The move breathed a fresh lease of life into the telco’s attempts to raise funds to make payments to vendors and sign contracts with telecom equipment makers and roll out its 5G network.

The share price of the troubled telco is back to its December 2022 levels, erasing the losses it saw this year, so far.


“The total amount to be converted into equity shares is ₹16133,18,48,990. The Company has been directed to issue 1613,31,84,899 equity shares of the face value of ₹10 each at an issue price of ₹10 each,” Vodafone Idea said in an exchange filing on February 3.

The equity conversion will pave the way for the government to become the largest shareholder of Vodafone Idea, long after the telecom reforms package was announced in September 2021.

As a result of this, the Aditya Birla Group’s stake will stand at 31.8%, while Vodafone Plc’s stake will be at 18.3%. This is a reduction from the existing stake of 75% held by the two promoters.


However, Aditya Birla Group, and Vodafone Plc, will continue to drive the company. Vodafone Idea’s management has already underlined that the government will neither take a seat on the company’s board, nor will it take decisions regarding the company’s operations.

Capital infusion key to Vodafone Idea’s future

Capital infusion remains a key to Vodafone Idea’s future, according to analysts. The telco has been struggling to retain subscribers while its rivals Reliance Jio and Bharti Airtel have seen both their subscriber numbers as well as the average revenue per user (ARPU) climb up each quarter since FY22.

In the company’s post-result investor call in Q2, Vodafone Idea’s chief executive officer Akshaya Moondra had said, ‘’We are trying to close the funding quickly so that some of the backlog of vendor payments that we have can be addressed.”

Vodafone Idea needs funds not just to fund its capital expenditure requirements, but also to service its debt. According to a Motilal Oswal report, its current earnings before interest, taxes, depreciation and amortization (EBITDA) of ₹8,700 crore in FY23 is inadequate to service debt.

Capex is another piece of puzzle that the telco needs to solve. Vodafone Idea is yet to roll out its 5G offerings even as Jio and Airtel 5G services have been available in several parts of the country since October 2022.

“The much-awaited capital raise remains critical to provide immediate liquidity and invest in the rollout of 5G and extending 4G infrastructure. Vodafone Idea acquired 5G spectrum in the 3300Mhz and 26GHz bands in the recent auction (September 2022) but unlike Reliance Jio and Bharti Airtel, it has not deployed the spectrum and remains significantly behind in 4G network rollout too,” said the Motilal Oswal report.

It remains to be seen if the equity conversion gives investors enough confidence about the future of Vodafone Idea, and whether it will be enough for them to infuse funds that the telco needs desperately.

Breather for the stock and Biggest single-day surge of nearly 22% as the government agrees to the proposal of converting the AGR dues to Equity.Debt was roughly around 16133 cr & now, 1613.3 cr equity shares would be issued of the Face value INR 10 at Issue price of INR 10 each.Also, FM said - Shares of $IDEA.NSE won't be held by Dept of Telecom rather and held by DIPAMNow look at the shareholding pattern of Vodafone Idea as follows (as on 31-12-22)•Promoter - 74.99% (approx)•Public - 25.01% (approx)Post this deal, promoter shareholding would be around 50% a trim of around 24.99%The company is not debt free and has been trying to raise funds too. As per the Technical view this stock is facing resistance around 9 levels. If these levels are breached we may see 12+ soon.RSI at 73 indicates it may cool off a bit and any fresh entry in this should be avoided.$IDEA.NSE

— (@PritiTiwari) February 06, 2023

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