Govt rules out stake monetization in Vi ahead of FPO

The government has no plans to monetise its stake in Vodafone Idea, Tuhin Kanta Pandey, secretary, department of investment and public asset management told Fe, ahead of the mega follow-on public offer (FPO) by the telecom operator.

The telco is hitting the market with an Rs 18,000 crore equity offering on Thursday — the share sale will open on April 18 (for anchor investors on April 16) and close on April 22 — to mobilise funds, which will help it in increasing its capex, launch 5G services and pare spectrum and adjusted gross revenue debt. The company needs funds to catch up with peers Bharti Airtel and Reliance Jio.

“The government is enthused that Vodafone will be roping in new investors through their upcoming Rs 18,000 crore FPO and has a plan to revive the company that will help prevent a duopoly in the telecom sector, a key objective of the revival package for the company,” Pandey said.

“FPO can ensure that the company is able to carry out necessary capex for the continued delivery of quality service to its customers,” Pandey said.

Currently, the promoter group including Kumar Mangalam Birla own 48.91% of Vodafone Idea, while the public holds 51.09% including 32.19% by the government held through DIPAM. DIPAM’s stake will decline post-FPO.

To bail out Vodafone, which has been struggling financially for a long time, the Centre in February 2023 decided to convert the accrued interest worth Rs 16,133 crore on account of deferment of AGR and spectrum dues to the Centre into equity as per a package.

The government had decided not to participate in the management and the board of the company as this was a financial rescue package to ensure India has a three-player market plus BSNL for healthy competition in the interest of consumers.

The company’s shares will be issued, under the FPO, in a price band of Rs 10-11 apiece against Tuesday’s closing price of Rs 12.92 on the BSE. The higher end of the price band of Rs 11, is at a discount of 26% compared to the recently approved preferential issue price to the promoter entity at Rs 14.87.

The fundraising, which comes close on the heels of a Rs 2,075 crore capital infusion by Aditya Birla group via a preferential share issue last weekend, will help the company shore up its position in the domestic telecom market, where peers Reliance Jio and Bharti Airtel are miles ahead of it.

The lenders have been prodding the promoters to raise funds through equity before raising another Rs 25,000 crore via debt.

“Investors may come seeing the buying opportunity as they are getting the stock very cheap now. Entering at face value means they are not paying any premium like in the case of preferential allotment,” another official said, adding that the company has now a strong plan to invest in technology to provide quality services to retain and grow subscribers.

The funds would help it arrest its subscriber churn owing to its weak 4G coverage, which is not available on a pan-India basis. The funds will also be used to launch 5G services, and clear government debts related to spectrum.

Besides maintaining fair competition in the market, the successful revival of the company will ensure that the government also gets back its Rs 2.03 trillion (94% of Vodafone’s debt) dues from the company as per the revival package in due course.

Vodafone Idea has been losing subscribers month after month and has been posting quarterly losses in the range of Rs 6,000-8,000, crore. Financial Express