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Government of India becomes Vodafone Idea’s largest shareholder

ICICI Securities 6 Mins 10 Feb 2023

Vodafone Idea (VI) has been in the headlines for its struggles with the Adjusted Gross Revenue (AGR) dues. The Indian government has asked the telecom giant to convert its AGR dues worth Rs 16,133 crore into equity. As a result, the government is now the largest shareholder in VI with a 33% stake. The share conversion is taking place at Rs 10 per share, a 35% premium to the current market price (CMP). This move has raised questions about the background of AGR, the ruling, its impact on telcos, and VI's future.

Background of AGR & the Ruling:

The AGR is the duty that telecom companies are required to pay to the government as a percentage of their "Adjusted Gross Revenue." The calculation of AGR used to include non-telecom related income like interest, dividend, rent, and profits from investment sales. This led to a dispute between the telcos and the Department of Telecom (DoT) since 2005. In 2019, the Supreme Court ruled against the telcos, upholding the DoT's definition of AGR, resulting in the telcos being required to pay dues worth Rs 1.65 lakh crore. The ruling was a big blow to the industry, and the government offered some relaxations, including a payment plan over 10 years and a moratorium on payment for four years.

Impact on Telcos:

The ruling has had a significant impact on the telcos, especially Vodafone Idea, which was left with a funding gap of Rs 65,953 crore in AGR dues and Rs 107,160 crore in deferred spectrum liabilities, along with bank borrowings of Rs 17,959 crore. The company has been trying to raise funds since 2020 without success, and the conversion of AGR interest to equity by the government comes as a relief. The conversion may help Indus Towers, a creditor of VI, in re-assessing the "bad" status of VI's dues.

VI's Future:

The equity conversion will help VI to some extent, but it remains to be seen whether it will be enough to ensure the company's survival. The government's 33% stake post-conversion may bring some stability, but a long-term solution is needed to secure VI's future. The company has a long way to go to restore its financial health, and it remains to be seen how it will navigate through the challenges ahead.


The conversion of AGR interest to equity by the government is a positive step for Vodafone Idea, but it is only one piece of the puzzle. The future of the telecom industry in India remains uncertain, and we must wait and see how things unfold.

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