- 11 Jan 2022
- ICICIdirect Research
VODAFONE IDEA: GOVERNMENT’S EQUITY CONVERSION FOR MORATORIUM INTEREST TO LEAD TO ~55.7% EQUITY DILUTION FOR SHAREHOLDERS
IDEA - 8 Change: -0.17 (-2.12 %)News: On expected lines, Vodafone Idea (VIL) has opted for Equity conversion for interest payment (of ~Rs. 16000 crore NPV) towards deferred spectrum and AGR payout during next 4 years. Since the average share price at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs10/- per share, subject to final confirmation by the DoT. Following conversion, it is expected that the Government will hold around 35.8% of the total outstanding shares, and that the Promoter shareholders would hold around 28.5% (Vodafone group) and around 17.8% (Aditya Birla Group), respectively.
Views: This brings about clarity on incremental liability due to AGR/Spectrum due moratorium and ensures medium term going concern issues. However, it would lead to ~55.7% dilution for the existing shareholders. Moreover, we believe near term fund raise (required for capex needs) and medium/long term ARPU step up to Rs. 240-250 levels is key for VIL to turn a meaningful competing entity against the peers.
Impact: Negative