Voda Idea’s stock price must stabilise above 10 for equity conversion: Indus

“In September 2022, the finance ministry cleared a proposal to convert Vi’s Rs 16,130 crore worth of accrued interest on deferred AGR-related dues into equity, and now DoT needs to finalise the transaction. (But) as per company law provisions, any equity infusion cannot be below par value (Rs 10), and hence the equity conversion would only be decided once the stock price stabilises above Rs 10,” Indus said in its quarterly report for the July-September period.

The equity conversion, which will give the government a 33% stake and make it the largest single shareholder in Vi, is vital for the cash-strapped telco to conclude its much delayed Rs 20,000 crore fundraise via a mix of debt and equity, especially as potential investors want clarity on this issue. Vi also needs cash urgently to clear its massive vendor dues, including around Rs 7,000 crore to Indus Towers alone.

The equity conversion, in fact, has been pending since January this year. This is since the Vi stock price has been hovering below Rs 10.

When Vi had initially opted to convert the accrued interest into equity on January 11, its shares had closed at Rs 11.80 on BSE. But the stock price has remained below Rs 10 for most of the current financial year even though it rose 3.4% between September 2 and 5, shortly after the telco prepaid a near Rs 2,700 crore short-term loan to

(). On Friday, Vi’s shares closed almost 1% lower at Rs 8.54 on the BSE.
The government, on its part, has recently asked Vi to present a concrete fund-raising plan before it finalises the conversion. The DoT has taken a cautious approach as it feels Vi would face serious challenges in taking on financially stronger rivals Jio and by just depending on government support, and without substantial external funding.

Loss-making Vi needs cash to not just invest in 4G capex but also to tie up vendor contracts for its pending 5G rollout, for which it’s under increasing pressure to clear dues. It needs cash to repay large vendors such as Indus, ATC, Nokia and Ericsson among others and also invest in network capex to arrest heavy customer losses to rivals Jio and Airtel.

Indus Towers, on its part, has said it won’t consider the model where Vi is clearing dues of rival telecom tower company American Tower Corp (ATC) by issuing convertible debentures. It, instead, expects Vi to clear its dues based on the payment plan recently approved by the Indus board. This is also since Indus’s trade receivables rose 4% sequentially in the September quarter to Rs 6,499 crore, largely due to delayed payments by Vi.