Centre to own nearly 49% of Vodafone Idea. Will it help the beleaguered telco?

“The promoters will continue to have operational control of the company,” Vodafone Idea said.

The amount includes outstanding spectrum auction dues, including deferred dues otherwise payable by the company after the expiry of the moratorium period, the telecom operator said in an exchange filing.

Why the second lifeline

This is the second lifeline that the government has offered to the struggling telco. As part of its 2021 relief package for the company, the government in February 2023 had approved the conversion of Rs 6,133 crore of Vi’s interest dues into equity. As per the company’s share price of Rs 6.8 at the end of Friday’s session, the government’s Rs 16,133 crore investment is currently valued at ₹10,970 crore, a loss of 32%.

As on December 2024, Vodafone Idea’s total debt was around Rs 2.3 lakh crore. Of this, Rs 77,000 crore was AGR (adjusted gross revenue) liability and Rs 1.4 lakh crore is the spectrum liability.

“…it is hereby informed that Ministry of Communications, Government of India has, in line with the September 2021 Reforms and Support Package for Telecom Sector has decided to convert the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, into equity shares to be issued to the Government of India under Section 62(4) of the Companies Act, 2013. This was communicated to the company via an order dated 29 March 2025, received by the company today, i.e. 30 March 2025,” the company said in its filing.

It said that the pricing of shares to be allotted at a premium due to certain provisions in the Companies Act, 2013, which require that shares cannot be issued at less than the par value.

“Since its your money as a taxpayer, you will rightfully ask, but hello, aren’t the shares at Rs. 6.80 in the market?… Well, of course, but there is a rule that you cannot issue shares below “par” so we have to cough up 50% more,” Deepak Shenoy, founder and CEO of wealth management firm Capitalmind said in a post on X.

Will it help the company?

The equity conversion has been done for the company to be able to pay part of its spectrum dues to the government. Without the move, the company’s would have to pay around Rs 40,000 crore as a yearly instalment after the moratorium expires in September this year. However, with the government converting some of that into equity, the company might get a runway for another two years or so, analysts said.

“Vodafone Idea owes the government a ludicrous (Rs) 210,000 cr. Of which it will only reduce the debt by (Rs) 37,000 cr. now. And there is no fresh money coming in. So everyone is getting diluted just like that… The twig is that after this they can’t convert more debt to give govt shares. Because then, shareholding crosses 50% and vodafone will become a PSU,” Shenoy added.

The equity conversion, though, might help in raising some debt, as it has been in the market to raise debt of around Rs 25,000 crore. The government’s additional ownership in the company might give banks more confidence to lend to the company, analysts said.