Government to raise stake in Vodafone Idea to 48.99%

The Indian government is set to increase its stake in Vodafone Idea Limited (Vi) to nearly 48.99% following the conversion of outstanding spectrum auction dues into equity shares, the telecom operator disclosed today. This development aligns with the broader telecom sector relief package announced in September 2021 to ease financial distress in the industry.

In an order dated March 29, the Ministry of Communications directed Vodafone Idea to issue equity shares worth ₹36,950 crore to the government under Section 62(4) of the Companies Act, 2013. The company received the communication on March 30 and is required to complete the issuance within 30 days, pending necessary approvals from regulatory bodies, including the Securities and Exchange Board of India (SEBI).

The share allocation will involve issuing 3,695 crore equity shares with a face value of ₹10 each at an issue price of ₹10 per share. The pricing is based on the higher of the volume-weighted price over the last 90 trading days or the last 10 trading days before February 26, 2025. This pricing method ensures compliance with Section 53 of the Companies Act, which prohibits issuing shares below their par value.

Despite the significant rise in ownership, the company has assured that its promoters will continue to retain operational control of the business.

“The company will take all necessary steps to execute the share issuance upon receipt of requisite approvals,” Vodafone Idea said in its disclosure.

This move is part of the government's ongoing efforts to support the financially strained telecom sector. Vodafone Idea has been struggling under a heavy debt burden, intensified by past regulatory dues and fierce competition in the industry. The equity conversion provides the company with some relief, though long-term financial stability will depend on its ability to strengthen its revenue streams and sustain operational efficiency.

The telecom sector relief package introduced in 2021 aimed at improving liquidity for struggling operators by offering a four-year moratorium on spectrum and adjusted gross revenue (AGR) dues, among other measures. The conversion of dues into equity was one of the key provisions of the package, allowing companies to offload their financial burden while giving the government a stake in return.