Vi surges amid news of government hiring an adviser to manage equity conversion of interest dues

If the deal goes through, the government will become the largest shareholder in the company.

Vodafone Idea Ltd (Vi), the Indian telecom operating company, rallied by more than 5 per cent today. At 2.38 pm, the shares of the company were trading at Rs 11.27, an increase of Rs 0.61 from the previous week’s closing price of Rs 10.66 on BSE.  

This rally came after news broke out about the government’s plans to hire a transaction adviser to enable the conversion of the company’s interest dues into equity. The adviser will be selected from firms listed by the department of investment and public asset management (DIPAM). 

While the adviser will decide the final amount that needs to be converted, the department will supervise the equity conversion. For the uninitiated, the government had announced a telecom relief package in September last year that gave the loss-making telco a time-freeze of four years from making payments towards its adjusted gross revenue (AGR) dues. 

The package provided the company with an option to convert the interest during the moratorium period into equity. Exercising this option, Vodafone Idea submitted a bid that the government convert dues amounting to Rs 16,000 crore for a 35.8 per cent stake in the company.  

The acceptance of this bid will bring down the telco’s debt and dilute the promoters’ stake, wherein parent Vodafone Group Plc and Aditya Birla Group are expected to own approximately 28.5 per cent and 17.8 per cent, respectively.