What can cash-strapped Indian operator Vodafone Idea (Vi) do after plans for the conversion of dues it owes to the Indian state into a government stake were once again delayed, this time due to the operator’s low share price?
We already know that Vi intended to convert around 161.3 billion rupees (about US$1.95 billion) of accrued interest on deferred spectrum and licence dues into equity, giving the Indian government a stake of around 33% in the company.
According to TeleGeography's CommsUpdate, Vi accepted proposals to exchange debt for equity in January as part of the government’s sector reform plans. Approval came from the Finance Ministry in September. The Department of Telecommunications (DoT) was supposed to be next to greenlight the move. Now, according to Indus Towers, one of Vi’s creditors, the process cannot proceed until Vi’s stock price consistently exceeds 10 rupees (about 12 US cents).
Quoting the Indus report for the September quarter, Indian media outlets are saying: “As per the company law provisions, any equity infusion cannot be below par value (10 rupees), and hence the equity conversion would only be decided once the stock price stabilises above 10 rupees.”
Vi also owes dues to American Tower Corporation (ATC). Vi’s board approved a plan earlier this month to raise 16 billion rupees (about US$193.3 milion) via the issue of optionally convertible debentures (OCDs) to pay pending dues to ATC, though local media outlets say that Indus Towers is not happy with this arrangement.
The Economic Times suggests that 70 billion rupees (about US$845.5 million) is owed to Indus Towers alone, but other large vendors also need paying, for which fundraising of 200 billion rupees (about US$2.4 billion) via a mix of debt and equity is urgently needed. This might also keep would-be investors happy.
Vi doesn’t just need to pay its debts. It also has to invest in network capex and plan 5G rollout. Given the market strength of rivals Reliance Jio and Bharti Airtel, this is a worrying issue – and the stock-price-led delay in the debt-for-equity deal is one more problem Vi really doesn’t need.