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Vodafone Idea stakeholder KM Birla offers to sell shares to govt

By Saima Siddiqui 
Updated Date

New Delhi: To keep the worst of the financially strapped telecom operators, Vodafone Idea, afloat Aditya Birla Group’s owner Kumar Mangalam Birla has shown interest in offloading his stake to any state-owned or “domestic financial entity” which might be interested in the deal. KM Birla’s Aditya Birla Group (ABG) holds around 27% share in Vodafone Idea Limited (VIL).

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“It is with a sense of duty towards 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government/domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in his letter.

Birla, VIL’s promoter and chairman of the Aditya Birla Group, made the suggestion in a letter to union cabinet secretary Rajiv Gauba on June 7. Birla’s letter highlighted the need for urgent measures from the government while offering to give up control of the company.

VIL has a debt of around Rs 1.8 trillion, which includes deferred spectrum obligations and adjusted gross revenue liabilities. Its board had last September announced a plan to raise Rs 25,000 crore but investors have not been forthcoming in the absence of government support.

Birla owns over 27 per cent stake in VIL, while Vodafone Plc holds over 44 per cent. The current market capitalisation of VIL is over Rs 24,000 crore. The two promoters have decided against infusing fresh funds in the company. Vodafone Plc has already written off all its investment in VIL following continuous losses.

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“To actively participate in the fund raising, the potential foreign investors want to see clear government intent to have a three player telecom market (consistent with its public stance) through positive actions on long-standing requests such as clarity on AGR liability, adequate moratorium on spectrum payments and most importantly, a floor pricing regime above the cost of service. In the absence of definitive steps in this regard, the potential investors have understandable hesitation to invest,” Birla wrote.

Birla further said that VIL’s financial situation will drive its operations to an irretrievable point of collapse without immediate active support from the government on these three issues.

Last month the Supreme Court dismissed petitions of VIL and Bharti Airtel seeking correction in alleged errors in calculating the AGR. VIL had calculated its remaining AGR dues at around Rs 21,500 crore after making a payment of Rs 7800 crore. However, the department of telecommunications concluded the company’s total AGR liability of around Rs 58,000 crore.

Vodafone Idea’s attempt at fundraising ongoing since last year. In September 2020, Vodafone Idea announced that it would be raising Rs 25,000 crore by means of rights issues and by the way of debt. However, these plans have not materialised yet. The more recent talks between Apollo Global Management and the telco also seem to be falling apart. As per the last update, Vodafone Idea was on the stage of finalising terms, but it seems even those plans have not resorted to any conclusion. Now in a climactic fashion, Birla has remarked about settling his stake with the public and private entity as per the reports.

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