Could the government end up owning more than 70% of Vi?

The possibility of the government acquiring 70% of Vodafone Idea (Vi) is rather high. This might take place through the conversion of the business’ unpaid statutory dues into equity. These fees are payable after the payment moratorium expires in the third quarter of FY26. It’s possible that this prospective government takeover may affect the company’s ability to attract crucial equity capital from outside investors. Analysts think that this circumstance may deter third-party investors from donating crucial sums.

In other words, it could be difficult for Vodafone Idea to get funding from investors outside of the government if the government seizes control of a sizable chunk of the firm and converts its dues into ownership. This situation highlights the financial challenges that Vodafone Idea is now experiencing.

“Challenges Ahead: Vodafone Idea VI Faces Regulatory Payments of Over Rs 40,000 Crore as Moratorium Ends in 2026”

The four-year moratorium period will end in 2026, and Vodafone Idea (VI), which is now losing money, would have to start making yearly regulatory payments of more than Rs 40,000 crore.

With a 33.1% interest in Vodafone Idea, the government now owns the largest portion of the company. This ownership was created when, in February 2023, the government converted the telco’s accrued interest connected to AGR arrears into equity. The co-founders of Vodafone Idea, UK-based Vodafone Plc, and the Aditya Birla Group (ABG) of India, share ownership equally. These two organizations collectively own 50.4% of Vi. The Indian Aditya Birla Group owns 18.1% of them, while Vodafone UK maintains a 32.3% share.

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A report from IIFL Securities claims that due to the possibility for considerable ownership dilution when the moratorium expires, it could be difficult to attract large external equity investments. This is due to the expectation of regulatory payouts totaling more than Rs 40,000 crore beginning with the fiscal year 2026. The amount of government ownership in Vodafone Idea might reach over 70% if the government decides to convert these regulatory payments into equity.

On the BSE on Thursday afternoon, Vodafone Idea shares were down 1.15%, trading for Rs 7.73.

Despite this, Vodafone Idea’s management is still hopeful about securing external equity-linked capital before the end of the 2018 December quarter. The business said that over the past month, the conversation has picked up steam. One of their promoters has committed to investing them in the amount of Rs 2,000 crore, and they are certain that once the equity money is in place, they will be able to get further loans.

During the telco’s June quarter earnings call, CEO Akshaya Moondra highlighted that talks with multiple groups of investors, involving both equity and equity-linked instruments, have gained traction over the past month. In some instances, these discussions have advanced to the due diligence stage.

When the embargo lifts, Vodafone Idea (Vi) might run into financial difficulties, which could pose problems for its viability. According to analysts, Vi may see a financial shortfall of Rs 25,000 crore in FY26 and Rs 36,000 crore in FY27, necessitating significant pricing increases of 84% and 122%, respectively. Even if the government transforms payments into stock, the situation could not get much better. Concerns over Vi’s liquidity persist, affecting the company’s capacity to pay back loans and raising questions about stock dilution. Payments to Indus Towers and Towerco could also be impacted. Vi needs $8–10 billion in new funding over the next two years, according to Goldman Sachs, to compete successfully.

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