Centre to Increase Stake in Vodafone Idea to 49%. How can it Help the Telecom Company? Everything You Need to Know.

The Indian government is set to increase its shareholding in the cash-strapped telecom company Vodafone Idea (Vi) to 49%. The centre has decided to convert an additional ₹36,950 crore worth of the company’s dues into equity. The government previously held a 23% stake in the company.

The company will issue 3,695 crore equity shares with a face value of ₹10 per share within the next month. It should be noted that the government will acquire these additional shares at a premium of more than 47%, as shares ended at ₹6.8 apiece on Friday. The government is now the largest shareholder in the telecom firm.

“The promoters will continue to have operational control of the company,” Vodafone Idea said.

Why does the government want to intervene?

This is the second chance that the government has given to Vodafone Idea. As part of its 2021 relief package for the company, the centre in February 2023 converted the company’s ₹6,133 worth of crore dues into equity. As per the Friday’s closing price of ₹6.8 apiece, the government’s ₹16,133 crore investment is currently valued at ₹10,970 crore, a loss of 32%.

As of December 2024, Vi’s total debt stood at ₹2.3 lakh crore, of which ₹77,000 crore was AGR (adjusted gross revenue) liability and ₹1.4 lakh crore was the spectrum liability.

In an exchange filing the company said, “…it is hereby informed that Ministry of Communications, Government of India has, in line with the September 2021 Reforms and Support Package for Telecom Sector has decided to convert the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, into equity shares to be issued to the Government of India under Section 62(4) of the Companies Act, 2013. This was communicated to the company via an order dated 29 March 2025, received by the company today, i.e. 30 March 2025.”

It said that the pricing of shares will be allotted at a premium due to certain provisions in the Companies Act, 2013, which require that shares cannot be issued at less than the par value.

Deepak Shenoy, founder and CEO of wealth management firm Capitalmind said in a post on X, “Since its your money as a taxpayer, you will rightfully ask, but hello, aren’t the shares at Rs. 6.80 in the market?… Well, of course, but there is a rule that you cannot issue shares below “par” so we have to cough up 50% more.”

How will it help the company?

As per the analysts, the equity conversion will enable the company to pay part of its spectrum dues to the government. If this step wouldn’t have been taken, the company would have to shell out ₹40,000 crore as a yearly installment after the moratorium expires in September this year. The move will give relief to the company for another two years.

“Vodafone Idea owes the government a ludicrous (Rs) 210,000 cr. Of which it will only reduce the debt by (Rs) 37,000 cr. now. And there is no fresh money coming in. So everyone is getting diluted just like that… The twig is that after this they can’t convert more debt to give govt shares. Because then, shareholding crosses 50% and vodafone will become a PSU,” Shenoy added.