Centre, promoters sitting on ₹4,170 cr loss as Vi shares tank

The Centre is sitting on a loss of nearly ₹3,000 crore on its equity investment in beleaguered telecom major Vodafone Idea (Vi), while the promoter group -- Vodafone Plc and the Aditya Birla group --- have seen an erosion of ₹1,710 crore in the value of their recent equity infusion of ₹4,500 crore. The loss is computed based on Vi’s closing price of ₹8.20 on May 12.

On March 31, 2022, the telco issued 33.8 billion equity shares at ₹13.30 a share (including a premium of ₹3.30 per share) on a preferential basis to the promoters. While Vodafone invested ₹3,375 crore, the Aditya Birla Group chipped in with ₹1,125 crore. As a result, the promoter group’s stake increased from 72.05% to 74.99%, with Vodafone holding 47.61%, and Aditya Birla group 27.38%.

Though the department of telecommunications (DoT) has not formally acknowledged the conversion of accrued interest liability on the deferred spectrum and adjusted gross revenue (AGR) into equity, Vi, in a filing to the exchanges on January 11, stated that, as per the company’s estimates, the net present value (NPV) of the interest is ₹16,000 crore. The company mentioned that since the average price of the share as of the relevant date (August 14, 2021) was below par value, the equity will be issued at par (₹10 a share), subject to confirmation by the DoT.

Vi managing director Ravinder Takkar, during the Q4 earnings call on May 11, confirmed that post-conversion of the dues, the Centre will hold around 33% (36% prior to the preferential allotment), while the promoters will hold nearly 50% stake.

Based on Vi’s share price of ₹8.20, the government is sitting on a loss of 18% (₹2,880 crore) on its estimated investment of ₹16,000 crore, while the promoter group has collectively lost 38% (₹1,710 crore) on the ₹4,500-crore infusion. While Vodafone’s investment has eroded by ₹1,282 crore, the Aditya Birla group’s valuation loss is ₹427 crore. The stock’s 52-week high is ₹16.80 and the 52-week low is ₹4.55.

The company’s gross debt (excluding lease liabilities and including interest accrued but not due) as of March 2022 is ₹1,97,880 crore. Of this, the dues to the government comprise deferred spectrum payment obligations of ₹1,13.860 crore and AGR liability of ₹65,950 crore and ₹18,070 crore in dues to banks and financial institutions.

Even as the debt overhang remains, Vi’s average revenue per user improved in Q4 to ₹124, up 7.5% quarter-on-quarter compared with ₹115 in Q3 FY22, aided by the tariff hikes in November 2021. The management is looking to further boost its ARPU to ₹200 in the short term and eventually to ₹250 in the long term. However, the company’s subscriber base declined to 243.8 million in Q4 compared with 247.2 million in Q3 FY22, primarily owing to the tariff increase. Of the overall subscriber base, 4G users are 118.1 million, with the company onboarding 1 million new customers during the fourth quarter.

During the year, Vi incurred a CAPEX of ₹449 crore against ₹415 crore spent in FY21. A chunk of the spending was on increasing the company’s 4G coverage and capacity. But going ahead, the company will need to raise more equity to fund its expansion and bid for the 5G spectrum. The management has stated the company is in active discussions with banks and investors for further debt and equity funding and would make subsequent disclosures as appropriate.