After Vodafone, Tata Tele to Also Convert AGR Dues into Equity

A day after Vodafone Idea agreed to convert the interest on its AGR dues into equity, even Tata Teleservices Maharashtra has adopted a similar strategy. However, the equity stake in the case of Tata Tele would be much lower. While Vodafone will end up ceding 35.8% stake in the company to the government, Tata Tele will only cede 9.5% to the government.

While the actual amount is yet to be figured out, in a filing to the exchange, Tata Teleservices Maharashtra has mentioned that the equity offer to the government as a result of the conversion would be closer to 9.5%. The stake conversion will be based on the net present value (NPV) of the AGR interest, which is estimated at around Rs.850 crore.

Of course, this amount is subject to final confirmation by the Department of Telecom. Currently, the promoters of Tata Teleservices Maharashtra hold 74.36% stake in the company while the public holds the balance 25.64%. This is based on the average price over a period of 6 months, which will be used as the benchmark for the conversion.

According to initial calculations, while the stock of Tata Teleservices Maharashtra is currently quoting at Rs.291, it has been a multi-bagger in the last one year surging from below Rs.3, so its average price will work out to around Rs.41.50. It is based on this price that the conversion stake will be worked out for the government of India.

It may be recollected that as part of the relief package, the government had made two offers viz. 4-year moratorium on payment of AGR charges subject to payment of interest and the benefit of conversion of this interest cost into equity. Telecom companies had to convey their interest or otherwise on this conversion by the end of December 2021.

Check - Vodafone opts for 4 Year Moratorium on AGR Charges

All the three telecom companies with substantial AGR dues; Bharti Airtel, Vodafone Idea and Tata Teleservices Maharashtra had opted for the moratorium. However, only Vodafone Idea and TTML have opted to convert their interest costs into equity. In the case of Bharti Airtel, they have declined the second part of the offer and will pay the interest in future.

The stock of TTML has rallied from under Rs.3 to Rs.291 in the last 1 year, making it the biggest multi-bagger in the Indian context. Ironically, the stock now has a market cap of Rs.57,000 crore but has been consistently making losses in 2 out of the last 82 quarters, which is not saying too much.

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Telecom relief package