Vodafone Idea Stock Falls 21% on Sale of Stake

Vodafone has communicated its decision to the government about converting its interest dues into equity stake to the government of India. December 31st was the deadline for the telecom companies with AGR dues to convey to the government whether they wanted to convert their interest dues on AGR and SUC into equity stake to the government.

Vodafone has informed the exchange that it has accepted the offer from the government and will convert its entire interest dues of Rs.16,000 crore into equity stake to the government. While the actual stake sale is yet to be arrived at, the estimate is that Vodafone Idea may end up selling nearly 35.8% in the company to the government.

Ironically, the government at around 35.8% will become the largest shareholder of Vodafone Idea and while it will forfeit the AGR dues in cash, it will get a telecom company with total debt of Rs.195,000 crore and billions of dollars in accumulated losses over the years. Whether it really adds value for the government, only time will tell.

It may be recollected that just a day earlier, Bharti had informed the stock exchanges that they had not accepted the offer from the government to convert the interest amount into equity stake in Bharti Airtel. 
While Bharti had accepted the offer for a 4 year moratorium on its AGR and SUC dues, Bharti did not consider it necessary to dilute its stake in favour of the government as it would be in a position to raise the funds when required and pay interest.

Check - Vodafone opts for 4 Year Moratorium on AGR Charges

Bharti had recently got a very good response to its Rs.21,000 crore rights issue, which has obviously given them the confidence. Unfortunately, Vodafone may not be in a similar situation and for them giving up stake to the government in lieu of interest payments was the best choice.

The stock reacted negatively to this news and fell over 20% on Tuesday. The stock closed on 11-January at a price of Rs.11.75. During the day, the stock traded a massive 211 crore shares valued at Rs.2,640 crore. 
During the day, the stock scaled a high of Rs.13.60 and a low of Rs.11.40 intraday.

The stock has a 52-week high of Rs.16.80 and a 52-week low of Rs.4.55. On Tuesday, the stock was among the most active stocks traded on the NSE in terms of volumes and value.

The company has a market cap of Rs.33,908 crore as at the close of 11-January with a free float market cap of Rs.9,494 crore.

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