On Tuesday 11th January 2022, Vodafone Idea announced the conversion of its Interest due on Spectrum and AGR to equity which will make the Government of India, the largest shareholder of the company. What’s more in the announcement and what should shareholders do after this announcement, let’s discuss it in detail in this article.
1) Vodafone-Idea News:
Government of India to own a majority stake in Vi:
- Vodafone Idea (Vi) in its board meeting on 10th January 2022 approved the conversion of the full amount of interest due on Spectrum and AGR to equity. With this decision, the Government of India will become the largest shareholder of the company and will hold around a 35.8% stake in the company.
- Post this adjustment, the promoter shareholder Vodafone Group and Aditya Birla Group will hold a stake of around 28.5% and 17.8% respectively.
- The conversion will be made at the price equal to higher of the average of weekly high and low of the volume-weighted average price of the equity shares during the last 26 weeks preceding the relevant date or two weeks preceding the relevant date.
- The Net Present Value (NPV) of this interest is expected to be about Rs.16,000 crore as per the Company’s best estimates, subject to confirmation by the DoT.
- The Company Executive has said that the Indian Government has shown no interest in appointing a board member at the company and also doesn’t want to take over the company’s operations.
- Like the case of the Vodafone Idea, Tata Teleservices (TTL) and Tata Teleservices Maharastra Limited (TTML) have opted for the relied measure of the Government of India to convert the full amount of interest due on Spectrum and AGR to equity.
- Post this announcement, the Government of India (GoI) will be taking around a 9.58% stake in Tata Teleservices Maharashtra Limited (TTML), while the stake of GoI is in TTL is not known yet.
- The Net Present Value (NPV) of this interest is expected to be about Rs.850 crore as per the Company’s best estimates, subject to confirmation by the DoT.
- The government of India will be acquitting the equity shares of TTML at Rs. 41.50 per share.
- Now, there are discussions in the street that the Fair Value of TTML is around Rs. 56,000-Rs. 57,000 Cr., but here retail investors should follow a cautious approach, As the business projections about the performance of the company in the coming years are coming from the Analyst side, and not the business.
- The stock of Tata Teleservices has given returns of around 2,450% in the calendar year 2021 is also another thing to look at by retail investors, as these returns have not come with high volumes as well.
What Should Shareholders Do?
Before moving to any further points, a Retail Investor should first ask whether they are investing in growth stocks? If we look at the case of Vi and TTML, the company is highly in a survival stage, and hence one should understand the difference between Growth Stocks and Surviving Stocks. Retail Investors should strongly assess the fundamentals of the company and then only should make an investment decision. Looking at the current situation of the company, a Retail Investor should avoid this counter.