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 KM Birla affords at hand over Vodafone Thought stake to govt
September 11, 2022

KM Birla affords at hand over Vodafone Thought stake to govt

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Aditya Birla Group chairman Kumar Mangalam Birla has supplied to switch the group’s whole possession in Vodafone Thought Ltd to the federal government in a last-ditch effort to maintain the cash-strapped telco from collapsing.

In a letter to cupboard secretary Rajiv Gauba in June, Birla expressed the group’s lack of ability to fund the corporate any additional.

“It’s with a way of responsibility in the direction of the 270 million Indians linked by Vodafone Thought, I’m greater than keen at hand over my stake within the firm to any entity—public sector/authorities /home monetary entity or another that the federal government might contemplate worthy of maintaining the corporate as a going concern,” Birla stated within the letter, components of which have been reviewed by Mint.

On 26 July, Mint reported that Vodafone Thought’s controlling shareholders, UK’s Vodafone Group Plc and India’s Aditya Birla Group, have been open to ceding management of the corporate if a strategic investor needs to take over.

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The event marked new considering by Vodafone Thought’s promoters, who have been initially seeking to onboard monetary buyers by a mixture of debt and fairness.

These efforts have to this point yielded no outcomes, placing the survival of the telco in danger.

Birla, who owns round 27% of Vodafone Thought, stated buyers are unwilling to place cash into the corporate with out readability on its adjusted gross income (AGR)-related legal responsibility, moratorium on spectrum funds and most significantly, a flooring pricing regime above the price of service.

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With out fast energetic help from the federal government on the three points by July, the monetary scenario of Vodafone Thought will deteriorate additional to an “irretrievable level of collapse”, Birla stated within the 7 June letter.

An Aditya Birla group spokesperson didn’t reply to requests for remark.

Vodafone Thought has just lately expressed its lack of ability to pay the telecom division the instalment of ₹8,292 crore that’s due on 9 April 2022 because the firm’s money shall be used for cost of adjusted gross income dues.

In a 25 June letter to the telecom secretary, Vodafone Thought had sought to pay the spectrum instalment in April 2023 as a substitute of April 2022.

The corporate has reported a lack of round ₹7,023 crore for the quarter ended March. It had posted a lack of ₹11,643.5 crore in FY20.

Vodafone Thought must pay ₹22,500 crore between December 2021 and April 2022 to repay a mixture of common debt to lenders, AGR and spectrum dues. It has an AGR legal responsibility of ₹58,254 crore, out of which the corporate has paid ₹7,854.37 crore and ₹50,399.63 crore is due.

Final yr, Vodafone Thought stated that it will increase ₹25,000 crore by a mixture of fairness and debt issuances after the Supreme Courtroom allowed it a 10-year cost interval to settle its regulatory dues.

Nevertheless, regardless of a number of rounds of talks with potential buyers, the corporate has not been in a position to get a agency dedication from any strategic or monetary investor, who’ve cited the low telecom tariffs and burgeoning liabilities as deal-breakers.

In a bid to scale back its AGR liabilities, Vodafone Thought, together with just a few different telecom service suppliers, approached the Supreme Courtroom, citing computation errors by the telecom division associated to AGR dues.

The apex court docket, nonetheless, dismissed the petition in July, dampening its probabilities of elevating funds.

In accordance with business specialists, Vodafone Thought’s probabilities of revival on potential rest from the federal government within the type of a moratorium on spectrum dues in addition to a considerable hike in tariffs seem bleak.

India’s telecom market is heading in the direction of a duopoly, with Vodafone Thought teetering on the point of collapse amid mounting dues to the federal government.

The entry of Reliance Jio Infocomm Ltd, managed by Asia’s richest Mukesh Ambani, in 2016 triggered a bruising tariff struggle, forcing many incumbents to exit the market.

Since then, opposed court docket orders have left two of the remaining three personal telcos struggling.

The weakest of the 2, Vodafone Thought, is now banking on authorities assist to avert a sure collapse.

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