A UK-India trade body has sought the assistance of Indian High Commissioner in UK in rushing up conversion of Vodafone Idea‘s accrued curiosity on the deferred adjusted gross income (AGR) dues into equity. Vikram Ok Doraiswami, the excessive commissioner, has written to the finance ministry, searching for steerage on the best way to proceed on the matter, noting that difficulty “might collect momentum within the coming months”.

In a letter to the envoy, the UK India Business Council has mentioned that conversion delay by the Department of Telecommunications – regardless of a written clearance of the finance ministry and PMO’s help – has damage telco’s operations.

UKIBC Warns of Negative Implications

The cash-strapped telco has not been in a position to elevate funds, the letter mentioned.

The commerce physique additional warned that if the problem wasn’t resolved quickly as per the Cabinet resolution, it will have extra “negative implications” for the corporate and for the funding local weather in India.

“Despite written approval from the ministry of finance and support from the PM’s Office, the DoT has held back converting interest to equity as per the Cabinet’s decision. Those in DoT that make decisions are verbally telling the company and its promoters that they want pre-conditions to the equity conversion, such as an additional equity commitment, which was never previously in the Cabinet decision,” mentioned the letter, a duplicate of which has been seen by ET.

A senior authorities official, nevertheless, instructed ET on Tuesday that the unwillingness on the a part of Vodafone Idea’s promoters – Vodafone Plc of UK and the Aditya Birla Group – to infuse satisfactory capital into the telco makes it unviable for the federal government to transform the curiosity into fairness.

This stance has stymied the telco’s efforts to lift fairness funding because the exterior traders need the federal government to first take stake. Banks have additionally pushed the telco’s promoters to place in additional funds earlier than lending to the debt-laden cellphone operator.

The excessive commissioner, in his letter searching for steerage from the finance ministry, has marked a duplicate to the DoT and the ministry of exterior affairs.

Members of the UK India Business Council embody Diageo, HSBC, Standard Chartered, Vodafone Group, Barclays, GlaxoSmithKline, PwC, Rolls-Royce, State Bank of India, ICICI Bank, amongst others.

Queries despatched to the UK India Business Council, the Indian High Commissioner, the finance ministry, the ministry of exterior affairs and DoT remained unanswered on the time of going to press.

Follow-up Meeting

The letter was written to the excessive commissioner as a follow-up to a gathering between the 2 sides on the challenges being confronted by Vodafone Idea in implementing some clauses of the telecom reforms package deal introduced by India in September 2021. As a part of the reforms, the federal government made a provision that offers the operator the choice to transform the curiosity into fairness and there have been “no strings attached” to that choice, the commerce physique mentioned. Vodafone Idea exercised the choice of fairness conversion in January 2022 and anticipated that the curiosity could be transformed to authorities fairness by April 2022 after DoT and finance ministry resolve some procedural issues.

The accrued curiosity on AGR-related dues stands at Rs 16,130 crore and if the conversion occurs, the federal government might get a 33% stake, making it the single-largest shareholder in Vi, mentioned analysts.

Strong Show

Since the announcement of reforms, the cash-strapped provider’s performances have improved – it has seen 4 quarters of income development and an increase in 4G subscriber numbers, amongst others.

“This positivity supported the company to make good progress in talks with banks and third-party equity investors,” the letter mentioned. “The government reforms sent a very positive signal, both to existing and prospective investors, that India is open and welcoming to foreign investment. It was on this basis that promoters, led by Vodafone, brought in Rs 50 billion equity in March/April 2022.”

However, the case round fairness conversion stays pending. “As a result of the delay in equity conversion, banks which were happy to support and investors ready to invest are extremely wary,” the commerce physique mentioned.

DoT officers have beforehand identified that earlier than the finalisation of the revival package deal, Vi’s promoters had assured the federal government they’d make investments round Rs 10,000 crore. The promoters since then have infused round Rs 4,900 crore, however most of it was used to clear dues of Indus Towers. “Practically none of this (Rs 4,900 crore) was used by Vodafone Idea,” mentioned the federal government official.

Officials, in reality, say Vodafone Idea wants round Rs 40,000-45,000 crore for sustaining itself, and wish promoters to herald half of this with banks funding the remainder. “In the absence of promoter funding, it will be difficult for the company to get external investors,” a senior official instructed ET in a report revealed on January 4. “Without promoter infusion, even banks are unlikely to support.”