After its board approved the conversion of dues into equity, Vodafone Idea Ltd. said the Indian government will own nearly 36% of the country’s third-largest wireless phone operator

Vodafone Idea said on Tuesday the Indian government will own 36% of the company and dues will be converted into equity.

After its board approved the conversion of dues into equity, Vodafone Idea Ltd. said the Indian government will own nearly 36% of the country’s third-largest wireless phone operator.

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. Since the average price of the Company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs 10/- per share, subject to final confirmation by the DoT, the company said in a statement.

The conversion will therefore result in dilution to all the existing shareholders of the Company, including the Promoters, it said.

Vodafone Idea stated that governance and other rights of promoter shareholders are governed by a Shareholders Agreement (SHA). The rights are subject to a minimum qualifying threshold of 21 per cent for each promoter group. The promoters, in light of the board’s approval, have agreed to amend the existing SHA to reduce the minimum qualifying threshold to 13 per cent from 21 per cent. The company said that there will be changes in the company’s Articles of Association (AoA).

Vodafone Group Plc will own around 28.5 percent of the company, while Aditya Birla Group will own about 17.8 percent, according to the statement.

This rescue strategy was critical for Vodafone Idea, a joint venture between the Vodafone Group and Kumar Mangalam Birla’s conglomerate, which had been losing customers to larger competitors.

Its financial situation deteriorated after Reliance Jio Infocomm Ltd. sparked a price war in 2016 and quickly clinched market share to become the dominant player.