Priyanka Tiwari
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The Indian government has increased its ownership in Vodafone Idea, converting ₹36,950 crore of the telecom company’s spectrum dues into equity. This move, announced on March 29, raises the government's stake from 22.6% to 48.99%.
Vodafone Idea stated that the government's support could significantly enhance its chances of securing debt funding. However, banks have expressed doubts about lending to the telecom operator.
According to a report by The Economic Times, several bankers acknowledged the government’s action as a positive step but noted it is insufficient to justify releasing new funds. The equity conversion only addresses dues up to September 2024, which accounts for just 15% of the company’s overall debt.
Lenders Seek Clarity on Dues Before Issuing Fresh Loans
Bankers have emphasized the need for a comprehensive repayment plan. Without clarity on how the remaining liabilities will be handled, both the telecom operator and its lenders remain in a precarious position, making fresh loan approvals unlikely.
Following the announcement, Vodafone Idea's stock surged 20% on April 1, and several brokerage firms issued optimistic forecasts. Banks had reportedly been urging the government to convert dues into equity, seeing it as essential to delaying Vodafone Idea’s financial obligations for the next few years.
Telecom Sector Risks and Government Responsibility
With Vodafone Idea’s total debt standing at ₹2.3 lakh crore as of December 2024, some bankers now view the problem as a broader government concern. One banker told ET that if the company fails, the telecom sector could be reduced to a duopoly, limiting market competition.
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