Relief package: Vodafone Idea opts for a moratorium on IGAs
Vodafone Idea on Friday informed the Ministry of Telecommunications (DoT) of its acceptance of the four-year moratorium on the payment of its Adjusted Gross Income (AGR) contributions.
It had already given last week its agreement to avail itself of the offer to defer its spectrum royalties for the same period. In addition to Vodafone Idea, Bharti Airtel has also opted to postpone its spectrum and its AGR contributions. Reliance Jio, however, did not opt for the moratorium.
Companies have been required to send their preferences by Friday on the moratorium following the government’s stimulus package for the sector which involves the deferral of payment of spectrum bands and AGR dues with net present value intact.
Vodafone Idea said its board would consider the other option in the stimulus package, such as offering equity to the government instead of accrued interest, and confirm its acceptance within the deadline. It now has 90 days to confirm the payment of accrued interest by offering equity capital to the government.
“The Board of Directors has approved the exercise of the option of deferral of contributions related to the AGR of the company for a period of 4 years with immediate effect, in accordance with the notification dated October 14 issued by the DoT to society, “he said in a regulatory filing.
The DoT said that the conversion of the accrued interest component to equity will be done by invoking Section 62 (4) of the Companies Act and the amount will be treated as a loan until the conversion is completed. . The relevant date will be August 14, one month before Cabinet approval.
“For the valuation of shares or equity, it will be equal to the greater of the average of the weekly highs and lows of volume – weighted average price of the equity shares during the last 26 weeks before the relevant date, subject to of the provision of section 53 of the Companies Act (ie shares cannot be less than par value), ”the DoT said.
Equity shares will be issued by the company to the government on a preferential basis. In addition, the details of the amount of interest will be provided by the company and certified by the DoT. “The net present value (NPV) of the interest amount will be calculated on the date the option is exercised. This amount of interest will continue to be treated as a loan to the business until the completion of the equity injection process, ”the DoT said.
Earlier in an interview with FE, CEO and Managing Director of Vodafone Idea, Ravinder Takkar, indicated the company’s interest in taking the option of paying interest by offering shares to the government. “Once the guidelines are announced, we will know exactly what the conversion would look like. But I think our understanding so far is that the interest associated with delay is the choice we can make and convert to equity. I would need to see the details and get approval from the board, but I imagine that’s something we would be willing to do, ”Takkar said.
In the case of Vodafone Idea, the annual amount of AGR and deferred spectrum amounts to Rs 23,000 crore. This means that the overall amount deferred for the four year period amounts to Rs 92,000 crore.
In addition, the government has provided additional cash flow through which the company can fund its annual license fees and spectrum usage fees of around Rs 4,000 crore at MCLR + 2% now without any penalties.