Government of India has decided to convert Vodafone Idea's outstanding spectrum auction dues pertaining to spectrum auctions prior to 2021, including deferred dues repayable after moratorium, into equity shares.The total amount to be converted into equity shares is Rs 369.5 billion, with Vodafone Idea issuing 36.95 billion shares (at Rs 10/share).
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Motilal Oswal Report
The Government of India has approved the conversion of Vodafone Idea Ltd.'s upcoming spectrum dues repayment into equity, in line with the provisions in 2021 telecom relief measures. GoI would convert ~Rs 369.5 billion spectrum dues into equity at face value (Rs 10/share).
GoI equity conversion provides cash flow relief for Vodafone Idea and is a key medium-term positive development, but stabilization of its subscriber base, long pending debt raise, and further relief on adjusted gross revenue dues remain vital for Vodafone Idea's long-term survival.
GoI's continued commitment to maintaining a 3+1 market construct in the Indian telecom sector and the easing of Vi's cashflow constraint are also positive for Indus Towers.
We retain our Sell rating on Vodafone Idea with a revised target price of Rs 6.5/share, while we remain Neutral on Indus Towers and would use any bounce to reduce exposure.
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