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Aditya Birla not Looking to Raise Vodafone Idea Stake

The Aditya Birla Group (ABG) has no plans to exercise its option to buy shares of Vodafone Idea from co-promoter, the Vodafone Group.

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Hemant Kashyap
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Sources report that the Aditya Birla Group will not buy any more stake in Vodafone Idea.

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ABG Won't Buy More Stake in Vodafone Idea

Under a shareholders' pact, ABG can buy additional shares at ₹130/share from Vodafone to raise its holding to 35.5%. This pact remains active for three years after the merger of Vodafone India and Idea Cellular. Since that took place on 31st August 2018, the pact is set to expire on this August 31st. Also, ABG can buy shares at current stock price in the 4th year of the merger, under an agreed equalization formula. Even if this does not happen, Vodafone can then sell its holdings to reach ABG's level of shareholding from the 5th year to the 10th. Right now, the UK telecom giant holds 44.39% of Vodafone Idea.

However, according to one person cited, ABG's priority lies in keeping the sinking telco afloat. There are fundraisers that Vi needs to close soon, to stay afloat and compete with the likes of Bharti Airtel and Reliance Jio.

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Another person said that if ABG could buy more stock, it would have rather invested that money in the telco. However, both the promoters have said that they will not infuse any fresh equity in Vodafone Idea; this stance seems bizarre given the telco desperately needing it.

Vodafone Idea Racing Against the Clock to Survive

Given its huge AGR dues, and lack of cash from operations, Vodafone Idea's survival has come under question. Multiple analysts suggest that this is the reason why ABG does not want to increase its stake; if the telco goes down, ABG's investment goes down too.

Speaking of dues, Vodafone Idea faces total AGR dues of ₹58,254 crore; it has paid more than ₹7,800 crore. The telco is also looking at around $3.1 billion shortfall in cash flows in FY23. Apart from the AGR dues, it has regular debt payments, spectrum usage charges and the spectrum payments from its purchases in spectrum sales. Till now, it has requested the DoT to give a moratorium of another year on its ₹8000 crore spectrum payment.

For the last 10 months, the telco has been trying to raise cash. Besides the ₹25,000 crore fund-raising plans announced last September, the telco has put on sale its data centre, optic fibre assets and home broadband unit YOU Broadband. The telco will look to raise another $1 billion from these sales.

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