Vodafone Idea shares flat as government’s 49% stake takes effect

The shares of Vodafone Idea Limited (VIL) were trading flat at ₹8.12 on the NSE today at 11.40 am.

The Government of India has converted ₹36,950 crore ($4.95 billion) of Vodafone Idea Limited’s (VIL) outstanding spectrum auction dues into equity, increasing its stake in the troubled telecom operator from 22.6 per cent to approximately 49 per cent, according to a regulatory filing on March 30.

The conversion will result in the issuance of 3,695 crore equity shares at ₹10 each within 30 days, as directed by the Ministry of Communications. This action aligns with the September 2021 telecom sector reforms package aimed at easing financial stress on telecom operators.

Despite the government becoming the largest shareholder, the existing promoters—Vodafone Group and Aditya Birla Group—will retain operational control of the company, though their combined stake will decline from 38.8 per cent to 25.57 per cent. Non-government minority shareholding will decrease to 25.44 per cent from 38.6 per cent.

Analysts from JM Financial note that this conversion should cover VIL’s spectrum dues for FY26 and partially for FY27, improving its near-term liquidity position. The government appears to have deliberately kept its stake below 50 per cent to avoid taking majority control.

However, structural challenges remain for VIL’s long-term viability. JM Financial maintains that the company needs significant tariff hikes to boost Average Revenue Per User (ARPU) from the current ₹163 to over ₹380 by FY28 to meet future payment obligations of ₹43,000 crore annually over FY28-31.

The company’s planned ₹25,000 crore debt raise, crucial for its three-year capital expenditure plan of ₹50,000-55,000 crore, remains pending, leaving uncertainty about its ability to compete effectively in India’s telecom market.