Explainer | Govt converts Vodafone Idea’s debt to equity: Key details and future outlook

The government has decided to convert Vodafone Idea’s outstanding spectrum dues into equity, providing financial relief to the telecom company. This move comes after the Cabinet rejected the Department of Telecommunications’ (DoT) proposal for a partial waiver of the company’s adjusted gross revenue (AGR) dues.

Key numbers

• Total spectrum dues converted: ₹36,950 crore
• Shares to be issued: 3,695 crore
• Issue price: ₹10 per share (face value)
• Govt stake before conversion: 22.60%
• Govt stake after conversion: 48.99%

How is the government converting spectrum dues into equity?

This conversion is being carried out under the 2021 Support Package, which was approved by the Cabinet.

The relief package allows telecom companies to convert deferred spectrum payment dues into equity at the end of the moratorium period.

Why is the debt-to-equity conversion at ₹10 per share?

The closing price of Vodafone Idea shares on March 28 was ₹6.80. However, Section 53(2) of the Companies Act states:

“Any share issued by a company at a discounted price shall be void.”

Since shares cannot be issued at a discount, the conversion is being done at the par value of ₹10 per share.

Can the government convert more of Vodafone Idea’s debt into equity?

With this conversion, the government’s stake rises to 48.99%. While there is no legal restriction under the Companies Act or the 2021 Support Package on further equity conversion, crossing the 50% stake would effectively make Vodafone Idea a public sector undertaking (PSU).

The government is already the largest shareholder in the company.

This marks the second round of debt-to-equity conversion. In 2023, the government converted ₹16,133 crore of debt into equity at ₹10 per share. Since then, the value of its holding has declined by 32%.

What’s next for Vodafone Idea’s debt?

While this conversion eases spectrum payment obligations for FY26, Vodafone Idea still faces significant debt challenges.

The company must repay about ₹43,000 crore annually from FY27 to FY31.