Equity conversion as Vi's calling card may be near-term helpline

Fund infusion critical to sustaining operations of the firm over medium term, say analysts

- RAM PRASAD SAHU Mumbai, 5 February

While the government's decision to opt for equity conversion instead of decision interest payments due from Vodafone Idea (Vi) removes an overhang, large fund infusion from promoters/investors will be crucial for the company to repay near-term dues and sustain investments.

The government on Friday asked Vi to convert the net present value of interest related to the deferment of spectrum auction instalments and aggregate gross revenue dues into equity shares

The conversion of ₹16,133 crore into equity will make the government the largest shareholder in Vi with 33 per cent stake.

An analyst at a domestic brokerage believes the government's presence as an equity partner in the company (although it has refrained from an operational role), its commitment to maintaining the current three-private player market, and its expectation of near-term fundraising is an important first step towards stabilising operations.

While this is positive, it is not enough to overcome multiple challenges the company is up against be it debt, lack of investments in the network, or smaller customer base, observe analysts.