The shares of the telco would be held through the Unit Trust of India, “or by any trustee type or other suitable arrangement, which may be worked out by the government,” the department of telecommunications (DoT) has said .
In similar letters sent to all telcos Friday, DoT said the “present value of the interest” on the deferred adjusted gross revenue (AGR)-related and spectrum auction dues during the moratorium period would be treated as a loan to the operator.
Price of Preference Share
The government may convert any part of such loan to “preference shares, instead of equity shares and such preference shares may be optionally or compulsorily convertible and / or redeemable and / or participating in nature”, DoT said.
The necessary order for invoking section 62(4) of the Companies Act will be issued by the competent department, the letters, issued after discussions with the ministry of finance, said. The specific section of the Companies Act details how debentures and loans taken from the government can be converted into equity in a firm.
Setting terms
- ‘Present value of interest’ on deferred AGR, spectrum auction dues during moratorium period to be treated as loan to operator
- Govt may convert any part of such loan to preference shares in telco
- Telco shares to be held by Unit Trust of India/other suitable arrangement worked out by govt
- For equity conversion, ‘relevant’ date for pricing of preference shares
The price of the preference share “shall be equal to the higher of the average of weekly high and low of the volume weighted average price of the equity shares during the last 26 weeks preceding the relevant date or the two weeks preceding the relevant date; subject to the provision under Section 53 of the Companies Act, (i.e. shares cannot be less than par value)”, the DoT said, detailing the conversion mechanism.
The relevant date for pricing of the share issue will be August 14, 2021.
On the BSE Monday, shares of Airtel closed at Rs 680.45, down 0.8%, while that of Vi ended at Rs 10.60, down 1.40%. August 14 was a Saturday. On August 13, shares of Airtel and Vi closed at Rs 625.58 and Rs 6.32, respectively.
Along with their chosen option, the telcos also need to submit the audited financial statements of 2020-2021 as well as relevant share price details.
ET was the first to report on the letter on its online platforms.
The letters follow a wide-ranging relief package announced by the government in the middle of September in which the most important elements were a one-time option to avail of a four-year moratorium on AGR and spectrum payments, as well as a one-time option to convert statutory dues to government equity.
