The Securities and Exchange Board of India (SEBI) has exempted the government from making an open offer to the shareholders of Vodafone Idea Limited (Vi) pursuant to its proposed acquisition of over 33 per cent stake in the telecom operator on conversion of dues into equity.
To this end, SEBI said that the acquisition of shareholding in Vi by the government of India (GoI) is proposed with the sole intent of saving the larger public interest and that GoI has no intent to participate in the management of the Board of the Vi. Moreover, SEBI clarified that there is going to be no change in control of Vi. As per SEBI such holding of GoI shall be classified as public shareholding.
The regulator noted that a substantial sum of money is due to be paid to the government by Vi, which may place a potential burden on the financials of the company. Also, an open offer obligation on the part of government involves huge sums of cash outflow from the GoI.
Under the regulations, entities acquiring 25 per cent or more stake in a listed company have to make an open offer to the company’s shareholders. As part of bailing out the debt-burdened telecom sector, the government, in September 2021, gave telecom operators an option of paying interest for the 4 years of deferment on deferred spectrum instalments and adjusted gross revenue (AGR) dues by way of conversion of dues into equity.
Vi had opted for conversion of debt into equity under the government’s bailout package. Further, on May 10, 2022, Vi had filed an application seeking exemption from the open offer requirement with respect to the government acquiring stake in the firm. However, post the transaction, GoI would have 33.44 per cent stake in the telecom operator.
