The government gave a lifeline to Vodafone Idea

The government taking a 35.8% holding in Vodafone Idea has surprised many. At a time when it looked poised to dilute its stakes in many public sector companies, the movie failed to excite the Street too, as the cash-strapped company’s shares dipped 21% yesterday.

Experts also pointed out that ailing government-owned telecom giants MTNL and BSNL are also crying for attention. They are yet to roll out 4G services.

In any case, the move might well provide Vodafone Idea with a rent of life. The third-biggest telecom transporter’s raising support plans are fundamentally postponed and Vodafone Group has made it clear it won’t make any new value imbuement into its Indian unit.

Against this scenery, the public authority of India is set to turn into the single biggest investor in striving Vodafone Idea after the telco selected to change over revenue worth Rs 16,000 crore on conceded range liabilities and Adjusted Gross Revenue duty into value.

It had recently acknowledged a four-year ban on the range and AGR duty presented by the public authority’s Telecom Reforms Package declared last September.

While Airtel had decided to pay the interest emerging out of such postponement, Vodafone Idea is exploiting the alleviation bundle to change over them into value. This will bring about an enormous weakening to existing investors.

- The government will hold some 35.8% stake in India’s third-biggest carrier.

-Vodafone Group will own around 28.5%

- Aditya Birla Group about 17.8%.

While this may provide comfort to financial creditors, at the same time it places an undue expectation on the government for any future fund infusions as it has consciously chosen to be part of the company’s turnaround.

As of September end, Vodafone Idea had a gross debt of Rs 1.94 trillion, 90% of which it owes to the government. The company’s decision crucially prevents a duopoly in the telecom market, which was ostensibly the intent of the telecom reforms package.

While this move has helped the company extinguish some dues, the government holding has evidently unsettled investors.

Prime Minister Narendra Modi had declared last February that the “government has no business to be in business”.

Vodafone Idea ought not to be permitted to stay a semi-public area organization for long. While the public authority might turn into the biggest investor, it may not engage in running the organization.

In a previous collaboration with Business Standard, Vodafone Idea’s CEO Ravinder Takkar had said that it would be wrong to express that the organization will transform into a public area undertaking. He said the public authority cares very little about gaining and running telecom organizations.

The public authority will likewise have a choice to change over the due sum relating to the conceded installment into value toward the finish of the four-year ban period.

Without critical outer gathering pledges by the organization, such a situation would mean the public authority turning into a controlling investor.

All things considered, it ought to before long concoct a leave methodology for its stake. Its backing gives transient alleviation and steadiness however over the long haul, it should be guaranteed that Vodafone Idea doesn’t exceed everyone’s expectations way.