Tata Teleservices, like Voda Idea, has decided to convert AGR dues into equity
Upon conversion, the government is expected to hold a 9.5 percent stake in the company

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After Vodafone Idea, Tata Teleservices (Maharashtra) on Tuesday said it will opt for conversion of the interest amount on AGR dues into equity. In the post-conversion, the government’s holding in the company is expected to be around 9.5 per cent.

The announcement of Tata Teleservices (Maharashtra) came within hours of Voda Idea also deciding to opt for converting the interest amount on AGR dues into government equity.

The government has given telecom operators an option of paying interest for the 4 years of deferment on the deferred spectrum installments. The AGR dues by way of conversion into equity of the NPV of such interest amount.

Earlier, debt-ridden Vodafone Idea (VIL) had announced that it has decided to opt for converting about Rs 16,000 crore interest dues liability payable to the government into equity. It will be amount to around 35.8% stake in the company, as per a regulatory filing of the telecom firm. Following the announcement, shares of Vi plunged over 20% at Rs 11.80 apiece on BSE today.

Shares of Tata Teleservices on Tuesday ended 5% up at Rs 291.05 apiece on BSE. Over a period of one year, the scrip has rallied over 2,800%.

In a filing to the BSE, Tata Teleservices (Maharashtra) said Net Present Value or NPV of interest is expected to be nearly Rs 850 crore as per the company’s estimates, subject to confirmation by the Department of Telecom (DoT).

“… pursuant to the Empowered Committee of the Board of Directors, at its meeting held on January 11, 2022, the company is expressing its desire for the conversion of the full amount of such interest related to AGR dues into equity subject to mutual agreement on the terms and conditions,” the filing said.

Stock Movement

The stock had risen higher on speculation that the company could turn out to be a winner replicating the success. The business model of Tata Elxsi or Tata Communication, other multi-baggers from Tata Group stable.

“The stock is always either at the upper circuit or lower circuit, which shows the speculative nature of trade in the counter,” Bathini said. The stock closed at the upper circuit on Tuesday as well, before the company announced the possible conversion of debt to equity.

Though, however bad this news could be for investors, the step makes sense for the company. Tata Teleservices has AGR dues of Rs 16,798 crore of which it has paid Rs 4,197 crore. It had opted for the 4-year AGR and spectrum payment moratorium.

Deven Choksey, Managing Director of KRChoksey Shares and Securities said that giving a stake to the government by converting debt is always a better option for both the government and the companies.