Vi at 49: not quite a PSU. SEBI bent the rules. BSNL déjà vu?

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The Rulebook:

Under SEBI’s Takeover Regulations (2011), any entity acquiring 25% or more shares in a listed company must make an open offer to buy 26% of shares to public shareholders, giving them an exit option at a fair price. This protects minority investors during major ownership changes.

Vodafone Idea(Vi)’s Debt-to-Equity Story

  • 2023: Govt converted ₹16,133 crore dues into equity, gaining a 22.6% stake.
  • 2025: Another ₹36,950 crore (spectrum dues) converted into equity at ₹10/share (face value), boosting the govt’s stake to 48.99%.
    (Although Vi shares were trading around ₹7, Section 53(2) of the Companies Act prohibits issuing shares below face value.)
  • Promoters (Vodafone UK + Aditya Birla) now hold ~26%, down from 38.8%

 

SEBI exempted this - Why?

The govt. sought exemption from the open offer rule, arguing:

  • The stake hike was for financial rescue, not to gain control.
  • An open offer would cost ₹8,000+ crore, defeating the relief purpose.
  • SEBI agreed, citing public interest.

Why Govt Stopped at 48.99%, What If Govt Goes Above 50%?

Crossing 50% would classify Vi as a Public Sector Undertaking (PSU)—triggering:

-        More red tape, CAG audits and reduced operational agility

-        May need new SEBI approval as it could be seen as exercising control over the company - contrary to the earlier justification of the acquisition being a financial rescue rather than a takeover.

-        It could also shake up private investor sentiment and market competition, due to:

o   Potential conflict of interest (regulator vs owner) in pricing, spectrum allocation, etc.

o   Higher debt-raising potential due to perceived govt backing.

o   But also risk of deterring private investors due to PSU inefficiency concerns.

 

And let’s not forget — the govt hasn’t exactly nailed it with BSNL. If Vodafone Idea turns into a PSU, will it face the same fate? That’s a worry investors can’t ignore.

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