UDAY KOTAK RAISES CONCERNS OVER VODAFONE IDEA'S FINANCIAL MANEUVER - DETAILS

A day after Vodafone Idea announced a Rs 2,458 crore preferential equity allotment to vendors Ericsson and Nokia as part payment of dues, prominent banker Uday Kotak criticized the strategy of issuing equity to creditors to repay debt. Without naming Vodafone Idea, Kotak questioned the practice on X (formerly Twitter), suggesting it creates "money out of thin air."

Kotak's post implied skepticism about this financial maneuver, stating, "A model for companies in financial difficulty: issue equity to creditors to repay their debt. If the stock is well traded, the creditor can sell in the market and get paid by investors." He concluded with a pointed remark, "What is that story about Peter and Paul?" referencing the adage about robbing Peter to pay Paul. The tweet sparked considerable discussion on social media, with many netizens quickly grasping the implied criticism.

Vodafone Idea, struggling with debt, announced plans to allocate shares worth Rs 2,458 crore to vendors Nokia India and Ericsson India to clear part of their dues. The telecom operator's board approved the preferential allotment of approximately 166 crore equity shares at an issue price of Rs 14.80 per share, a 35% premium compared to the company's follow-on offer price, with a lock-in period of six months.

The telco's filing detailed that Nokia Solutions and Networks India Private Limited and Ericsson India Private Limited will receive up to Rs 1,520 crore and Rs 938 crore respectively, pending shareholder approval at the Extraordinary General Meeting (EGM) scheduled for July 10, 2024.

"Nokia and Ericsson both have a long-term partnership with VIL, as key suppliers of network equipment, and this preferential allotment will enable VIL to clear part of their outstanding dues," the filing stated.

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(With Inputs From PTI Agency)

2024-06-15T06:25:42Z dg43tfdfdgfd