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HomeEconomyBusinessVodafone Idea board accepts KM Birla's resignation

Vodafone Idea board accepts KM Birla’s resignation

Earlier, Birla had offered to hand over his stake in debt-laden Vodafone Idea to the government or to any other entity that the government may consider worthy

The board of directors of Idea Limited on Wednesday approved Kumar Mangalam Birla’s request to step down from his position in the company.

In a statement to the bourses, the cash-strapped company informed that Birla will step down as non-executive director and non-executive chairman of the board with effect from 4 August. Consequently, the board has approved the appointment of Himanshu Kapadia as the non-executive chairman of the company.

The announcement comes few days after reports that Birla offered to hand over his stake in debt-laden Idea to the government or to any other entity that the government may consider worthy to keep the company operational.

The company had had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

In a letter to cabinet secretary Rajiv Gauba on 7 June, Birla — who holds around 27% stake in VIL — said investors are not willing to invest in the company in the absence of clarity on AGR liability, an adequate moratorium on spectrum payments and most importantly floor pricing regime above the cost of service.

Without immediate active support from the government on the three issues by July, the financial situation of VIL will come to an “irretrievable point of collapse,” he wrote.

In September 2020, VIL had received approval from its board to raise up to Rs 25,000 crore. However, the company has not been able to raise the funds so far.

Shares of Vodafone Idea continued to tumble as it settled 18.51% lower at Rs 6.03 on the BSE.

Birla wants Vodafone-Idea to turn a PSU

Aditya Birla Group chairman Kumar Mangalam Birla had nearly two months ago offered to hand over the group’s 27.66% stake in Vodafone Idea to any public sector or domestic financial entity who could keep the company afloat while asserting that without immediate government support, the telco would be driven to an irretrievable point of collapse.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity — public sector/government/domestic financial entity, or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in a letter dated 7 June to Cabinet Secretary Rajiv Gauba. He further said potential foreign investors wanted the government to show clear intent of its keenness to have a three-player market.

The letter predated last month’s Supreme Court order which dismissed the plea of Vodafone Idea and other telcos to permit rectification of ‘arithmetical errors’ in the computation of adjusted gross revenue (AGR) dues.

Last week, senior officials said that while a government takeover of the telco had been informally discussed, it was unlikely. “The government and financial regulators have taken charge of companies such as Satyam, IL&FS and most recently DHFL,” a senior official said.

“But there were instances of financial irregularities, which is not the case in Vodafone Idea,” the official added.

Officials said options such as an extension of the moratorium in spectrum dues, reduction in licence fees and spectrum usage charges (SUC), and a prospective relook at the adjusted gross revenue definition were under consideration. They acknowledged that it was possible that none of these measures was enough to ensure the survival of Vodafone-Idea.

ABG and UK-based Vodafone Group Plc, the two parents of VIL, hold 27.66% and 44.39%, respectively, in the cash-strapped telco.

Vodafone case: India struggling overseas

Indian government’s appeal against a verdict of an international arbitration tribunal that overturned its demand for Rs 22,100 crore in back taxes from Vodafone Group Plc has been transferred to a senior court in and hearings are scheduled in September, sources said.

An international arbitration court had on 25 September last year rejected the tax authority’s demand for Rs 22,100 crore in back taxes and penalties relating to the British giant’s 2007 acquisition of an Indian operator.

The government in December applied in to set aside the primarily on jurisdictional grounds. The proceedings have been transferred to a senior court, with a date set for September, two sources with knowledge of the matter said.

The appeal was filed in the court as the south-east Asian nation was the seat of arbitration.

The government has similarly challenged the order of a three-member tribunal at the Permanent Court of Arbitration in The Hague that asked India to return $ 1.2 billion, plus interest and cost, to British oil and gas company Cairn Energy plc.

The government had used a 2012 law, that gave tax authorities the power to reopen past cases, to seek taxes from Vodafone and Cairn over alleged capital gains made several years ago.

Both Vodafone and Cairn had challenged the tax demands under bilateral investment protection treaties and initiated the arbitration. India lost both arbitrations.

Sources said the government believes that taxation is not covered under investment protection treaties with various countries and the law on taxation is a sovereign right of the country.

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