The Finance Ministry approves of Vodafone Idea's equity after Vi clears IDFC First Bank's loan

Vodafone Idea, the struggling telecom business, has repaid IDFC First Bank's loan. The Finance minister has cleared a proposal to convert debt into equity. Vodafone Idea has offered a stake in the company after the stock price stabilises at Rs. 10 or above.

Debt-ridden Vodafone Idea (VIL) has decided to opt for converting about Rs 16,000 crore of interest liability payable to the government into equity which will amount to around 33 per cent stake in the company while promoters' holding will come down from 74.99 per cent to 50 per cent.

The finance ministry had cleared the proposal to acquire a stake in VIL in July.

“There is a Sebi norm that the acquisition should take place at par value. DoT will clear acquisition after VIL shares stabilises at Rs. 10 or above” an official source told PTI.

In September 2021, the bank had a Rs 3240 crore (2.90% of loan book) exposure to Vodafone Idea. The telecom company repaid Rs 1500 crore of the total loan amount in December 2021, along with Rs 110 crore in interest. Later, the whole sum was paid out, as V. Vaidyanathan, the bank's MD and CEO, also confirmed to.

According to sources, the telecom operator also repaid a debt to State Bank of India for Rs 2700 crore (SBI).

Interestingly, this was the first time in the previous three months that the stock surpassed the Rs 10-mark.

Despite the encouraging news, Vodafone Idea closed slightly lower on the BSE, down around 1% to Rs 9.69 per share, while IDFC First Bank increased over 2% to settle at Rs 51.10 per share.

Talking about IDFC First Bank target price, market expert Sumit Bagadia said the stock has shown good movement from the lower level in the past 3-4 months. He said the stock will soon achieve the short-term target price of Rs 55-58. He suggested staying invested in the counter.