Markets regulator Sebi on Wednesday exempted the government from making an open offer to the shareholders of Vodafone Idea Ltd (VIL) pursuant to its proposed acquisition of over 33 percent stake in the telecom operator on the conversion of dues into equity.
In a nine-page order, Sebi said the acquisition of shareholding in VIL by the Government of India (GoI) is proposed with the sole intent of saving the larger public interest.
"Moreover, GoI has no intent to participate in the management or the Board of the VIL and there is going to be no change in control of the VIL. Further, such holding of GoI shall be classified as public shareholding," Sebi said while giving the exemption from making the open offer.
The regulator noted that a substantial sum of money is due to be paid to the government by VIL, which may place a potential burden on the financials of the company.
Also, an open offer obligation on the part of the government involves huge sums of cash outflow from the GoI, Sebi's Whole Time Member S K Mohanty said in an order.
He also mentioned the public policy and public interest involved in the entire transaction and taking into cognizance various steps taken by GoI in easing liquidity and cash flow to telecom service providers as well as to help various banks having substantial exposure to the telecom sector.
Citing these grounds, he said, "I find that it would be apt to grant exemption to the acquirer from open offer requirements as laid down in the... Takeover Regulations."
Under the regulations, entities acquiring 25 percent or more stake in a listed company have to make an open offer to the company's shareholders. As part of bailing out the debt-burdened telecom sector, the government, in September last year, gave telecom operators an option of paying interest for the 4 years of deferment on deferred spectrum installments and AGR dues by way of conversion of dues into equity.
VIL had opted for the conversion of debt into equity under the government's bailout package. On May 10, VIL filed an application seeking exemption from the open offer requirement with respect to the government acquiring a stake in the firm.
Post the transaction, GoI would have 33.44 percent stake in the telecom operator.