Robbing Peter to pay Paul? Uday Kotak on Vodafone Idea's deal with Nokia and Ericsson
Vodafone Idea, billionaire banker Uday Kotak on Friday questioned the debt-ridden telecom operator's decision to settle dues of two European equipment vendors — Nokia and Ericsson — by issuing preferential shares. He indirectly compared the deal with the age-old proverb «robbing Peter to pay Paul».
«Financial markets create money out of thin air? 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. What is that story about Peter and Paul?,» Kotak said on social media platform X without naming Vodafone Idea.
Last evening, Vodafone Idea announced after a board meeting that it will issue preferential equity of 1.66 billion shares at Rs 14.80 per share to Finland’s Nokia and Sweden’s Ericsson, for a total of up to Rs 2,458 crore, to settle part of their pending dues.
This preferential allotment price is higher by 35% compared to the FPO price and comes with a lock-in of 6 months.
The decision has come under scrutiny because bills are being paid using equity. Shares of Vi have more than doubled in the last year, potentially giving confidence to the management and vendors for such a debt repayment pact.
Post this preferential issuance, the shareholding of Nokia and Ericsson in the company will be 1.5% and 0.9%, respectively.
«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
