SEBI exempts govt from open offer in Vodafone Idea deal

Last month, the government stepped in to support the struggling telecom operator by converting ₹36,950 crore of Vi’s spectrum auction liabilities into equity

Market watchdog SEBI on Thursday granted an exemption to the Government of India (GoI) from making an open offer to Vodafone Idea (Vi) shareholders. This decision follows the government’s plan to acquire a 34 per cent stake in the telecom company by converting spectrum dues into equity, increasing its ownership from 22.6 per cent to nearly 49 per cent.

“An open offer shall require additional investment for the acquisition of further equity shares by the GoI. Such a requirement renders the conversion of the outstanding dues to equity untenable as the purpose of this conversion shall be defeated, having a negative impact on the investors of the target company and the public at large,” SEBI whole-time member, Ashwani Bhatia said in the order.

‘Safeguarding public interest’

He emphasised that the government’s increased stake in Vi is driven purely by the goal of safeguarding broader public interest. The move is intended to ensure that Vi, a key telecom service provider, can maintain its operations and continue expanding telecom access across India.

The order clarified that the government has no plans to influence Vi’s management or board, and its expanded shareholding will remain categorised as public shareholding, with no shift in the company’s control.

“An open offer may result in the acquisition of further equity shares of the target company by the GoI which will result in cash outflow by the government and may also result in GoI’s shareholding in the target company potentially exceeding 50 per cent and may entail acquisition of “control” in respect of the target company, which is not the intent of the GoI with respect to this conversion,” Bhatia said.

Last month, the government stepped in to support the struggling telecom operator by converting ₹36,950 crore of Vi’s spectrum auction liabilities into equity, a measure enabled by the telecom reforms package introduced in September 2021. Normally, such a significant stake increase—crossing the 25 per cent threshold—would mandate an open offer under the Takeover Regulations of 2011. However, SEBI has waived this obligation for the government.

The order also pointed to the public interest and policy considerations at play, noting the government’s efforts to alleviate liquidity pressures on telecom firms and support banks with significant exposure to the sector.

Bhatia concluded: “Given the substantial sum of money is due to be paid to the GoI by Vi, which may place a potential burden on the financials of Vi, and also that an open offer obligation on the part of GoI involves huge sums of cash outflow (from GoI), I find that it would be appropriate to grant exemption to the acquirer from open offer requirements as laid down in Regulation 3(1) of the Takeover Regulations, 2011.”

This exemption aligns with the government’s broader strategy to rescue the debt-laden telecom industry. In 2021, reforms allowed operators to convert interest on deferred spectrum and Adjusted Gross Revenue (AGR) dues into equity over four years. Vi opted into this bailout scheme, paving the way for the current equity conversion.

Published on April 3, 2025