A day after Vodafone Idea made the surprise announcement to issue Rs 2,458 crore in preferential equity to Ericsson and Nokia, as a partial payment of dues to these vendors, top banker Uday Kotak lashed out against this practice of "equity to creditors to repay their debt." Though Kotak did not directly refer to Vodafone Idea, he went on X: "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 sells in the market and gets paid by investors.
Kotak said in a tongue-in-cheek reference, "What is that story about Peter and Paul?" It was an interesting way of referring to the age-old saying of passing the obligation from one entity to another.
Kotak's comments had much social media discussion, as they made sense across a wide spectrum.
The development was announced publicly a day earlier by Vodafone Idea, whereby it made an allotment of approximately 166 crore equity shares of Rs 10 each at an issue price of Rs 14.80 per share, a good 35 percent higher than the recent follow-on offer price of the company. Nokia had agreed to receive up to Rs 1,520 crore, while Ericsson had agreed to receive up to Rs 938 crore, subject to the receipt of necessary approvals from shareholders of Vodafone Idea in respect of the private placement at an EGM to be convened by the company on July 10, 2024.
In its regulatory filing, Vodafone Idea made it clear that both Nokia and Ericsson have been long-standing partners of the company and have been principal network equipment suppliers, and the preferential issue of equity shares was intended to be considered towards a part of their outstanding dues.
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