Government’s 33% stake may not save Vodafone Idea

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Editor's note: On 7 February, the government of India became the single largest shareholder in loss-making Vodafone Idea when it chose to convert the telco’s penal interest dues into equity.  It was an ominous start. The Rs 16,133 crore worth of dues, which fetched it a 33.4% stake, came at Rs 10 a share. This, at a time when the market value was Rs 7.95, meaning a notional loss of Rs 3,309 crore from the get-go.  Though the government did not invest a rupee in cash for these shares and will not participate in the day-to-day affairs of the company (or even have a representative on its board), becoming a part owner of Vodafone Idea does qualify as a major departure from its recent actions. The move comes exactly a year after Prime Minister Narendra Modi reiterated his Bharatiya Janata Party’s stand that the government “has no business to be in business”. In fact, over the last two years, the government has stepped up efforts to disinvest its stake in the businesses it owned. Air India was privatized, while the Life Insurance …