Kotak’s views created quite a chatter on social media
NEW DELHI: A day after Vodafone Idea announced that Rs2,458 crore preferential equity will be allotted to vendors Ericsson and Nokia towards part payment of dues, noted banker Uday Kotak on Friday took a swipe at the mechanism of issuing “equity to creditors to repay their debt”.
Without naming Vodafone Idea, Kotak in a post on X (formerly Twitter) wrote “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,” he posted.
As a parting shot, Kotak went on to say “What is that story about Peter and Paul?” in an apparent reference to old adage about robbing Peter to pay Paul.
Kotak’s views created quite a chatter on social media, as the import of the post was obvious to netizens.
The post came just a day after debt-ridden telecom operator Vodafone Idea said it will allocate shares worth Rs2,458 crore to vendors Nokia India and Ericsson India to clear their partial dues.
The board of Vodafone Idea Ltd (VIL) has cleared allotment of shares on preferential basis at about 35 per cent higher price compared to the follow-on offer price of the company, and comes with a lock-in of six months.
“The Board of Directors of Vodafone Idea Limited today approved preferential allotment of about 166 crore equity shares of face value of Rs10 each, at an issue price of Rs14.80 per share, for an aggregate consideration of up to Rs2,458 crore, to two of its key vendors, Nokia Solutions and Networks India Private Limited and Ericsson India Private Limited,” the telco’s filing had said.
Nokia and Ericsson will participate for up to Rs1,520 crore and Rs938 crore respectively, subject to approval by VIL shareholders at the EGM to be held on July 10, 2024.
“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 part of their outstanding dues,” the filing said.
