Shares of Vodafone Idea on Tuesday ended 18.94 per cent higher on the Bombay Stock Exchange, following an announcement on Sunday that the government’s stake in Vodafone Idea will more than double to 48.99 per cent as it is set to acquire shares worth ₹36,950 crore in lieu of outstanding spectrum auction dues.

After hitting the upper circuit in the early hours of trade on Tuesday, VIL shares ended at ₹8.10 on the BSE and at ₹8.17 on the NSE. Stock markets were closed on Monday.

The government is already the single-largest shareholder in Vodafone Idea with a 22.6 per cent stake, and the fresh move will take its total holding to more than the combined stake of the company’s promoter firms — Vodafone and the Aditya Birla group. The two VIL promoters hold 14.76 per cent and 22.56 per cent stake in the company, respectively.

“The ministry of communications... in line with the September 2021 Reforms and Support Package for Telecom Sector, has decided to convert the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, into equity shares to be issued to the government of India. The total amount to be converted into equity shares is ₹36,950 crore,” a filing from the company said on Sunday.

Vodafone Idea (VIL) said it has been directed to issue 3,695 crore equity shares of the face value of ₹10 each at an issue price of ₹10 each within 30 days after issuance of the necessary order from relevant authorities, including from the Securities and Exchange Board of India (Sebi).

“After the aforesaid issuance of equity shares, the government of India’s shareholding in the company will increase from the existing 22.60 per cent to approximately 48.99 per cent. The promoters will continue to have operational control of the company,” the filing said.

Analysts, while pointing out that conversion of dues to equity will offer cash flow relief to the telcom company and help it in further fundraising, the repayment of AGR (adjusted gross revenue) remains an overhang.

“Besides spectrum dues, Vi also has to repay around ₹165 billion (₹16,500 crore) annually pertaining to AGR dues, which are not part of the proposed conversion. We estimate Vi’s cash flow to be insufficient to fund its ongoing capex plans alongside AGR dues repayment,” Motilal Oswal said in a report.