India to convert local vodafone unit’s past dues into equity

India has asked the local unit of Vodafone Group Plc to convert 161.3 billion rupees ($2 billion) of its dues into equity and issue shares, making the government the largest shareholder in the unprofitable wireless phone operator. 

The company has been directed to issue equity shares at a price of 10 rupees each, Vodafone Idea Ltd. said in an exchange filing Friday. It has been asked to convert the net present value of interest related to deferring spectrum installments and past dues into equity shares. Vodafone Idea "will take all necessary actions forthwith to undertake the aforesaid issuance,” it said.

This equity conversion plan gives the Narendra Modi-led government more say in rescuing Vodafone Idea and removes the need for any immediate cash outgo from the beleaguered wireless operator. While the move avoids bankruptcy for the joint venture between Vodafone Group and billionaire Kumar Mangalam Birla’s conglomerate, it’ll be a stopgap measure for a company that’s been losing customers in droves.

Last year, the company’s board approved a rescue plan that gives almost 36% stake to the Indian government.