Kumar Mangalam Birla's Smart Move

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Recently Kumar Mangalam Birla the CEO of Aditya Birla Group has stepped down from the CEO position of the debt trapped company Vodafone-Idea (VI). He has also written a letter to the Government to offer his 27% stake in VI to any Public Sector Company run by the Government of India or any other private entity who are interested in handling the telecom giant company.

He also wrote in his letter that he has tried his best to revive the company but wasn't able to do that due to immense competition faced by Jio and Airtel. After coming of Jio only three companies could have survived in the Indian market which were Vodafone, Idea and Airtel. But now it seems VI has also cleared the ground for Jio and Airtel. He told the Government in his letter that if they want a three company competition in the telecom market then specify it and take concerned steps for it. He also stressed on floor pricing of plans per subscriber so that they can survive in this fierce price war. 

How Birla played smartly?

VI had a total debt of around 180 thousand crore rupees which includes AGR & spectrum dues and loan from banks while the value of VI in market is only around 7000 crores which is far less than its mounting debt. Kumar Mangalam Birla has around 27% stake in VI so he has a liability of around 64000 crores over him and his share value is very less so by selling his stake he can get rid of this debt. He has invested hefty amount of money in the company and he doesn't want that this debt be born by other profitable companies of Aditya Birla Group's conglomerate. So he want to sell his stake as early as possible.

VI is continuously losing its subscribers thereby increasing its losses and the Government's welfare attitude can force itself to buy KMB's stake in VI as internet services to around 27 crore subscribers can't be disrupted. So the government may come as a crusader to save the company from declaring bankrupt. There are rumours spread that VI can be merged with another loss making PSU of the  government BSNL which is a victim of the Jio Movement. But till now the government didn't show any intent to save the company and it will be interesting to watch how the government will take its decision in this matter.

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