The growth of the Indian economy is being witnessed by the development in various industrial sectors.  Modifications in the business models of different entities is the need of the hour in order to face the competing world. This often calls for corporate restructuring which includes mergers, acquisitions, takeovers. With a view to jointly stand the challenges posed by the dynamic business environment and aiming towards greater profiteering, corporates come together merging into a new entity.

Vodafone Idea Limited

On August 31, 2018, Vodafone India (hereinafter referred to as “Vodafone”) and Idea Cellular (hereinafter referred to as “Idea”) completed their merger to create a giant telecom entity- Vodafone Idea Limited having 480 million existing customers and a revenue market share of 32.2.%. The new corporate offers 45.2% of its stake to Vodafone Group while Aditya Birla Group owns 26% although both partners have equal rights and shareholdings. [1]

NCLT Approval

The composite scheme of amalgamation and agreement among Vodafone Mobile Services Limited, Vodafone India Limited (jointly referred to as the “Vodafone Group”) and Idea Cellular Limited in accordance to Sections 230-232 of the Companies Act, 2013 were submitted before the Ahmedabad Bench of the National Company Law Tribunal (also referred to as “NCLT”).

On January 11, 2018, the NCLT sanctioned the aforesaid scheme of merger of Vodafone and Idea, based on the reasons some of which are listed below:[2]

  • Expansion of business for greater value to the shareholders;
  • Synergies in operational processes;
  • Rationalization of network structure;
  • Optimization of resources;
  • Reduction of maintenance expenses;
  • Availability of combined resources;
  • Delivery of high quality service to customers thus strengthening customer base;
  • High spectrum availability;
  • Sustained investment accelerating PAN-India expansion;
  • Streamlining nation-wide information technology system.

The NCLT gave a final approval to the Vodafone-Idea merger on August 30, 2018.1

Merger Aids

Both Vodafone and Idea had a combined debt of INR 109,000 Crores in the end of June, 2018 and start with a cash balance of INR 19,300 Crores after equity infusion by parent companies.1 The merger may give a breather to both the debt-ridden firms in a market.