Did Uday Kotak take a subtle jab at Vodafone Idea? Banker asks if 'financial markets create money out of thin air'

Vodafone Idea had said it will issue equity to Ericsson and Nokia to clear dues

Vodafone Idea Representational image | Shutterstock

Kotak Securities Chairperson Uday Kotak has slammed the system wherein companies allot shares to creditors on a preferential basis to repay debt, asking if financial markets create money out of thin air.

This comes after cash-strapped Vodafone Idea said it will issue Rs 2,458 crore in preferential equity to vendors Ericsson and Nokia in a bid to clear their dues partially.

However, Kotak did not name Vodafone Idea in his post on X. “Financial markets create money out of thin air?” the banker asked in the post.

“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 added.

Her further asked, “What is that story about Peter and Paul?” referring to the proverb about “robbing Peter to pay Paul.

The debt-laden telecom firm said it will allot preferential shares worth Rs 1,520 crore to Nokia and Rs 938 crore to Ericsson. This is subject to approval by shareholders at the EGM scheduled for July 10. Once the shares are allotted, Nokia will own 1.5 per cent stake in the company and Ericsson 0.9 per cent.

The move is part of the telecom operator's bid to stand up against bigger players Reliance Jio and Bharti Airtel as it plans to launch 5G network while improving its existing 4G services.

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