Shares of Vodafone Idea on Tuesday jumped 10 per cent as the government's stake in the firm will more than double to 48.99 per cent as it is set to acquire shares worth Rs 36,950 crore in lieu of outstanding spectrum auction dues.

The stock surged 9.99 per cent to Rs 7.49 -- its upper circuit limit -- on the BSE.

At the NSE, it jumped 10 per cent to Rs 7.48 -- the highest trading permissible limit for the day.

The government is already the single-largest shareholder in the debt-ridden Vodafone Idea with 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 Aditya Birla Group.

VIL promoters hold 14.76 per cent and 22.56 per cent stake in the company, respectively, at present.

"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 Rs 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 Rs 10 each at an issue price of Rs 10 each within 30 days after issuance of the necessary order from relevant authorities, including from Securities and Exchange Board of India (Sebi).

"Post the aforesaid issuance of equity shares, the Government of India shareholding in the company will increase from 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.

The government's decision to convert Rs 36,950 crore dues of Vodafone Idea into equity is a "major" and "timely" display of support that will offer significant cash flow relief to the telco in the next three years and help it complete a long-delayed bank debt raise, brokerage firm Citi said on Monday.

"Overall, we view this as a major display of support by the government in a very timely manner, which should provide significant cash flow relief to VIL in the next 3 years and help it complete its bank debt raise," the brokerage said in its latest report.