Piramal may sell Vodafone stake in 2 years

Mumbai: Piramal Healthcare today said its 5.5 percent stake purchase in Vodafone Essar was a financial investment and it might sell the stake for a return of up to 20 percent, possibly through an IPO, within the next two years.

“We are acquiring a 5.5 minority stake in Vodafone Essar for Rs 2,856 crore. It is a minority stake,” Piramal Healthcare Chairman Ajay Piramal told reporters, adding that the company would not take a board seat.

The company had yesterday announced the purchase of a 5.5 percent stake in Vodafone Essar for $640 million and an expected return of 20 percent would be worth $128 million.

[caption id=“attachment_58981” align=“alignleft” width=“380” caption=“The Piramal transaction would reduce Vodafone’s holding in the Indian unit to 69.8 percent. Photo by Clive Darr/Flickr”] [/caption]

Hinting at a possible sale of this stake, Piramal said: “You heard Vodafone talking about IPO (in the past)… Therefore, we are assuming that this IPO will take place anywhere in the next 12-24 months.

“This is where we could participate in or we could participate with Vodafone and get an expected return. Somewhere, we believe, (return) should be in the range of 17-20 per cent,” he said.

“The Vodafone deal is a strategy to deliver superior return from our surplus return,” Piramal added.After announcing a deal to buy out its partner Essar Group in the venture, UK-based Vodafone had said it might consider an IPO of the Indian telecom company to keep its stake within the permitted foreign stakeholding limit of 74 percent.

The Piramal transaction would reduce Vodafone’s holding in the Indian unit to 69.8 percent. The widely expected sale was necessary to adhere to foreign direct investment norms for at least 26 per cent of the telecom company to be Indian-owned.

The deal announcement comes more than a month after Vodafone reached a settlement with Essar over the latter’s 33 percent in the joint venture.

On 1 July, Vodafone announced that it would pay $5.46 billion, as against $5 billion decided earlier, for purchasing a 33 percent from Essar in their joint venture Vodafone Essar Ltd (VEL).

The purchase of Essar’s 33 percent was increasing Vodafone’s stake in VEL to 75.35 per cent, which was higher than the FDI limit of 74 percent.

Vodafone has had a tough time in India since entering the market in 2007. The company is also locked in a legal battle with Indian tax authorities over a $2 billion tax demand on its acquisition of the 67 percent stake of Hutchison in Hutchison-Essar for over $11 billion.

PTI