Indian pharmaceutical company Piramal Healthcare has agreed to buy an extra 5.5% stake in Vodafone India for Rs30bn (US$613m), bringing its total interest in the telco to approximately 11%. The stake will be sold by India’s conglomerate Essar…
Indian pharmaceutical company Piramal Healthcare has agreed to buy an extra 5.5% stake in Vodafone India for Rs30bn (US$613m), bringing its total interest in the telco to approximately 11%.
The stake will be sold by India’s conglomerate Essar Group, which already agreed in August last year to sell its 33% stake in the Vodafone India JV (then known as Vodafone Essar) to British telco Vodafone.
But as a result of this transaction, which has yet to be completed, Vodafone would have directly held around 75% of Vodafone India, and 100% indirectly, according to reports.
This would have been in violation of FDI rules, which state that foreign companies cannot own more than 74% of an Indian telco.
Therefore, on 10 August 2011, Piramal agreed to temporarily buy a 5.5% stake in the JV for US$640m.
On 4 February, the pharmaceutical company announced it would buy another 5.5% in the company.
According to a Reuters report, Piramal has raised Rs18bn through commercial papers with 30-day and 75-day maturities to help fund the stake increase. This facility is reportedly arranged by Kotak Mahindra Bank.
In the 4 February statement, Piramal said that “the transaction contemplates various exit mechanisms for Piramal, including both participation in a potential initial public offering of [Vodafone India] and a sale of its stake to Vodafone.”
An IPO of Vodafone India seems likely after Vodafone was found not liable for a US$2.4bn tax bill linked to the purchase of its 67% stake in Hutchison Essar (now known as Vodafone India) in 2007.
In mid-December, Marten Pieters, CEO of Vodafone India, had been quoted telling its staff that the company was gearing up for an IPO after receiving approval from Vodafone. But he reportedly added the Indian market needed to be ready first, which may now be the case.
Piramal was not available for comment before the press deadline.
