Piramal Healthcare to buy additional 5.5% in Vodafone India for Rs3,007 cr

04 Feb 2012

Piramal Healthcare Ltd, today said it will buy an additional 5.5-per cent stake in Vodafone India Ltd for about Rs3,007 crore ($620 million) in cash, just two weeks after the British telecom firm won a Rs11,000 crore tax ruling in its favour.

With the additional purchase, Piramal's total shareholding in Vodafone (India) has gone up to about 11 per cent.

"Piramal has agreed to purchase approximately 5.5 per cent of the issued equity share capital of Vodafone India Ltd from ETHL Communications Holdings Ltd for a cash consideration of approximately Rs3,007 crore (£385 million), taking Piramal's total shareholding in the telecom firm to approximately 11 per cent," Vodafone Group said in a statement.

Piramal acquired the additional stake just two weeks after the Supreme Court set aside a 2008 Bombay High Court judgement that ruled Vodafone International Holdings must pay Rs11,000 crore in capital gains tax for its 2007 takeover of Hutchinson's Indian holdings. (See: Vodafone wins tax case in Supreme Court) 

Piramal can sell the stake when Vodafone goes in for an IPO slated for this year. It can also exercise an option to sell the stake back to Vodafone, and also choose to exit even if Vodafone does not go in for an IPO, Vodafone said.

In August 2011, Piramal paid $640 million (Rs2,900 crore) for acquiring a 5.5-per cent equity stake in Vodafone Essar Ltd from ETHL.

Piramal Healthcare chairman Ajay Piramal, who is sitting on a Rs17,000 crore cash pile from selling his formulations business in May 2010 to Abbott Laboratories, is looking at investing in profitable projects. 

In May, 2007, Vodafone acquired a 67-per cent stake in Hutchison-Essar Ltd (HEL) from Hong Kong-based Hutchison Group, for $11.2 billion.

In July 2011, Vodafone announced that it would pay $5.46 billion for purchasing Essar's 33-per cent holding in Vodafone Essar. After buying Essar's stake, Vodafone's shareholding in Vodafone Essar would rise to 75.35 per cent, exceeding the foreign direct investment (FDI) limit of 74 per cent.

Vodafone had said that it would transfer 1.35-per cent stake to an Indian investor to remain compliant with the existing FDI norms in telecom sector.

Vodafone is now planning to list the additional 1.35-per cent stake and is reported to have appointed investment bank NM Rothschild as advisor to the listing.