Cabinet clears Vodafone’s Rs10,141-cr buy-out of India operations

The Cabinet Committee on Economic Affairs (CCEA) has approved the proposal of British telecom company Vodafone Plc to increase its equity stake in its Indian arm Vodafone India Limited from 64.38 per cent to 100 per cent.

The proposal, made by CGP India Investment Limited on behalf of Vodafone Plc, would result in foreign investment of approximately Rs10,141 crore, the CCEA said in a release.

Vodafone Plc will buy out the two main minority shareholders in Vodafone India – the Ajay Piramal-led Piramal Enterprises and Analjit Singh, founder-head of Max India Ltd, who together hold a little over 15 per cent equity in Vodafone India Ltd.

Vodafone, which entered India in 2007 by buying Hutchison Whampoa's India venture with the Essar Group in an $11-billion deal, now owns a combined total of 84.5 per cent, including indirect holdings, in Vodafone India, the country's No2 telecom company.

''We welcome today's decision,'' e-mailed Ben Padovan, group head of media (external affairs), for Vodafone Group Services.

The Ajay Piramal-led Piramal Enterprises, which owns 10.97 per cent in Vodafone India, will get Rs8,900 crore, a premium of about 51 per cent. Max India Ltd founder-chairman Analjit Singh will get the remaining Rs1,241 crore of the Rs10,141 crore total Vodafone spend.

The Foreign Investment Promotion Board (FIPB) had on 30 December 2013, cleared the proposal of CGP India, an indirect Mauritian subsidiary of Vodafone International Holdings BV, to hike stake to 100 per cent its stake from the 64.38 per cent that it currently owns (See:Vodafone gets FIPB nod to take full control of India operations).

Since the proposal was worth more than Rs1,200 crore, it had to be referred to the Cabinet.

Last year, the government had, in a policy shift, allowed 100 per cent FDI into the telecom sector.

Vodafone Plc, the parent company, will buy out the minority shareholders, who together own 35.62 per cent of the equity.

The company had approval from the Foreign Investment Promotion Board (FIPB) in December last year.

''We welcome today's decision,'' e-mailed Ben Padovan, group head of media (external affairs), for Vodafone Group Services.

The Ajay Piramal-led Piramal Enterprises, which owns 10.97 per cent direct equity holding in Vodafone India, will get Rs8,900 crore, a premium of about 51 per cent for its stake, more than double of what it had expected (reportedly 17-20 per cent).

The remaining Rs1,241 crore will go to Analjit Singh, founder-head of Max India Ltd, who indirectly holds the remaining stake.

Piramal had invested a total of Rs5,900 crore to buy the 10.97 per cent in Vodafone India, in two tranches. Piramal first bought 5.47 per cent stake for Rs2,893 crore in 2011 and, in February 2012, it bought another 5.5 per cent, for Rs3,007 crore.

Vodafone India's valuation has risen 48 per cent since February 2012, when Piramal took 5.5 per cent for Rs3,007 crore. Vodafone India is now valued at Rs81,130 crore, about 42 per cent higher than the Rs57,000 crore Vodafone Plc had paid Hutchison in 2007 to buy 67 per cent stake in the company.