The Telegraph
Friday , April 11 , 2014
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Piramal exits Vodafone

Mumbai, April 10: Piramal Enterprises is selling its entire 11 per cent stake in Vodafone India to its British parent for Rs 8,900 crore.

Vodafone will now gain full control of its Indian telecom operations, making it the first foreign telecom company to hold 100 per cent in a local arm.

The Ajay Piramal-group company had acquired shares in Vodafone in two tranches — it bought 5.5 per cent in August 2011 and another 5.5 per cent stake in February 2012. The company paid close to Rs 5,864 crore for the 11 per cent stake. Piramal bought these shares at an average price of Rs 1,290 per share, a company statement said.

Piramal today announced that it was selling 4.5 crore shares to Prime Metals, an indirect subsidiary of Vodafone Group Plc. The deal values the shares of Vodafone India at Rs 1,960 per share, meaning Piramal has made an absolute gain of more than 51 per cent from the transaction.

The deal value of Rs 8,900 crore puts the enterprise value of Vodafone India at around Rs 81,000 crore for Vodafone India.

Based on current stock prices, rivals Bharti Airtel is valued in terms of market capitalisation at Rs 1,27,776 crore and Idea Cellular, close to Rs 48,000 crore. “The equity purchase in Vodafone was consistent with our objective of making investments that offer an opportunity to generate attractive long-term return on equity,” Ajay Piramal, chairman of Piramal Group, said. He added that the company had delivered against its targeted returns with this investment.

There is speculation that Piramal Enterprises may issue a special dividend to its shareholders.

The announcement of the transaction led to the shares of Piramal Enterprises gaining on the bourses. On the BSE, the share spurted nearly 8 per cent in intra-day deals to Rs 577.10. However, it gave up some of its gains to end at Rs 556.15, a rise of 3.73 per cent over its previous close.

Vodafone had entered India in 2007 by buying out Hutchison Whampoa’s local unit in a $11-billion deal. The deal with Piramal comes at a time the British telecom giant is locked in a tax dispute with the Centre.

After the Union government had allowed foreign telecom carriers to own 100 per cent in their Indian operations last year, Vodafone had said it would increase its stake.

The overseas telecom giant subsequently purchased a 4.5 per cent stake held by Vodafone India non-executive chairman Analjit Singh, which took its direct and indirect stake in the Indian arm to around 89 per cent.

Piramal has been making such strategic investments after selling its domestic formulations business to Abbott Healthcare for $3.72 billion in 2010 and its holding in Piramal Diagnostic Services to Super Religare for Rs 600 crore.

Piramal subsequently forayed into the finance business by setting up Piramal Finance.

Ajay Piramal also acquired a 10 per cent stake in Shriram Transport Finance, the used commercial vehicles financier, through a block deal at the stock exchanges from TPG, the US-based private equity firm.