India's Piramal Healthcare Ltd. will rely on borrowings for future buys and investments as it will finish its cash pile after raising stake in mobile operator Vodafone's India unit, senior company officials said.

Piramal Healthcare will buy 5.5 percent more stake in Vodafone India for about 30 billion rupees ($616 million), taking its total stake in the mobile phone company to about 11 percent, it said over the weekend.

"We continue to evaluate acquisitions... and various options to maximise value for our shareholders and this (Vodafone) is one of these," Ajay Piramal, chairman, Piramal Healthcare, said on Monday.

Piramal Healthcare raised 18 billion rupees through commercial papers with 30-day and 75-day maturities, to partly fund the Vodafone stake buy, its Chief Financial Officer Rajesh Laddha said. The drugmaker will use 12 billion rupees of cash-on-hand to fund the remaining cost of acquisition.

The firm paid a yield of 10.65 percent and 10.15 percent for the April and March maturity commercial paper transactions respectively, which was arranged by Kotak Mahindra Bank.

Piramal, which sold its India formulations business to Abbott Laboratories in 2010, received an up-front payment of $2.2 billion from Abbott, besides additional payments of $400 million annually for the next four years beginning 2011.

Piramal expects to receive the current year's payment of $400 million is September.

"We may raise more funds provided there is an opportunity," Laddha said.

The firm is in discussions with merchant bankers to monetise the $400 million tranches from Abbott maturing in Sept. 2012 and Sept. 2013.

The commercial paper borrowings have been made by the company towards bridge financing till it is able to borrow against its receivables which involves lengthy legal and regulatory processes, he said.

"It (assigning of receivables) was taking a little longer than expected and we could not tie the inflow and the outflows. So we had to a CP," Laddha said.

However, analysts are not enthused at the company's investment strategy.

Investment in Vodafone India is intended to park money for short term-gains, Hiten Gala, senior manager, advisory at brokerage Sharekhan said.

"Therefore, it is not strategic and the company will prefer to exit within 12-18 months (post Vodafone India IPO)."

The Mumbai-based drugmaker expects annual returns of 17-20 percent from the investment in Vodafone, Piramal said.

Shares in Piramal Healthcare, which surged more than 7 percent in early trades, ended 1.1 percent lower at 432.80 rupees in a firm Mumbai market.

Vodafone, which holds 64 percent in its India unit, has the first right to buy Piramal's stake in the cellphone operator if an initial public offerring does not happen within 18 months, Piramal said.

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