Cash-rich pharmaceutical company Piramal Healthcare Ltd has doubled its stake to 11 per cent in Vodafone India Ltd (earlier Vodafone Essar), the second largest telecom firm in the country by revenues. The current deal values Vodafone India at Rs 54,672 crore, a premium of Rs 2,745 crore, compared to the deal struck by Piramal Healthcare in August 2011.
The latest deal involves Piramal Healthcare acquiring 5.5 per cent stake for Rs 3,007 crore from ETHL Communications Holdings Ltd, part of the Essar group. Piramal has partially funded the transaction by raising Rs 1,800 crore through commercial papers with 30-day and 75-day maturities, according to Reuters.
“The transaction follows the settlement between Vodafone and Essar over the sale of Essar’s 33 per cent stake (approx.) in Vodafone India Ltd, announced in July 2011, and the purchase by Piramal of approximately 5.5 per cent of the issued share capital of VIL from Essar in August 2011,” a statement from Piramal Healthcare said on Saturday.
The deal also contemplates various exit mechanisms for Piramal, including participation in a potential initial public offering of VIL and a sale of its stake to Vodafone, the statement adds.
The share price of Piramal Healthcare was up over 8 per cent in early trade before correcting to Rs 442, up 0.84 per cent at 12:40 pm on the BSE.
Vodafone, the world’s largest mobile telecom company in terms of revenues, has also seen some favourable judgements over the past one month. It has recently won a long-running legal battle against the tax department in the Supreme Court. The telco had challenged a $2.2 billion tax bill in the apex court after losing the case in Bombay High Court in 2010.
Also, Vodafone is among the few telcos who have not been affected by the recent Supreme Court ruling that cancelled 122 2G telecom licences for mobile networks, issued during 2008.
These developments, along with the fluctuations in the Indian rupee, could have caused the change in valuations. Besides, Vodafone India is also looking at an IPO, which will help it participate in market consolidation after the much-awaited new telecom policy is announced this year.
UK-headquartered Vodafone Group Plc said that it had agreed to buy 33 per cent stake in its Indian joint venture Vodafone Essar, from the Ruias last year. The company acquired 22 per cent stake in the Indian arm in two tranches – on June 1 and July 1, 2011.
The remaining 11 per cent, for which payment should have been made by February 15, 2012, as per the agreement, has been acquired by Piramal Healthcare in the recent deal. The balance will continue to be held by local partners like Analjit Singh of Max India.
Piramal Healthcare has been expanding its business interests after the sale of its domestic formulations business to Abbott Laboratories for $3.7 billion in 2010. Since then, it has expanded into lending business through a non-banking financial company (NBFC) and also acquired the group’s private equity real estate business Indiareit Fund.
The board also took permission from its shareholders to expand into a host of new businesses – financial services, insurance, security systems & technology, infrastructure and real estate development, engineering, including EPC, IT and packaging business.