Ajay Piramal-led Piramal Enterprises has agreed to divest its entire 11 per cent stake in Vodafone’s Indian arm to Prime Metals Ltd, an indirect subsidiary of Vodafone Group for Rs 8,900 crore ($1.48 billion), as per a stock market disclosure.
The deal is a part of Vodafone's plan to take full control of its Indian operations following the relaxation in foreign investment norms in the telecom sector where the FDI ceiling was raised from 74 per cent to 100 per cent.
Max India chief Analjit Singh was the other minority shareholder in Vodafone India, who has already sold his stake early this year.
Piramal Enterprises’ stake comprises 45.4 million shares which are being bought by Vodafone for Rs 1,960 per share, valuing the telecom firm at $13.45 billion.
This translates into 52 per cent profit on two-year-old investment in the company, not counting dividends, in local currency.
Piramal had acquired the stake at an average price of Rs 1,290 per share for Rs 5,864 crore in two tranches during FY12. Taking this into account, Piramal Enterprises is estimated to have clocked internal rate of return (IRR) of close to 20 per cent (not counting dividend earnings, if any).
In February this year, Vodafone received the Indian cabinet’s approval to buy stake from its minority Indian partners — Piramal Enterprises and Analjit Singh.
“The equity purchase in Vodafone was consistent with our objective of making investments that offer opportunity to generate attractive long-term return on equity,” Ajay Piramal, chairman, Piramal Group, said.
Vodafone, which entered India in 2007 by buying Hutchison Whampoa's local cellular assets in a $11 billion deal, directly and indirectly owned a combined 84.5 per cent of Vodafone India, the country's second-largest telecom firm by users and revenue, before the transaction with Singh and Piramal Enterprises.
(Edited by Joby Puthuparampil Johnson)