For Piramal, good use of cash with exit option via Vodafone IPO

Our Bureau Mumbai | Updated on March 12, 2018


Piramal Healthcare's agreement to hike its stake in Vodafone India is a good, move, telecom analysts said.

“Piramal's funds have been deployed in a very productive manner because the scenario looks good for Vodafone, both on the competitive front as well as the regulatory front,” said Ms Sangeeta Tripathi, Research analyst – Telecom, Sharekhan.

Vodafone entered India in 2007 after it acquired Hong Kong-based Hutchison Whampoa Ltd's phone business in India. In August last year , Piramal Healthcare had picked up 5.5 per cent minority stake from ETHL Communications Holdings Ltd (Essar) in Vodafone India for Rs 2,856 crore. At that time, Piramal had said that they expected an average return of 17 to 20 per cent on their investment in Vodafone.

The present agreement will increase the healthcare company's stake in the telecom major to 11 per cent and will mark the exit of Essar group as a shareholder in Vodafone India.

Valuations up

“At last, the Piramals have deployed another chunk of idle cash to generate more money from money. Vodafone's valuation would go up substantially as it has not been affected by the 2G licence cancellations and we expect the company to increase its market share (21 per cent as at Q2 FY12) and also help them list on Indian stock exchanges in the near future,” said a telecom analyst at an Indian brokerage

Piramal's move to up its stake in Vodafone follows the latter winning the $2-billion income-tax case. Piramal's initial investment in Vodafone is said to have helped the mobile company meet regulatory requirements. Following the apex court's order to cancel 122 licences of telecom operators, Bharti Airtel and Vodafone have emerged as net gainers.

Confidence play

Piramal Healthcare can exit its stake through “participation in a potential initial public offering of VIL and a sale of its stake to Vodafone,” said a release from Vodafone.

“This transaction shows Piramal's confidence in Vodafone. The tax ruling by the Supreme Court in Vodafone's favour and the cancellation of licences of the telecom operators involved in the 2G scam has worked in favour of Vodafone,” said Mr Jagannadham Thunuguntla, Strategist & Head of Research, SMC Global Securities. “The Vodafone IPO can be expected in the next three to four months. This is an excellent opportunity for Piramal to make quick money,” he added. ; raghavendrarao.k

Published on February 04, 2012

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