Flush with funds, Piramal Healthcare is set to fork out Rs 2,856 crore ($640 million) for a 5.5 per cent stake in Vodafone's India unit.
With this, Vodafone has now parked over 26 per cent of the company's shares with Indian investors in line with foreign direct investment guidelines for the telecom sector. The deal values Vodafone India at $11.6 billion. Piramal had last year sold its domestic formulations business for Rs 17,000 crore. The Vodafone transaction contemplates various exit mechanisms for Piramal, including both participation in a potential initial public offering of VEL and a sale of its stake to Vodafone, the British company said in a press statement.
Currently, Infrastructure Development Finance Company and Mr Analjit Singh, Chairman of Max India, hold 24 per cent stake in the company, according to a Vodafone spokesperson.
Vodafone has been scouting for a local partner ever since the Essar Group exited by shedding its stake in favour of the former as part of a $5.4-billion deal announced on July 1. The Vodafone Group would buy out the Ruias' 33 per cent holding in Vodafone Essar, thereby increasing its direct ownership in the country's third-largest operator to 75 per cent.
Post completion of the transaction with Piramal, Vodafone will have a direct interest of approximately 69.8 per cent in the venture, Vodafone spokesperson, Mr Simon Gordon, said in a statement.
But there could be an issue with the IDFC holding too. More than 50 per cent in IDFC is held by foreign investors. According to the FDI guidelines, if the investing company is owned or controlled by non-resident entities, the entire investment by the investing company in an Indian company will be considered foreign investment. So, the equity held by IDFC could be considered as foreign, say analysts. However, Vodafone has always maintained that IDFC's shares should be considered as Indian holdings.