In In a surprise move, billionaire Ajay Piramal owned corporate entity, Piramal Healthcare has picked up a 5.5% equity stake in Vodafone Essar, the Indian operations of the worlds largest mobile operator Vodafone Plc. Late on Wednesday, the two companies made a joint statement in this regard. According to the terms of the deal Piramal will pay $640 million (nearly Rs 2,900 crore) for the stake, thus valuing Vodafones Indian operations at $11.6 billion (Rs 52,500 crore).
A valuation of Rs 52,500 crore, gives Vodafone India a market capitalisation that is one-third of that of Indias largest mobile operator Bharti Airtel, whose capitalisation stands at Rs154,540 crore. Vodafone has 16 percent market share in India and a subscriber base of 141 million.
In the statement issued by the two companies, it has been revealed that Piramal will have the option of exiting at the time of IPO by Vodafone. Piramal will also have the option to sell the stake back to Vodafone. Such terms have made some analysts wonder if the entire exercise could be some kind of facilitation or warehousing. After protracted negotiations, which were widely reported in the media, Vodafone and the Ruias had agreed on a $5.5-billion payout by Vodafone for the 33 per cent stake that the Essar group held in the venture.
Vodafone had formally paid $3.3 billion to the Ruias for the 22 percent stake they held in Vodafone India on July 25. This payout by Vodafone included the tax expense linked to the stake sale. According to sources, Vodafone was supposed to pay Ruias another $1.3 billion by February 15 next year for their remaining 11 percent in the telecom venture. However, now it appears that through this new deal the Piramals are acquiring about half of the remaining 11 percent stake that the Ruias owned in Vodafone. It also seems as if the Piramals are paying slightly less for their 5.5 percent stake in comparison to what has been paid by Vodafone to Ruias.
Vodafone directly owns about 56 per cent in the Indian telecom entity. Another 11 per cent is held by partners like Analjit Singh who have elaborate call and put agreements to sell their stake to Vodafone Plc if the government of India raises the foreign stake in telecom companies above the current limit of 74 per cent. Once Vodafone manages to buy the entire 33 percent stake from the Ruias, its stake would have gone above 74 percent. So the company needs an Indian partner to comply with the limit that the government has set on foreign holding in telecom ventures.
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