Pharmaceutical giant Piramal Healthcare has acquired 5.5 percent stake in Vodafone Essar, the Indian operations of the Vodafone Plc, which will help keep the British company’s holding within stipulated foreign direct investment norms.
Piramal will pay $640 million (approximately Rs. 2,900 crore) for the stake, valuing the company at $11.6 billion (Rs. 52,500 crore).
S & R Associates advised Vodafone with a team led by Partners Rajat Sethi and Niti Dixit along with Venkatesh Vijayaraghavan, Zehra Khan and Dhruv Nath.
Amarchand Mangaldas advised Piramal with a team led by Managing Partner Cyril Shroff and Partner Leena Chacko.
Linklaters advised Vodafone while Stephenson Harwood advised Piramal on English law issues.
Last month,Vodafone had bought its India Joint Venture partner, Essar Group’s 33 percent stake in Vodafone Essar Limited (VEL) for $5.5 billion, ending its four year troubled relationship.
According to VCCircle, this transaction would have left Vodafone with around 75.4 percent stake in the Indian telecom venture, just marginally above the 74 percent mark which is the maximum that a foreign investor can own in an Indian telecom firm as per the existing FDI norms. The balance will continue to be held by some local partners like Analjit Singh of Max India.
Vodafone needed to dilute this to comply with the current FDI norms and the same is now being done by Piramal acquiring 5.5 percent stake. This will bring Vodafone’s holding to around 70 percent stake and in line with the FDI norms.
Vodafone and Essar initially went into business together in 2007, when Vodafone purchased a 67 percent stake in Hutchison Whampoa’s Indian telecoms business, in which Essar already had a stake. The deal allowed Vodafone to enter the Indian market for the first time.
Piramal’s stake will come from Essar’s ETHL Communications Holdings Ltd. The transaction contemplates various exit mechanisms for Piramal, including both participation in a potential initial public offering (IPO) of Vodafone Essar and a sale of its stake to Vodafone, Live Mint reports.
Last year, Abbot Healthcare had acquired Piramal Healthcare’s domestic formulations for an up-front payment of $2.12 billion (Rs. 9,945 crore) and an additional $400 million (Rs.1,876 crore) to be paid annually for the next four years. Piramal also bought back about 20 percent of its shares from the public and institutional investors for about Rs. 2,500 crore.