In a transaction that will see it earn more than 50 per cent on its investment in a span of less than three years, Piramal Enterprises (PEL), a part of the Piramal Group, has agreed to divest its entire 11 per cent equity stake in Vodafone India to Prime Metals, an indirect subsidiary of Vodafone Group plc, for a consideration of Rs.8,900 crore.
The stake, comprising 45,425,328 shares, was acquired at an average price of Rs.1,290 per share for a consideration of Rs.5,834 crore and was bought in August 2011 and February 2012. PEL will make a profit of Rs.3,036 crore on its investment, a return of over 50 per cent.
Speaking to The Hindu, Ajay Piramal, Chairman, Piramal Group, said, 'The equity purchase in Vodafone was consistent with our objective of making investments that offer opportunity to generate attractive long-term return on equity. From the beginning, we had said that we have a medium term view on this investment.’’
In the past, PEL had said it intended to exit the Vodafone investment at the time of Vodafone India’s likely initial public offering (IPO). 'We could have waited for their IPO and probably even got a better return. But, we felt a return of more than 50 per cent was good and we should not be greedy. I am glad to say that we have delivered against our targeted returns with this investment,' Mr. Piramal said.
The Piramal Group had sold its healthcare business to Abbott Laboratories in September 2010 for Rs.17,000 crore and the group had invested part of the sale proceeds in Vodafone India.
Mr. Piramal said the company had also invested in three broad areas. 'In financial services, we have an NBFC (non-banking finance company), a real estate fund and the investment in the Shriram Group. The second area is in traditional pharmaceuticals and drug discovery and the third is in information management. All offer very good growth potential'.
Vodafone plc entered India in 2007 by buying the assets of Hutchison Whampoa. It at present owns around 85 per cent in the Indian operations and in February it received approval from the government to buy the stakes of minority shareholders in India.
On the Bombay Stock Exchange, Piramal Enterprises rose more than 7 per cent to an intra-day high of Rs.577 before closing at Rs.556.15, a gain of 3.73 per cent.