Might sell new Vodafone stake in 2 years: Piramal

Piramal Healthcare today said its 5.5% stake purchase in Vodafone Essar was a financial investment and it might sell the stake for a return of up to 20%, possibly through an IPO, within the next two years.

"We are acquiring a 5.5% minority stake in Vodafone Essar for Rs 2,856 crore. It is a minority stake," Piramal Healthcare Chairman Ajay Piramal told reporters, adding that the company would not take a board seat.

The Piramal-led company had yesterday announced the purchase of a 5.5% stake in Vodafone Essar for $640 million and an expected return of 20% would be worth $128 million.

Hinting at a possible sale of this stake, Piramal said: "You heard Vodafone talking about IPO (in the past). Therefore, we are assuming that this IPO will take place anywhere in the next 12-24 months.

"This is where we could participate in or we could participate with Vodafone and get an expected return. Somewhere, we believe, (return) should be in the range of 17-20%," he said.

"The Vodafone deal is a strategy to deliver superior return from our surplus return," Piramal added.

After announcing a deal to buy out its partner Essar Group in the venture, UK-based Vodafone had said it might consider an IPO of the Indian telecom company to keep its stake within the permitted foreign stakeholding limit of 74%.

The Piramal transaction would reduce Vodafone's holding in the Indian unit to 69.8%. The widely expected sale was necessary to adhere to foreign direct investment norms for at least 26% of the telecom company to be Indian-owned.

The deal announcement comes more than a month after Vodafone reached a settlement with Essar over the latter's 33% in the joint venture.

On July 1, Vodafone announced that it would pay USD 5.46 billion, as against USD 5 billion decided earlier, for purchasing a 33% from Essar in their joint venture Vodafone Essar (VEL).

The purchase of Essar's 33% was increasing Vodafone's stake in VEL to 75.35%, which was higher than the FDI limit of 74%.

Vodafone has had a tough time in India since entering the market in 2007. The company is also locked in a legal battle with Indian tax authorities over a $2 billion tax demand on its acquisition of the 67% stake of Hutchison in Hutchison-Essar for over $11 billion.