Piramal Healthcare will pick up approximately 5.5% of the issued equity share capital of Vodafone Essar Limited from Essar (ETHL Communications Holdings Limited) for approximately $640 million. This follows the settlement between Vodafone and Essar, wherein Essar exercised a put option over 22% of Vodafone Essar, after which Vodafone has exercised its call option over the remaining 11%. Following this $5 billion transaction, Vodafone was left with 78% stake in the company, 4% more than the permitted foreign direct investment limit in India. It needed an Indian partner, which is where Piramal came in: essentially to take Vodafone goes below the FDI limit.
What’s interesting is that according to Vodafone, “the 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”
Vodafone estimates that the value of 100% of the gross assets of Vodafone Essar, as of 31 March 2011 was $14 billion.
Of course, given the global markets volatility, this isn’t the ideal time for Vodafone to list, but as the Economic Times reported yesterday, preparations are beginning. It isn’t unimaginable that once Vodafone gets Indian shareholders on board via an IPO, Piramal Healthcare will exit. But when the listing will happen, is anybody’s guess.