Drugmaker Piramal Healthcare which doubled its stake in Vodafone India to 11% over the weekend said on Monday it would exit the investment through the telecom firm’s IPO within 12-18 months, or around mid-2013.
Ajay Piramal, chairman of Piramal Healthcare, said the investment in Vodafone India was not a strategic one and the company would look at selling its stake through the IPO.
Piramal said that he expects 17-20% annual returns from the Vodafone investment and thereafter did not have any further plans to invest in telecom.
Analysts said the stake acquisition was a good investment, aimed at rich short-term returns.
Vodafone, which holds 64% in its India unit, has the first right to buy Piramal’s stake in the cellphone operator if an IPO does not happen within 18 months, Piramal said.
The drug maker raised Rs1,800 crore through commercial papers with 30-day and 75-day maturities, to partly fund the Rs3,007 crore Vodafone stake buy. It will use Rs1,200 crore of cash-on-hand to fund the remaining cost of acquisition.
The pharma company will not have cash left in its balance sheet after it buys a 5.5% stake in Vodafone, Piramal said.
Following the stake buy, Rajesh Laddha, Piramal group’s chief financial officer, would join the Vodafone board and the position would entail only strategic top-level involvement, with no impact on the day-to-day affairs.
Piramal also plans to increase lending to NBFCs, with a target of Rs600 crore by March from Rs130 crore in December.
The company, which sold its India formulations business to Abbott Laboratories in 2010, received an up-front payment of $2.2 billion from Abbott, besides additional payments of $400 million annually for the next four years beginning 2011. Piramal expects to receive the current year’s payment of Rs2,000 crore in September. It is investing significantly in contract manufacturing in the OTC space, critical care, while identifying new areas in the UK and the US.
“We are pursuing opportunities in drug discovery and we are optimistic that our efforts might even result in a product launch,” he said.
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