Vodafone to invest $2 bn to raise stake in Indian arm

Vodafone Plc is set to seek approval from FIPB within the next few weeks

British telecom major Vodafone Plc is planning to invest more than $2 billion (Rs 12,360 crore) to increase stake in its Indian entity by buying out minority shareholders, according to a Financial Times report.

For this, Vodafone Plc, which currently holds a 64 per cent stake in Vodafone India, is set to seek the approval of the Foreign Investment Promotion Board (FIPB) within the next few weeks. However, it has yet to finalise if it would go for a 100 per cent equity holding.

When contacted by Business Standard, Matt Peacock, a spokesperson for Vodafone Plc, said in an email: “We are not commenting on this.”

Last month, this paper had reported that the British telco was planning to approach FIPB to buy Analjit Singh’s 6.2 per cent stake in Vodafone India.

The decision has come just a little over a month after India allowed 100 per cent foreign direct investment (FDI) in the telecom sector. Earlier, foreign telcos were permitted to hold only up to 74 per cent equity in Indian ventures.

Besides Analjit Singh, Ajay Piramal holds a 11 per cent stake in Vodafone India, while the rest is with IDFC. According to Vodafone, independent investors, including Analjit Singh and IDFC, own 25 per cent in the company.

Singh had increased his stake to 6.2 per cent after he bought former CEO Asim Ghosh’s stake in the company.

In February last year, Piramal had bought an additional 5.5 per cent for Rs 618 million. Based on this transaction, Vodafone India’s valuation could be $11.2 billion.

If Vodafone decides to buy only Analjit Singh’s stake, it would have to pay about $696 million. But, to buy the 25 per cent held by Singh and IDFC together, it would have to shell out $2.8 billion.

In its last annual report, Vodafone had mentioned that it had an agreement with Piramal to buy his 11 per cent stake for about Rs 8,300 crore if an initial public offering did not happen by February 2014.

The British telco had entered India in 2007 after buying Hutchison Whampoa’s Indian cellular assets for about $11 billion.