Vodafone Group Plc has applied to the Foreign Investment Promotion Board (FIPB) for permission to raise its stake in Vodafone India Limited (VIL, Indian telecom operator) from 74% to 100% for US$2.7bn. This would be the first deal (if it goes through) post the Indian government allowing 100% FDI in telecom (from 74% earlier) in Aug-13. Taking the right use of the paralyzed Indian economy, weak Indian Rupee, Vodafone has made the smartest move and it is to be seen whether the Agenda driven Politicians will clear the proposal or keep it hanging.
Minority Share Holders
Piramal Healthcare (PIEL) acquired an ~11% shareholding in VIL from Essar during FY12 for ~Rs59bn. The transaction contemplated various exit mechanisms for PIEL, including both participation in a potential initial public offering (IPO) of VIL and a sale of its stake to Vodafone. Under this agreement, if such an IPO had not completed by 18 Aug-13 (already gone) or 8 Feb-14 (looks unlikely to us), or Piramal chose not to participate in such an IPO, Piramal could sell its stake to the Vodafone Group in two tranches of 5.485% for an aggregate price of ~Rs83bn (vs investment value of Rs59bn). In addition, Vodafone has also provided exit routes to other minority shareholders through call/put options.
Due to the lack of clarity on regulatory policies regarding telecom spectrum, Tax liability for foreign operators in the country and extreme harassment by the Government of India under the agenda [Vote-bank & Corruption] driven politics of Congress led by Weak & Puppet leaders, we believe Vodafone is unlikely do an IPO by Feb-14. Vodafone is therefore taking steps to provide an exit for minority stake holders.