Vodafone to increase its stake in Indian arm to 100% for $2.7 billion

Vodafone plc of the U.K. is planning to increase its stake in its Indian arm to 100 percent from 74 percent for at an estimated $2.7 billion.

The telecom giant, according to a PTI report, has applied to Foreign Investment Permission Board (FIPB) for permission to raise its stake in Vodafone India, which is one of the best performing telecom subsidiaries of Vodafone Group.

Last month, American telecom major Verizon Communications agreed to pay $130 billion to buy Vodafone Group’s 50 percent stake in its US wireless business. During the announcement, Vodafone CEO the funds mobilized through the stake sale will be utilized for network expansion, shareholder dividends, etc.

Vodafone will be the first telecoms to utilize latest initiatives of Kapil Sibal, Indian telecom and IT minister, to increase the FDI. When telecom minister announced the government decision to allow 100 percent FDI, it cheered the Indian telecom industry.

PTI report says Vodafone had raised its stake to 74 percent in Vodafone Essar (VEL) by buying 33 percent stake from Essar in 2011 for $5.46 billion.


Also, in 2011, Piramal Healthcare purchased 5.5 percent stake in Vodafone India for about Rs 2,900 crore. According to sources, Piramal Healthcare now holds about 11 percent stake in Vodafone India and Max India’s founder Analjit Singh owns about 6 percent. If Vodafone increases the stake, there will be changes in their equity holding.

Vodafone India is an important telecom asset for Vodafone Group as the company posted 24.5 percent jump in operating profit to Rs 10,640 crore for the financial year ended March 31, 2013.

The revenues of the company rose 10.2 percent to Rs 35,885 crore for 2012-13 fiscal from Rs 32,564 crore in the previous financial year.

The company has invested over Rs 54,000 crore since 2007 till end of March 2013. Vodafone India had over 15.5 crore mobile customers in the country by end of June 2013.

The telecom giant is increasing the stake at a time when the British telecom major is facing a tax liability of over Rs 11,200 crore, along with interest, on its 2007 acquisition of Hutchison Whampoa’s stake in Hutchison Essar.

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