Piramal Enterprises Divests 11% Stake in Vodafone, Extracting a Return Of 51%
Biswajit Yadav / 10 Apr 2014
Piramal Enterprise, the flagship of Piramal Group, sold its entire stake, comprising of 4.54 crore shares (11%) in Vodafone India to Prime Metals for a total consideration of Rs 8900 crore. Following the news, the share of Piramal Enterprise went up by 7.63% to Rs 577.10 and closed at Rs 556.15 (up by 3.73%) on BSE.
Piramal Enterprise, the flagship of Piramal Group, sold its entire stake, comprising of 4.54 crore shares (11%) in Vodafone India to Prime Metals for a total consideration of Rs 8900 crore. Prime Metals is an indirect subsidiary of Vodafone Group plc, and it has purchased shares from Piramal Enterprise at a rate of Rs 1960 per share. Piramal Enterprise has acquired these shares at an average price of Rs 1290 per share with a total consideration of Rs 5864 crore in two tranches during FY12.
Piramal Enterprise is in the business of pharmaceuticals, financial services and information management sectors. By investing in Vodafone, the company has garnered a return of 51% in less than three years and if it is annualised, the return is around 19%.
Piramal Group had earlier anticipated that they will either exit through an initial public offer (IPO) or they will sell the shares back to Vodafone. As per the plan, the company went ahead with the second option and sold the shares back to Vodafone. The company has divested a total amount of Rs 8900 crore and they would now look for expansion plans. The company wishes to invest in its existing business lines. The company may also like to reduce its debt burden, which stands at Rs 8815.84 crore as of September 2013.
On the financial front, Piramal Enterprise has posted a topline growth of 30% on YoY basis to Rs 1290 crore, whereas the company has posted loss of more than Rs 10 crore during Q3FY14 as against profit of Rs 63.85 crore during Q3FY13. The loss was on account of high finance cost and reduction in other income. The finance cost stood at Rs 230.04 crore, up by 64% on YoY basis during Q3FY14 and the other income was reported at Rs 15.50 crore during Q3FY14 as against 61.49 crore during Q3FY13, showing a decline of 297% on yearly basis.
Commenting on the divestment from Vodafone, Ajay Piramal, Chairman, Piramal Group, said, “The equity purchase in Vodafone was consistent with our objective of making investments that offer opportunity to generate attractive long term return on equity and I am glad to say that we have delivered against our targeted returns with this investment”.
Following the news, the share of Piramal Enterprise went up by 7.63% to Rs 577.10 and closed at Rs 556.15 (up by 3.73%) on BSE.
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