Piramal Group To Exit Vodafone; Eyes Banking And Infra Space

The Piramal Group is looking forward to spreading its wingspan into the banking and infrastructure space. A leading media house has reported that the Ajay Piramal Group, flush with funds from the sale of its domestic formulations business, had evinced interest in other businesses. Meanwhile, it has also said that it will continue to invest in R&D and launch new products through Piramal Life Sciences.

The group had already entered the telecom space in India some time earlier. The company has brought 11% stake in two tranches in the Indian arm of Vodafone for a total of Rs 5,900 crore. Piramal had paid Rs 2,893 crore for a 5.5% stake in August 2011 and then Rs 3,007 crore in February 2012 for another 5.5%.

The company has said that it has entered into the deal with Vodafone for a very short period, i.e. a time horizon of 24-36 months. They have also confirmed that they are on track regarding this investment and are slated to exit later this year or by the next calendar year. They are looking for 17%-20% returns in around 18 months’ time. There are three options through which the company can exit from Vodafone, viz. through an initial public offering (IPO) whenever Vodafone comes out one, by selling its stake to other companies, or by selling the stake to Vodafone itself.

Now, in another development a few days ago, the group’s flagship company ‘Piramal Enterprises’ is in the process of investing over Rs 1000 crore in the infra sector in two separate structured transactions. Piramal's Structured Investment Group, which handles proprietary investments, has invested Rs 550 crore via optionally convertible instruments like debentures in Navayuga Road Projects (NRPL), the road subsidiary of the Rs 3000 crore Navayuga Engineering Company (NECL). NECL’s road portfolio includes eight annuity and build-operate-transfer (BoT) projects with a total project cost of Rs 8,700 crore.

Piramal Enterprises is also in the process of deploying another Rs 500 crore via similar convertible debentures in Green Infra, one of the largest wind Independent Power Producers (IPPs) in the country, backed by IDFC Private Equity.

There is still time before the things materialise on the banking front, but the infrastructure is on its way. This diversification plan is an interesting step when all others are selling off their non-core assets to focus on their core businesses.