Speaking to CNBC-TV18's Anuj Singhal and Ekta Batra, Ajay Piramal, Chairman, Piramal Enterprises, said the money will be used for business expansion.
He said the company will be looking at creating long-term value for its shareholders. Piramal Enterprises has over Rs 10,000 crore cash in books.
The company has seen a 19 percent annual return on Vodafone investment, said Piramal, adding that they are now looking at opportunities to buy stake in financial services space
As per the initial agreement with Vodafone, Piramal, which had invested the money it got from Abbott stake sale, had contemplated two exit options. The first one was via the initial public offer (IPO) route which did not materialize. The second was by selling it back to Vodafone.
Vodafone Plc has recently got clearances from Foreign Investment Promotion Board (FIPB) and Cabinet Committee on Economic Affairs (CCEA) to increase its stake to 100 percent in Indian arm Vodafone India, post the approval of 100 percent FDI in telecom in July 2013.
Below is the interview of Ajay Piramal, Chairman, Piramal Enterprises with Sonia Shenoy & Anuj Singhal on CNBC-TV18.
Anuj: Could you tell us if this is as per the terms that you had agreed with Vodafone initially because there was an option IPO that never materialized, so is the money that you are getting inline with what you had agreed upon when you signed the agreement?
A: When we signed the agreement there were two options for us - either we could have exited through an IPO or Vodafone would have acquired us. Now we have just followed it within the lines of the agreement that they are acquiring 11 percent of our stake that we held in Vodafone India.
Ekta: When will this transaction be completed by?
A: It will be completed by tomorrow. It is done actually.
Ekta: What are you going to use the funds for?
A: We will use the funds for investing in our existing lines of business. Piramal Enterprises is basically in three broad sectors – one is that we are in the financial services space where we have a non banking financial company (NBFC), where we have an investment in Shriram Transport and the fund management that we do. The second area that we are in is in the pharmaceuticals and life science space and the third area is in information management through a company which we acquired in the United States in 2012. So, we will invest in one of these areas now.
Anuj: All the money would go into these operations and you do not have any plan of any kind of special dividend or any reward to shareholders?
A: That will be decided by the board when the board meets in its next meeting in May, but we believe that we work in the long-term interest of shareholders and create long-term value for them and we as promoters have the largest shareholding and that is why it is in our interest to ensure that what is right in the long-term interest of shareholders – that is what is done and the board is also align enhance long-term shareholder value.
Anuj: Coming back to the transactions because as you said there were two options IPO which never materialised, the other option was an annual return of about 17 percent to 20 percent, based on that it would have been about close to Rs 8,000 crore or so. You have got about Rs 8,900 crore. Can you tell us where this additional money is coming from?
A: At the time that we did this transaction, the first tranche was done in August 2011 and the second was done in February 2012. We acquired the shares that time at Rs 1,290 per share and now we are selling at Rs 1,960. So, over this period it's a 50 percent return and if you annualise it will come to 19 percent or so.
Ekta: Any more stakes buys that you would be looking at. I know you cannot talk about it more explicitly but the sectors that you would rather be interested in or where you would see high opportunity investment such as the Vodafone investment where you have garnered 50 percent return on your initial stake?
A: As I said we are in the financial services space and there will be opportunities coming in the Indian market. Our view is that the many of the companies are pretty stretched in India today and the banks also as far as lending them funds are also stretched and therefore there should be opportunities and we expect that there will be an upturn in the economy and therefore we think that there will be opportunities for us to invest in and if we have cash sitting in then there can be good opportunity because most companies are today starved for cash.
Ekta: How much cash do you have on books?
A: Though we have loans in our books a lot of the loans are against our foreign assets which we acquired whether it is in the information management space or in our critical care space and those are funds which are much lower cost, they are dollar funds against dollar revenues, so we will keep those and not retire them so this whole cash is available for us to invest.
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