Exit guaranteed from Vodafone irrespective of IPO: Piramal

Piramal said, "In the next 12 to 24 months, either we will do the IPO or we would have a transaction where if Vodafone is allowed to acquire it [stake] — if the FDI guidelines allow that — then we will do that. If not, then we will then get another third party in the deal."

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: Will you stay invested only for the next 12 to 24 months, even if the IPO does or doesn’t happen. Are you assured a guaranteed return of 17-20%, which is about USD 900 million?

A: We are assured of a guaranteed exit in the next 12 to 24 months and we are expecting a return. But, the USD 900 million is not a correct figure.

Q: Are you assured of a guaranteed return? Is there a pre-determined price? Why did you decide to put your money into Vodafone?

A: We are assured of a guaranteed exit.

Q: You are sure of a guaranteed exit, whether or not the IPO happens?

A: That is right.

Q: Why have you decided to invest in Vodafone? You are sitting on around Rs 10,000 crore of a cash balance. Given the kind of regulatory concerns that surround this sector, there is uncertainty on the growth of that sector too. On the spectrum front, the big question lies on whether or not these companies will have to discharge large sums of money in the future. What made you want to put your money in Vodafone specifically?

A: Today, we have cash and receivables of about Rs 10,000 crore, after we distributed Rs 2,700 crore to the shareholders. We plan to invest about Rs 7,000 crore in the next five years in the pharmaceutical space, both through organic as well as inorganic means. In the interim, what do we do with the funds as the investment in pharmaceuticals is for five years?

We have had a lot of funds in fixed deposits and fixed maturity plans, which don’t give us the desired returns. This is sector has issues because of licensing and several other issues, which we are not concerned with. As of now, we are dealing with a company which has a good track record.

Q: While you may not be concerned with the regulatory concerns surrounding this sector, by when do you hope to conclude this transaction? This is an Indian company buying from another Indian company. You might not require foreign investment promotion board (FIPB) approval, but the larger Vodafone-Essar transaction continues to be stuck with the FIPB.

A: We hope to conclude this transaction shortly. It is between two Indian companies – a sale of shares from one Indian company to another. The Vodafone-Essar deal is big because Vodafone Plc is the company there involved. We expect this to be cleared in the near future.

Q: Is the conclusion of this particular transaction incumbent upon the conclusion or approval coming in from the FIPB for other transactions?

A: No. They are two independent transactions and these are two
independent companies. Vodafone is not involved in this transactions of buying and selling.

Q: Give us a sense by when you will make the next big-ticket investment and whether you have identified the sector or the company that you would like to make that investment for?

A: In some ways, we are looking at opportunistic investments. We need to understand that the environment today is very uncertain and there are people who would like to get investors who have a fair amount of cash available with them. We feel that in the short-term, we will not be able to invest all the surplus into businesses which we want to remain-in in the long-term, where we have a strategic interest.

Q: Will these be Indian companies or will these be multi-national companies with India operations, or could you look at companies that are based abroad and have nothing really in that sense to do with India?

A: It is open where we would invest in. Again, as I said, these would be really investments which we are making for a short- to medium-term. They have to be first class global companies where we can see a reasonable return anywhere in the region of this 17-20% and where the risk is minimized. If it satisfies these conditions and if at that moment, we have funds available, we would do it.