Piramal Healthcare expects its minority investment in Vodafone's India unit to yield 17-20% returns, said group chairman Ajay Piramal, adding, he expected the telecom firm's initial public offering (IPO) to hit the markets in 12-24 months.
The drugmaker on Wednesday agreed to buy 5.5% stake in Vodafone's India operations for $640 million (Rs 2,856 crore).
Sitting on a cash pile of Rs 10,000 crore, the drug major is eyeing more such investment opportunities. "The investment is part of our strategy to deliver superior returns to shareholders from the surplus funds we have," said Piramal.
The company also announced plans to invest Rs 7,000 crore in pharmaceuticals in next five years.
Piramal Healthcare sold its domestic formulation business to global drug maker Abbott for Rs 17,000 crore last year.It has since then received Rs 10,000 crore from Abbott. The rest will be received in tranches by September this year. It also sold its diagnostics business to Super Religare Laboratories for Rs 600 crore.
"Such a huge amount (Rs 10,000 crore) cannot be absorbed only in pharmaceuticals sector," he said. "Therefore, we have to find avenues to invest these funds."
The transaction contemplates various exit options for Piramal, including participation in a potential initial public offering of Vodafone Essar and a sale of its stake back to Vodafone. "We can sell the stake to a third party as well if the IPO doesn't happen in 24 months," said Piramal.