The difference in valuation (almost one-seventh) between the 24.65% stake of Analjit Singh-promoted Scorpio Beverages and the 10.97% held by Piramal Enterprises in Vodafone in buying out their respective stakes is due to holding company discounts and the outstanding debt applicable on the former.
According to documents filed with the Foreign Investment Promotion Board (FIPB) and clarifications provided by the company, the holding company discounts and outstanding debt are reflected in the transfer price applicable to SBP, which does not apply on Piramal Enterprises. These discounts have led to lowering of the price payable to Analjit Singh.
As is known, Vodafone Group’s application is pending before FIPB. The group plans to hike its stake in the Indian unit from 64.38% to 100%. This will be done by acquiring 24.65% from Analjit Singh in SBP and 10.97% from Piramal Enterprises. The total amount the company will pay to hike its stake is R10,141 crore, of which R8,900 crore will be paid to Piramal while R1,241 crore will be paid to Singh. Vodafone Plc spokesperson did not respond to a detailed questionnaire seeking responses on the difference in valuations between the two.
The structure of Vodafone India is currently like this: The 64.38% is held by Vodafone International Holdings BV (VIHBV), a company incorporated in the Netherlands and a subsidiary of Vodafone Group Plc, through its wholly-owned subsidiaries.
CGP India Investments is an indirect shareholder in VIL and an indirect Mauritian subsidiary of Vodafone International Holdings BV (VIHBV), which now proposes to buy a stake from Scorpio Beverages. CGP plans to acquire the 51% held by Analjit Singh and Neelu Analjit Singh in SBP. The balance 49% stake in SBP is held by CGP. Of the 51% stake Analjit Singh has in SBP, 24.65% is directly held in Vodafone India.
The 49% investment by CGP in SBP is through a holding company structure. Further, Vodafone was the guarantor for the loans Singh took to acquire 51% in the company. There are outstanding debts, too, in this holding company and its subsidiaries, which would now be taken over by Vodafone.
Earlier, a note prepared by the Central Board of Direct Taxes had stated that Vodafone was all along the beneficial owner of the stake held by Singh. It had said that Vodafone had an agreement with Singh to buy out his stake at a pre-determined price (below the market price).
Prime Metals, a shareholder of VIL and a wholly-owned Mauritian subsidiary of CGP, would similarly acquire VIL?s 10.97% stake from Piramal Enterprises.
