Piramal Healthcare said on Saturday it would buy an additional 5.5 per cent stake

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in Vodafone’s India unit, Essar, for Rs 3,007 crore ($616.14 million), doubling its total stake in one of the country’s largest mobile services provider to about 11 per cent. The valuation that it’s paying is around 150 crore higher in Rupee terms while being lower in dollar terms.

"The transaction contemplates various exit mechanisms for BSE listed Piramal Healthcare, including both participation in a potential initial public offering of VIL and a sale of its stake to Vodafone Plc," Vodafone and Piramal said in a joint statement released to the Bombay Stock Exchange. Piramals’s purchase is part of the exit option that was offered by the British firm to the Ruias of Essar group. Piramal Healthcare picked up a strategic 5.5 per cent in Vodafone for $ 640 million (Rs 2,856 crore ) in August 2011.

UK-based telecom major Vodafone has roped in investment bank NM Rothschild to assist with its listing plans but investment bankers feel that it will probably be another three quarters before the firm can launch its initial public offer of equity shares.

Vodafone last year bought 22 per cent from the Essar Group and Piramal bought 5.5 per cent. The world's biggest cellular carrier by revenue, Vodafone is the largest overseas corporate investor in India. Vodafone, which entered India in 2007 when it bought control of Hong Kong-based Hutchison Whampoa’s India phone business, is the second-largest player by revenue market share behind Bharti Airtel in India. Vodafone had to arrange a domestic buyer for the balance 5.5 per cent held by the Ruias as per the put option exercised by the latter.

Under the deal signed by Piramal, the company can either exit its stake at the time of an IPO or by selling the stake back to Vodafone or other interested parties. “It’s a good deal for Piramal shareholders since the company has assured 17-20 per cent per annum compound return on these investments,” said Ranjit Kapadia, senior vice president at Centrum Broking.

The Vodafone stake buy is the cash-flush drugmaker's second big diversification after it bought private equity firms IndiaReit Fund Advisors and IndiaReit Investment Managers. The company, which last year bought about 5.5 per cent in Vodafone from Essar, was sitting on a cash pile of Rs 10,000 crore, it said last August.

Piramal sold its Indian formulations business to US-based Abbott Laboratories in 2010.

In a landmark judgment, the Supreme Court last month set aside the Bombay high court ruling asking Vodafone International Holdings to pay Rs 11,000 crore in tax on acquisition of stake in Hutchinson-Essar Limited in 2007.