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Business News/ Companies / Vodafone CEO says preparing for IPO in India
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Vodafone CEO says preparing for IPO in India

Vittorio Colao declines to give timeline for possible share sale; meets Arun Jaitley, other govt officials

A file photo of Vittorio Colao, chief executive officer for Vodafone Group Plc. Photo: BloombergPremium
A file photo of Vittorio Colao, chief executive officer for Vodafone Group Plc. Photo: Bloomberg

Mumbai: Vodafone Group Plc on Wednesday said it has started preparatory work for an initial public offer (IPO) of its Indian business.

“I cannot give you a date, but I can tell you (that) we are positively inclined to an IPO and have started some preparatory work," Vodafone Group chief executive officer (CEO) Vittorio Colao told reporters in New Delhi.

The group had in May asked investment bank Rothschild to compile a report about the benefits of a possible IPO, which would provide the company with cash for its India plans. The share sale will also offer investors an opportunity to reap dividends from a market where wireless growth is outpacing that of more mature countries such as Vodafone’s home market, the UK.

The company has been considering an Indian IPO for several years, but has held back because of regulatory and tax issues in the country. “We have not made a final decision because there are many factors that influence (the IPO) one way or the other but we are positive," he said.

Declining to give a timeline, he said, “its very hard to give you a date as many things can happen—financial markets, price, anything can happen. We have preparatory work underway so that we can make a decision." Vodafone is India’s second largest wireless mobile operator with a market capitalization of about £9.3 billion, and an enterprise value of £11.4 billion, according to analysts at Citi.

The Indian division’s earnings before interest, taxes, depreciation and amortization reached £1.28 billion on sales of £4.3 billion in 2014-15. The business, which has more than 180 million customers, accounts for 10% of Vodafone’s total revenue. It is said that any IPO would be for a non-controlling share of the business. Asked if the company can go for an IPO during the pendancy of a 20,000 crore tax dispute, Colao said, “yes", without elaborating.

Vodafone in January said that it has invested more than £12.8 billion in India since 2007. In 2013, it committed to invest about 8,500 crore annually. In addition, the company acquired spectrum for about 25,959.74 crore in March and has plans to expand 3G service network from 9 circles to 16 circles.

Colao, who had in September last year stated that doing business in India was complicated, said he sees positive signs at high levels. “Do you see new India? Yes we see a New India. I also hear people say it’s not fast enough. I say fine but it’s also a big country.

“Today, one message I can give you is we are seeing a new India. Is it visible in the every aspect of our business? No, it’s not but it’s starting to be visible in enough places. If the pace continues, digitization of the country will happen," he said.

Asked if it has become easier to do business in India since the Prime Minister Narendra Modi-led government took office, he said: “Things are moving and this is positive."

He cited decision on allowing trading and sharing of scarce telecom spectrum as well as “different posture on what was aggressive tax environment" in the past, stating that “things are changing". “I do see positive signs at very high level," he said, adding that changes are occurring at the macro level.

Colao met finance minister Arun Jaitley and other government officials. Prior to his over half-an-hour long meeting with Jaitley, he had a one-on-one meeting with telecom minister Ravi Shankar Prasad. Colao’s visit comes close on the heels of reports that the government is mulling referring retrospective tax cases like the 20,000 crore tax case against Vodafone to a judicial commission for an early decision.

The meetings come days after Vodafone won a major reprieve from the Bombay high court which set aside an Income Tax Appellate Tribunal ruling that the tax department had powers to raise tax demand on the company in a 8,500 crore transfer pricing case. The Union government has an option to appeal against the judgement.

Vodafone’s main tax dispute relates to a 20,000 crore tax and penalty raised on it for not withholding tax when it bought majority stake in Hutchison Essar. The matter is before an arbitration panel, to which both the government and the company have named their judges. The two judges are to name a neutral presiding arbitrator for the arbitration to begin. The case relates to retrospective amendment to the income tax laws carried out by the previous government in 2012 to upturn the Supreme Court verdict that had favoured Vodafone.

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Published: 14 Oct 2015, 03:13 PM IST
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