Mumbai: Vodafone Group Plc, the world’s largest telecommunications firm, said on Wednesday that Piramal Healthcare Ltd will buy a 5.5% stake in its Indian unit for $640 million (around 2,890 crore), which will help keep the British company’s holding within stipulated norms.

Vodafone agreed last month to buy the 33% stake held by its Indian partner of four years, the Essar Group, in the telecom joint venture for $5.46 billion, ending a fractious relationship between the two. The sale was part of a 2007 agreement that obliged Vodafone to pay at least $5 billion for the stake. Piramal’s stake will come from Essar’s ETHL Communications Holdings Ltd, Vodafone said.

Prior to this, the London headquartered telecommunications company held a 42% direct equity stake in the Indian joint venture, with Essar holding 33% and 24.6% being held by enties majority owned and controlled by Indian partners (in which Vodafone has minority interests). These partners include Analjit Singh, founder and chairman of the Max India Group, and Infrastructure Development Finance Co. Ltd.

“The transaction contemplates various exit mechanisms for Piramal, including both participation in a potential initial public offering (IPO) of Vodafone Essar and a sale of its stake to Vodafone," a spokesperson for Piramal Healthcare said.

Vodafone chief executive Vittorio Colao had said in an interview in April that as the firm moves to the next phase of growth, it would seek to list the Indian unit locally, but would comply with foreign direct investment norms that cap its stake at 74%. The stake purchase by Piramal will limit Vodafone’s holding at about 70% after Essar’s shares are acquired.

The pharma company’s chairman Ajay Piramal had said earlier that the firm, which is sitting on cash of at least 15,000 crore after recent divestments, will look at investment opportunities outside healthcare.

“Piramal Health will be no more an exclusive pharma company, but will become a diversified business group," he said in recent interview to Mint. Piramal, in his personal capacity as well as through his group companies, holds investments in several other non-related firms.

Piramal Health sold its domestic formulation business to US drug maker Abbott Laboratories Inc. for 17,000 crore in May 2010. It sold its diagnostics arm to Religare group’s Super Religare Laboratories Ltd for 600 crore in July 2010. The company then bought back about 20% of its shares from the public and institutional investors for about 2,500 crore.

India has been an important part of Vodafone’s strategy to tap growth in emerging markets since its entry into the country in February 2007. The Indian unit’s overall revenue in the three months ended 30 June gained 9% to £1.03 billion (around 7,570 crore today), compared with £954 million a year earlier, because of stabilizing service rates and an increase in users.

Vodafone Essar’s IPO will depend on the favourable resolution of a $2 billion tax claim that the Indian government has imposed on the company, and which is being contested in the Supreme Court.

“We need to see how things evolve between now and the end of the year. Once things are in place, then you can start thinking about the (IPO) story, but we can’t think of starting this exercise without these things (resolution of tax hearing) falling in place," Colao had said.

The claim is over the company not withholding tax from Hutchison Telecom International Ltd, when it bought the latter’s stake for $11.2 billion in 2007.