Vodafone (London, England) announced on Wednesday a deal in which Piramal Healthcare will buy 5.5% of its mobile business in India for $640 million, to keep the British company within the foreign ownership rules. A spokesman for Vodafone said the healthcare company had recently made a host of disposals and was looking for an investment.
Vodafone said Piramal had agreed to buy the stake from Essar, its joint venture partner in the country. Vodafone sealed a long awaited deal to buy out Essar in July, however the sale would have pushed Vodafone just above the 74 limit set for foreign companies in India.
The sale of 5.5% will put Vodafone nearer the 70% mark.
Last week India's Supreme Court began hearing Vodafone's appeal challenging a $2.5 billion tax bill over its acquisition of mobile assets in the country.
Vodafone, fighting the tax bill in India over its 2007 purchase of Hutchison Whampoa Ltd's Indian mobile business, had appealed to the Supreme Court challenging a lower court order that Indian tax authorities had jurisdiction over tax bills in cross-border deals.
Indian tax authorities have said Vodafone's deal was liable to be taxed because most of the assets were based in India and under Indian law, buyers have to withhold capital gains tax liabilities and pay them to the government.
Vodafone has earlier said Indian law did not require it to deduct tax and that capital gains tax is usually paid by the seller.
(Reporting by Devidutta Tripathy; Editing by Aradhana Aravindan) (Kate Holton)