Vodafone is in initial talks with the Piramal group and HDFC Bank to sell as much as 49% of its payments bank arm, more than the 26% it has to compulsorily divest, with an aim also to cross-sell financial services products from the eventual partner, three people familiar with the matter said. “However, the talks are still exploratory and Vodafone is still wooing more suitors,” one of the people said. Another person said HDFC and Vodafone were carrying out their due diligence. Vodafone had also held talks with Yes Bank, but those came undone. Vodafone India declined to comment, while the Piramal group, HDFC Bank and Yes Bank didn’t respond to emails seeking comment until press time on Thursday. Payments banks have to follow the foreign investment rules that cover commercial banks. This means, foreign holding, such as by Vodafone, can’t be more than 74%. Vodafone has issued an open mandate to bankers to find the best partner for its payments bank, and is willing to proceed simultaneously on other potential deals, said one of the people. Typically, the group relies on Goldman Sachs as its banker of choice. Experts estimate the payments bank posting an annual revenue or savings of $1-1.5 billion over the next three years for Vodafone, though customer retention and small fee income. Vodafone had a tie-up with ICICI BankBSE -0.74 % for its M-pesa mobile wallet, and a further partnership with the nation’s largest private sector bank was logical. But one of the people said the bank had chosen FINO, a micro-finance company germinated in ICICI Bank, as its payments bank partner. HDFC Bank already has core banking and a host of financial services and products in place, and the payments bank could cross-sell some of them. Vodafone’s M-Pesa has 5 million customers and 1,20,000 agents or business correspondents, which will give immediate scale to the bank’s mobile wallet efforts run under Pay-Zapp if it ties up with Voda. But then, the British telecom major “is comfortable dealing with the Piramal group”, one of the people said. After Essar’s exit and before Vodafone was allowed full ownership of its Indian arm, the Ajay Piramal-led group had stepped up as its Indian financial partner. Vodafone since has bought back Piramal’s stake. Currently, the financial services business of the Shriram Group is vested under the chairmanship of Ajay Piramal, after he invested in South India’s largest financial services group in 2014. The Shriram Group and the payments bank too could cross sell products.
Source: Economic TimesVodafone in talks with Piramal group and HDFC Bank to offload 49% in payments bank.
Industry: Financial services 2016-04-01
