By Kate Holton and Devidutta Tripathy
LONDON/NEW DELHI (Reuters) - Vodafone intends to increase its stake in its Indian subsidiary after the country cleared foreign companies to take full ownership of local carriers, a source familiar with the group's plans said on Monday.
The British company is set to seek approval in the coming weeks from the Indian government's Foreign Investment Promotion Board to buy stakes from minority partners, the source said, adding that it has yet to decide if it will buy out all partners.
Vodafone declined to comment when asked if it will increase its stake in Vodafone India. The cost of buying out minority shareholders could be as much as $2 billion.
Vodafone, which entered India in 2007 by acquiring Hutchison Whampoa's local cellular assets in an $11 billion deal, directly and indirectly owns a combined 84.5 percent of Vodafone India, the country's second-biggest telecoms company by users.
In August India relaxed rules on foreign holdings in the sector to allow companies such as Vodafone to own up to 100 percent of their Indian businesses. Before the rule change foreign companies were limited to direct stakes of no more than 74 percent in Indian carriers.
Up to three foreign direct investment proposals in the telecoms sector are "just around the corner" after the rule change, Indian finance minister P. Chidambarm told Reuters on Monday, without naming any company.
India's Piramal Enterprises owns about 11 percent of Vodafone India. The remainder is owned by investors including Indian businessman Analjit Singh, Vodafone India's non-executive chairman.
Vodafone has an agreement to buy Piramal's 11 percent stake for 83 billion rupees ($1.3 billion) if an initial public offering of Vodafone India does not happen by February 2014, the British company said in its latest annual report.
Piramal, which bought the stake after Vodafone and its former Indian partner Essar Group parted ways, has said it is a financial investment with assured returns. Piramal could sell the stake in 2014, its chairman Ajay Piramal said in May.
Going by the valuation agreed for the Piramal stake, the total minority stake in Vodafone India would be worth $1.9 billion, according to Reuters calculations.
Vodafone is the biggest corporate investor in India, but it has encountered numerous challenges, from the high cost of radiowave spectrum to a continuing $2 billion-plus tax dispute.
The Financial Times reported on Monday that Vodafone would file an application this month with Indian authorities to seek clearance to buy the minority stakes in Vodafone India.
(Additional reporting by Karen Rebelo in Bangalore; Editing by David Goodman)