Companies & Sectors
Cairn India to merge with Vedanta

Cairn shareholders will get one equity and one redeemable preference share of Vedanta


Industrialist Anil Agarwal on Sunday announced the merger of two of his group companies -- the oil and gas exploration major Cairn India with the natural resources arm Vedanta Ltd. Cairn shareholders will get one equity and one redeemable preference share of Vedanta.
The transaction is intended to be completed by the first quarter of 2016, the group said.
"The merger of Cairn India and Vedanta Ltd consolidates our position as India's leading diversified natural resources champion, uniquely positioned to support India's economic growth," Vedanta chairman Agarwal said.
"The independent directors, at both Vedanta and Cairn India, unanimously recommend the proposed combination. This marks a significant step towards achieving our stated long-term vision of a simplified group structure with alignment of interests between all shareholders for the creation of long-term sustainable value."
The group, in a filing with stock exchanges on Sunday, said the strategy remains unchanged to continue focus on delivering attractive growth, sustainable development, long-term value for shareholders and to sustain strong dividend distribution.
"Approximately 752 million each of equity shares and redeemable preference shares will be issued to the minority shareholders of Cairn India by Vedanta Limited pursuant to the merger," it said, adding: "No shares will be issued to Vedanta Limited or any of its subsidiaries for their shareholding in Cairn India."
Vedanta Limited itself was created with the merger of Sesa Goa, Sterlite and Vedanta Aluminium.
Cairn said on Saturday in a stock exchange filing: "A meeting of Board of Directors of the company will be held on June 14, 2015, inter alia, to consider and evaluate amalgamation of the company with Vedanta Limited." 
Vedanta took majority control of Cairn India for $8.67 billion in 2011 and holds 59.9 percent in the latter through its various units.
Merging Cairn India with itself would provide Vedanta access to the oil explorer's cash and help reduce its debt burden. At the end of March this year, Vedanta had total liabilities worth over Rs.99,000 crore on a consolidated basis.
The Anil Agarwal-led Vedanta earlier this month hiked stake in its oil and gas exploration subsidiary Cairn India by nearly five percent for $315 million from a wholly-owned subsidiary -- Twinstar Mauritius Holdings (TSMHL).



Dr Anantha K Ramdas

2 years ago

Please refer to your article on the Cairn-Vedanta merger proposal.

Shareholders of Cairn India must oppose this move as it is not a fair and equitable proposal. They have invested money in Cairn because of the gas and oil sourced by the firm and the long term prospects it has. In any case, both the items are in short supply in the country. Shareholders expect Cairn to grow as big as Reliance and ONGC and reward the shareholders for years to come.

What is the compromise solution to this merger proposal? Here are some suggestions:

a) first Cairn shareholders be rewarded with a 1:1 bonus

b) this should be covered in the dividend payout for the current year

c) then the 1:1 merger with Vedanta can be considered

d) the carrot of 1:1 preference share of Vedanta offered and to be redeemed after 18 months should not be accepted, unless, this is allowed to remain, pari passu with the Vedanta shares

e) the Vedanta shareholders also must demand that the Company makes moves to invite China to come in as a joint venture partner in Goa to convert the low grade ores mined there and use the technology of mixing it with high grade ores, obtained from Brazil, Australia or elsewhere, including India. The finished steel can be shipped back to China or exported, thus "make in India" a reality.

Why not Moneylife take the lead in starting a campaign to oppose the merger unless better terms are offered to shareholders?

Niko seeks 3-month extension to sell stake in KG-D6 block

Niko had in February announced it intended to sell-off its 10 percent stake in the KG-D6 block to square a $340 million debt


Reliance Industries' consortium partner Niko Resources of Canada has extended by over three months its search for a buyer of its stake in RIL's eastern offshore KG-D6 gas block to pay off debt.
"The Board of Directors of Niko now believes that it requires more time to determine if the sales process will be successful or, if not, to develop an alternative plan with the assistance of its advisors and stakeholders to achieve the best results for the stakeholders of the company," Niko has said in a filing to the Toronto Stock Exchange.
It said it has now reached reached an understanding with lenders to extend the search till September 15.
Niko had in February announced it intended to sell-off its 10 percent stake in the KG-D6 block to square a $340 million debt. The company had earlier planned to sell off the interest by April 30 but later extended it till May 31.
The company has earlier blamed a lower-than-expected gas price announced by the Indian government for its decision to sell its stake in the KG-D6 block.
The government had in October announced a new natural gas price of $5.61 per million British thermal unit, raising it from $4.2. 
"The announced price for the period from November 2014 to March 2015 is a 33 percent increase over the price received previously, but is lower than expected. In addition, there is uncertainty around the long-term natural gas price outlook in India," Kevin J. Clarke, chairman Niko Resources had said.
In April, Niko had said that RIL's gas discovery MJ-1 may hold 1.4 trillion cubic feet of gas resources, roughly half of the reserves in the KG-D6 block's main gas fields.
Reliance on Friday sought an early revision of gas prices and urged the government to quickly resolve what it termed as "legacy issues" over its production-sharing contracts for discovered hydrocarbons.
Announcing the new gas price October last, the government had said the premium to RIL for its gas discoveries being under arbitration, the company would continue be paid the earlier price of $4.2 per unit.
The arbitration concerns the penalty imposed on the company for allegedly failing to meet output targets from the Reliance-led consortium's specific offshore blocks. The government wanted the company to make good this shortfall vis-a-vis the terms of the contract.
Petroleum Minister Dharmendra Pradhan had told parliament last year that a fresh notice had been served on Reliance Industries seeking additional penalty for lower production of gas.
The government had said that a premium would be given for all new discoveries in ultra-deep-water areas, deep-water areas and the high pressure-high-temperature areas, but did not spell out further details on how it will be calculated and when it will be awarded.
While shallow-water blocks are at a depth of up to 100-500 metres, deep-water blocks descend to around 1,000 metres. Those at depths beyond 1,500 metres are classified as ultra-deep-water blocks. 
These are the areas where the RIL has maximum discoveries.



Air Pegasus's Bengaluru-Madurai service soon

The third largest city in Tamil Nadu, Madurai, about 490km from Chennai, is also called as Athens of the East for its cultural heritage


Low-cost carrier Air Pegasus will begin flying from here to Tamil Nadu's Madurai from June 26, spreading its footprint to the fourth city across south India in its venture to provide direct air connectivity to tier-two cities.
"We will operate a 66-seat twin engine turboprop ATR-72 thrice a week initially on Monday, Wednesday and Friday from Bengaluru with a return flight on same day," Air Pegasus managing director Shyson Thomas said in a statement here on Sunday.
The third largest city in Tamil Nadu, Madurai, about 490km from Chennai, is also called as Athens of the East for its cultural heritage.
"We will be the sole operator to Madurai from Bengaluru with a direct flight, which will add value to the economy of the temple city," Thomas said.
The budget airline began booking for the new service from Sunday with tickets priced at Rs.1,234 for the 80-minute flight.
Taking off at 10.40 a.m. from Bengaluru, the aircraft will land at Madurai at noon. It will take off from there at 12.30 p.m. to return here at 1.50 p.m.
The city-based airline launched its third service to Kadapa in Andhra Pradesh on June 7 from Bengaluru after launching its maiden service to Hubbali in north Karnataka on May 12 and to Thiruvananthapuram on May 13.
Its parent company, Decor Aviation, has been providing ground handling services to Indian and overseas airlines from 11 airports across the country over the years.
Thomas said Air Pegasus aims to be a regional airline brand providing more connectivity in underserved regions and connecting non-connected sectors.
The company, which invested Rs.100 crore to launch the airline, with 3:1 equity-debt ratio, plans to add three more ATR aircraft to the two it has on dry lease by December.
The ninth carrier in the country and third to launch service after Air Asia and Vistara during the last 14 months, Air Pegasus named after the winged stallion from Greek mythology, has permit to launch service to and from any of the 22 airports across south India, connecting tier-two and tier-three cities with cities and metros like Chennai and Hyderabad.
Though the southern region has 30 functional airports, all of them are not connected yet, as full-fledged, budget carrier and other low-cost airlines have been operating between metros and tier-one cities only.


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