Cairn India board, however, added a caveat that it will agree to making royalty cost recoverable and pay Rs2,500 per ton cess on the Rajasthan oil only after its partner ONGC issues a no-objection certificate to its parent, Cairn Energy
New Delhi: An overwhelming majority of over 97% of Cairn India shareholders on Wednesday voted in favour of company reversing its earlier stand and conceding to pay royalty and cess on its mainstay Rajasthan oilfields, reports PTI.
Cairn India board, however, added a caveat that it will agree to making royalty cost recoverable and pay Rs2,500 per ton cess on the Rajasthan oil only after its partner Oil and Natural Gas Corporation (ONGC) issues a no-objection certificate to its parent, Cairn Energy’s proposal to sell controlling stake to mining group Vedanta Resources.
The company in a letter to the stock exchanges said “an overwhelming majority of 97.29%” of its shareholders had voted for accepting the two conditions that the government had set for approving Cairn Energy's sale of 40% stake in its Indian unit to Vedanta.
Cairn Energy, which had summoned the shareholder vote since Cairn India board had previously taken a position that the conditions were unacceptable to it, and Vedanta Group voted for acceptance of the riders. Cairn Energy held 52.11% stake in Cairn India and Vedanta Group another 28.5%.
The letter said Cairn India board, chaired by its chairman Bill Gammell, “has accepted the mandate” and will obtain consent from partner ONGC.
“...subject to the receipt of the foregoing approval from ONGC, the company (Cairn India) shall communicate an acceptance in respect of RJ-ON-90/1 (Rajasthan) block, that the royalty paid by ONGC is recoverable by ONGC as contract cost; and the company’s subsidiaries shall withdraw the arbitration claim relating to the dispute raised by them on payment of cess,” it said.
“The acceptance of royalty as being cost recoverable and the withdrawal of the arbitration pertaining to cess will be concomitant with transfer of control of Cairn India,” the letter added.
Cairn India currently does not pay any royalty on its 70% interest in the Rajasthan fields. Royalty, as per the contract, is paid by state-owned ONGC, which got a 30% stake in the 6.5 billion barrel field for free.
But as per the Production Sharing Contract, ONGC had much before the $9.6 billion Cairn-Vedanta deal was announced in August last year, demanded that like all other taxes the royalty should be added to project cost which is first deducted from revenues earned from oil sales before profits split between partners.
Cairn had opposed this as it would lower its profitability and had also initiated arbitration against government on its liability to pay oil cess on its share. It believed the cess, like royalty, was a liability of ONGC.
“The acceptance of royalty as being cost recoverable and the withdrawal of the arbitration pertaining to cess will be concomitant with transfer of control of Cairn India,” the letter said.
Cairn said it is producing 125,000 barrels of oil per day (bpd) from the Mangala oilfield in the Rajasthan block.
“Our understanding of the resource base in the Rajasthan block supports a vision to produce 240,000 bpd, equivalent to a contribution of about 30% of India’s current crude production, subject to further investment, partner and regulatory approvals, including exploration rights in the development areas.”
The board of Cairn India had in February opposed changes in the Rajasthan contract making it liable to pay royalty and a Rs2,500 per tonne cess.
Sources said Cairn Energy chairman Bill Gammell arrived here on Tuesday morning to chair the Cairn India board meeting.
Mr Gammell had last month skipped a Cairn India shareholders' meet.
Cairn India will now formally write to its partner ONGC, which owns stake in eight out of the company's 10 properties in India, for consent for the Vedanta transaction.
The ONGC board may consider waiving its pre-emption or right of first refusal (ROFR) and give Cairn a no-objection certificate to conclude the deal at its board meeting on 27th September.
Cairn Energy, which is selling a 40% stake in its Indian unit to Vedanta, had previously said it would rather call off the deal than force Cairn India to accept the government’s conditions.
Cairn India had on 26th July stated that its April-June quarter net profit would halve to Rs1,435 crore if it was asked to share royalty on the Rajasthan crude oil.
The Cabinet Committee on Economic Affairs (CCEA) on 27th June gave consent to the Cairn-Vedanta deal, subject to Cairn or its successor agreeing to charge or deduct the royalty paid by ONGC from revenues earned from the sale of oil before the profits are split between partners.
Cairn Energy’s request for the twin government conditions to be voted on by shareholders is being done through a postal ballot.
After postal ballots were counted, Cairn India’s board of directors met.
Last August, Vedanta proposed buying a 51%-60% stake in oil and gas explorer Cairn India for up to $9.6 billion in cash, but the deal has been delayed awaiting government and regulatory approvals.
A Group of Ministers (GoM) headed by finance minister Pranab Mukherjee had recommended to the Cabinet that the deal should be approved if Cairn or its successor agreed to royalty being added to the project cost and recovered from oil sales, as well as agreeing to pay its share of oil cess.
Days before the CCEA accepted the GoM recommendation and gave conditional approval, Cairn Energy lowered the price it was demanding from Vedanta to make up for the reduced profitability due to acceptance of the preconditions.
It also removed a non-compete provision from the deal and the related non-compete fee of Rs50 per share.
Vedanta’s total payment for a 40% stake in Cairn India, at the reduced price of Rs355 per share, will now be $6.02 billion, instead of the earlier announced $6.84 billion.
Striking workers from Suzuki Powertrain India, Suzuki Motorcycle India Pvt Ltd and Suzuki Castings are asking for an early settlement to the standoff between MSI management and workers at the Manesar plant that has severely affected production since 29th August
The companies where the workers have gone on strike are-Suzuki Powertrain India and Suzuki Motorcycle India Pvt Ltd. Workers from Suzuki Castings-a part of Suzuki Powertrain India-also have joined the strike
Gurgaon: Workers at three factories of two different companies of Suzuki in India have gone on strike this afternoon in support of their colleagues at Maruti Suzuki India's (MSI) Manesar plant, who are locked in a standoff with the management since 29th August, reports PTI.
The two companies where the workers have gone on strike are-Suzuki Powertrain India and Suzuki Motorcycle India Pvt Ltd. The three factories of these companies are located in the Gurgaon-Menes industrial belt.
"The workers of these three companies have gone on strike since this afternoon in support of MSI's Manesar plant workers," president of Suzuki Powertrain India Employees Union president Sube Singh Yadav told PTI.
He said the workers from these three plants are asking for an early settlement to the standoff between MSI management and workers at the Manesar plant that has severely affected production since 29th August.
Workers from Suzuki Castings-a part of Suzuki Powertrain India-who are affiliated to Suzuki Powertrain India Employees Union, also said they have joined the strike.
Suzuki Motorcycle India Workers Union President Anil Kumar said workers at the two-wheeler maker's plant stopped working in support of colleagues at MSI.
"We want them (Maruti) to settle the issue as soon as possible, till then we will be on strike. Moreover, we are also demanding regularisation of our colleagues here who have been working here for more than four years," he said.
Comments from officials of Suzuki Powertrain India and Suzuki Motorcycle India could not be obtained immediately.
Suzuki Powertrain India employs over than 2,000 workers at its Manesar plant, where it manufactures diesel engines and transmissions for supplies to MSI. Suzuki Castings has nearly 700 workers.
Suzuki Motorcycles India has 1,400 workers at its plant near Manesar and it rolls out about 1,200 motorcycles and scooters a day.
Yesterday MSI sacked five more workers at its Manesar plant on disciplinary grounds even as it recruited 100 new people to replace the existing workers, who have refused to sign the good conduct bond.
MSI management and the workers have been locked in a standoff since 29th August when the management prevented workers from entering factory premises unless they signed the bond, after allegations of sabotage and deliberate compromise on the quality of cars being produced surfaced.
The bond required the workers to declare that they would "not resort to go slow, intermittent stoppage of work, stay- in-strike, work-to-rule, sabotage or otherwise indulge in any activity, which would hamper the normal production in the factory".
Bounce-back to continue to the level of 5,070
The market ended its three-day losing streak to climb higher, even as headline inflation for August inched closer to double-digits. Yesterday, we mentioned that the Nifty should close above 4,980 to resume its uptrend. Today's intra-day high and close on the index was well above this level. We may now see a small upmove to the level 5,070. However, if the buying continues after 5,070, then the gains may continue to 5,140.
The market opened positive, on support from its Asian peers, which were higher in morning trade. The Nifty opened 24 points up at 4,965 and the Sensex resumed trade higher by 56 points at 16,523. However, concerns over the likelihood of the Reserve Bank of India (RBI) continuing with its stiff monetary policy when it meets on Friday, weak Asian markets and a sharp fall in US futures, pulled down the indices. Capital goods, banking, power and oil & gas stocks witnessed selling pressure in early trade. At the lows, the Nifty touched 4,917 and the Sensex slipped to 16,387. The market was range-bound in subsequent trade.
Investors brushed aside higher inflation numbers for August, as a positive opening on key European bourses set off buying interest in IT and metal stocks, lifting the market into the green in post-noon trade. The gains continued and the market hit its intra-day high in the last few minutes on short-covering. At the day's high the Nifty breached the 5,000 mark to touch 5,026, while the Sensex rose to 16,754.
The market came off the highs and traded sideways for the rest of the session. The Nifty closed up 72 points at 5,013 and the Sensex settled at 16,710, a gain of 242 points.
The broader indices underperformed the Sensex today with the BSE Mid-cap index rising 0.21% and the BSE Small-cap index gaining 0.37%.
BSE IT (up by 4.27%), BSE TECk (up 2.92%), BSE Metal (up 1.90%), BSE Bankex (up 1.46%) and BSE Oil & Gas (up 1.42%) were the top sectoral gainers, while BSE Capital Goods (down 0.36%) was the lone laggard.
The major gainers on the Sensex were Jaiprakash Associates (up 6.39%), Infosys (up 5.78%), Wipro (up 4.34%), Hindustan Unilever (up 3.34%) and HDFC Bank (up 2.69%). The main losers on the index were Tata Power (down 1.92%), Larsen & Toubro (down 1.52%), Cipla (down 1.48%), Bharti Airtel (down 0.70%) and State Bank of India (down 0.47%).
The Nifty gainers were led by JP Associates (up 6.85%), Infosys (up 6.07%), Wipro (up 4.36%), HCL Technologies (up 4.08%) and BHEL (up 3.82%). The key losers on the index were Sesa Goa (down 2.42%), Tata Power (down 2.07%), Cipla (down 1.55%), L&T (down 1.52%) and Bharti Airtel (down 1.06%).
Markets in Asia pared early gains and settled mostly lower following the Chinese government's reluctance to support debt-ridden European economies. "Countries must first put their own houses in order," Chinese premier Wen Jiabao said at the World Economic Forum in Dalian, China, today.
The Jakarta Composite fell by 1.95%, the KLSE Composite declined 0.72%, the Nikkei 225 slipped 1.14%, the Seoul Composite plunged 3.52% and Taiwan Weighted tumbled 2.20%. On the other hand, the Shanghai Composite gained 0.17%, the Hang Seng added 0.08% and the Straits Times rose 0.37%.
Back home, foreign institutional investors were net sellers of shares worth Rs468.41 crore on Tuesday. On the other hand, domestic institutional investors were net buyers of equities worth Rs121.19 crore.
Lupin's subsidiary Lupin Pharmaceuticals has received final approval from the US Food and Drugs Administration (FDA) for its abbreviated new drug application to market a generic version of the anti-epilepsy drug Levetiracetam extended release tablets. The drug had annual sales of about $161 million for 12 months ended June, according to IMS Health data. Lupin gained 2.5% to close at Rs480 on the NSE today.
Tata Steel today said it is in the process of completing an investment programme to upgrade hot-rolled strip processing capabilities at its Dudley plant in West Midlands, UK, by installing a leveller worth £500,000. The new leveller, which will come on stream in January 2012, will decoil cut-to-length and fully flatten hot-rolled steel coil in thicknesses of 3-5 mm and in widths of up to two metres. The stock jumped 3.42% to Rs473 on the NSE.
Sugar manufacturer Bajaj Hindusthan is in the process of raising Rs1,644 crore through a rights issue. The company will issue two fresh equity shares for every one share held by shareholders at a price of Rs36 a share, which is much lower than the prevailing market price. The stock declined 1.9% to end at Rs51.50 on the NSE.