ONGC may have to pay $13 billion for Rajasthan block

New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) may have to pay over $13 billion if it were to exercise its pre-emption or right of first refusal (RoFR) to buy Cairn India in the giant Rajasthan block, reports PTI.

Cairn India holds 70% operator interest in the 6.5 billion barrels Rajasthan block that is at the centre of its parent, Cairn Energy Plc's $8.48 billion deal to sell its majority stake in the company to Vedanta Resources.

At Rs355 a share (the price at which Vedanta is acquiring Cairn Energy shares), Cairn India is valued at over Rs67,355 crore or $14.6 billion. Almost 90% of this value is because of the Rajasthan block that can produce 240,000 barrels of oil per day (12 million tonnes per annum).

"Cairn India's stake in Rajasthan block will be valued at $13 billion," a source involved in the process said.

ONGC believes that by virtue of holding 30% in the Rajasthan block, it has the pre-emption or ROFR to buy Cairn India in case the company's ownership changed.

If it has objections to the Cairn Energy-Vedanta deal, it will have to seek to buyout Cairn India in the Rajasthan block by making a higher offer that would work out to $13 billion, he said.

But ONGC will have to make up its mind fast as it has time only till 7th September to decide. Vedanta's open offer to minority shareholders of Cairn India for acquisition of 20% shares puts 7th September as the cut off date for any rival offer, the source said.

Also, as per UK takeover rules, Cairn Energy Plc has to seek shareholders' nod and other regulatory approvals for the sale before Vedanta's open offer opens on 11th October.

"That means, it will have to publish a prospectus for the sale by mid-September and call Extraordinary General Meeting (EGM) of shareholders by end September or early October," he said.

A rival offer or a competitive bid like the one from ONGC would have to be made before the EGM so that it can then approach the Securities and Exchange Board of India (SEBI) to stop Vedanta's open offer, the source said.

"To buy Cairn India's stake in Rajasthan block, it has to seek Board approval, appoint merchant bankers, seek Cabinet nod and make rival offer all in a month's time," he said.

The source said the best deal for ONGC would be to seek operatorship or management control of the Rajasthan block in lieu of giving a go-ahead to the Cairn-Vedanta deal.

The Production Sharing Contract (PSC), which Cairn has signed with the government, for the Rajasthan block, provides for explicit government approval only in case of a party selling its interest in the block, but does not make the nod mandatory in case of change of ownership at corporate level.

The Joint Operating Agreement, between Cairn India and ONGC, gives partners pre-emption rights in case of sale of interest by either parties but not in case of corporate ownership change.


ADB may raise India's growth and inflation forecast

New Delhi: Multilateral lending agency Asian Development Bank (ADB) today said it is likely to revise upwards by the September-end India's growth and inflation forecast, which is 8.2% and 5% respectively for the current fiscal, reports PTI.

"After seeing the high inflation in the first half of the fiscal, we plan to revise upwards the inflation forecast above 5% in our next Economic Outlook slated for September 28," ADB chief economist Jong-Wha Lee said here.

Mr Lee said inflation in India is coming primarily from the supply side and the double-digit food inflation is impacting the lower middle class the maximum as their share of income on food and beverages is high.

The economist was speaking to reporters after the launch of ADB's flagship annual statistical publication, Key Indicators: For Asia and the Pacific 2010, with a special chapter on 'The Rise of Asia's Middle Class'.

Without hinting at the direction India's growth outlook will be revised, Mr Lee said India was doing well in reducing poverty and nurturing middle class for sustainable growth, and must focus on providing quality education and infrastructure.

On the Reserve Bank of India's (RBI) stance on checking inflation, he said that "tight monetary policy is the right step" but warned of excessive hike in rates "as raising rates would also attract more capital inflows" and related problems.

Besides, he said growth should also be a concern for RBI while trying to contain inflation. He contested the view that high inflation is unavoidable during high growth, which was recently ascribed to by finance minister Pranab Mukherjee.

According to Mr Lee, if Indian economy grows continuously improvement in agricultural productivity and building the country's infrastructure could result in lowering inflation and with a sustainable economic growth.

Further, he said India's fiscal and budget deficits are high and should press for fiscal consolidation.

"Withdrawal of fiscal stimulus is the right direction ahead ... it's only a matter of timing and speed," Mr Lee said.


Personal finance Thursday

Reliance MF files offer document with SEBI to launch Reliance Fixed Horizon Bond Fund; SBI Mutual Fund launches SBI Debt Fund Series-370 Days Fund-5; IDFC Mutual Fund to transact through BSE & NSE platform; State Bank of Indore hikes lending rate by 50 bps to 13.25%; ICICI Bank introduces Zero Transfer Fee on home loans

Reliance MF files offer document with SEBI to launch Reliance Fixed Horizon Bond Fund

Reliance Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch Reliance Fixed Horizon Bond Fund. The fund is a closed ended income scheme. The new fund offer (NFO) price will be Rs10 per unit for various series launched under the scheme. The series 1 to series 3 have duration of three years and series 4 to series 6 have duration of five years. The scheme offers two options-growth and dividend payout option. The entry and exit load for the scheme is nil. The minimum subscription amount for the scheme is Rs5,000 and in multiples of Re1 thereafter. The minimum target amount for each series is Rs20 crore. The investment objective is to generate regular returns and growth of capital by investing in government securities and other fixed income/debt securities normally maturing in line with the time profile of the scheme.

SBI Mutual Fund launches SBI Debt Fund Series-370 Days Fund-5

SBI Mutual Fund has launched a new fund called SBI Debt Fund Series-370 Days Fund-5. The fund is a close ended debt scheme. The new fund offer (NFO) price for the scheme is Rs10 per unit. The new issue will be open for subscription from 23 August and close on 25 August 2010. The scheme offers two options-growth and dividend payout option. The minimum subscription amount is Rs5,000 and in multiples of Re1 thereafter. The fund seeks to collect a minimum target amount of Rs1 crore under the scheme during the NFO period. Entry and exit load charge will be nil for the scheme. The investment objective of the scheme is to provide regular income, liquidity and returns to the investors by making investments in debt instruments such as government securities, corporate bonds and money market instruments maturing on or before the maturity of the scheme.

IDFC Mutual Fund to transact through BSE & NSE platform
IDFC Mutual Fund provides an alternate transaction platform to facilitate purchase and redemption of units of IDFC Asset Allocation Fund through the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)-Mutual Fund Service System (MFSS). The fund includes three plans-Aggressive Plan, Conservative Plan and Moderate Plan. The facility will be offered from 19 August 2010. Units can be held according to the choice of the investor, in physical or depository mode. The investment objective of the fund is to generate capital appreciation by making investments in various mutual funds schemes primarily local funds based on a defined asset allocation model.

State Bank of Indore hikes lending rate by 50 bps to 13.25%

The State Bank of Indore has increased its lending rate by 50 basis points (bps). The benchmark prime lending rate (BPLR) of the bank is now 13.25%. With the increase, home, auto and corporate loans have become expensive for the existing borrowers. The decision comes days after the parent State Bank of India (SBI) raised its BPLR by 50 bps to 12.25%. The new rate of SBI became effective from 17th August. It is to be noted that the merger process of State Bank of Indore with SBI will start from 26th August. The entire undertaking of State Bank of Indore shall be transferred to and vested in State Bank of India from 26th August.

ICICI Bank introduces Zero Transfer Fee on home loans

ICICI Bank introduces a special offer called 'Zero Transfer Fee' on its home loans. The 'Zero Transfer Fee' allows customers to transfer the balance loan amount of their existing home loan from any other bank to ICICI Bank for no additional charge. For loans upto Rs30 lakh and above, the rate of interest would be fixed at 8.25% from the date of first disbursement till 31 March 2011 and at 9.25% from 1 April 2011 to 31 March 2012. The loan will be converted to floating/ARHL (Adjustable Rate Home Loans) with effect from 1 April 2012. The ARHL loan will be benchmarked to I-Base. I-Base is the benchmark rate for all banks and all floating rate lending happens in reference to this benchmark rate. This scheme would be offered on sanctions done till 31 August 2010.


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