New Delhi: Vedanta Resources sees no regulatory hurdles to its purchase of a stake of up to $9.6 billion in Cairn India, as Cairn Energy’s chairman headed to New Delhi on Tuesday to push for the deal.
Vedanta, in its first move into the energy sector, is buying a controlling stake in India’s No.4 oil and gas company as it seeks to capitalise on rising energy demand, economic growth and an expanding population.
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The deal will need New Delhi’s approval as Cairn India has signed production-sharing contracts (PSCs) with the government for its oil and gas exploration blocks and as per the pact any change of ownership would require the government’s approval.
“We don’t foresee problems,” Anil Agarwal, the billionaire chairman of Vedanta, told the Times of India newspaper in an interview in reply to a question whether there were any regulatory challenges.
Vedanta is buying between 40 and 51% of Cairn India from Cairn Energy, holder of a 62.4% stake, and will offer to buy up to 20% from other shareholders to give it a stake of between 51 and 60%.
State-run ONGC, which has a 30% stake in Cairn India’s Rajasthan oil block called RJ-ON-90/1, also has a first-right-of-refusal in any change of ownership at British firm’s Indian unit.
In a separate interview in Economic Times newspaper, Agarwal said ONGC would continue to remain a partner in Cairn India.
“Whatever approvals are needed, whatever needs to be done for such a deal, we’ll do,” Agarwal said.
Cairn meets ministers
Cairn Energy chairman Bill Gammell said on Monday he would come to New Delhi to speak with government officials.
“Both the companies will need approvals for this deal but I don’t think these approvals will turn into deal breaker,” said S P Tulsian, a Mumbai-based independent investment analyst and petroleum sector expert .
“This acquisition involves natural resources and therefore the government would like to know the details of change of ownership before giving the go-ahead. It’s more procedural in nature.”
Shares in Cairn India rose 1.3% in a Mumbai market up 0.3%, after falling sharply on Monday when the deal.
Agarwal also said in the Times of India interview they would go to Africa and Sri Lanka through Cairn India and would also allocate funds for expansion.