BackCairn Energy slumps in London on $1.6 billion Indian tax bill
The firm sank as much as 21%, the most since 6 February 2012
PremiumLondon: Cairn Energy Plc fell the most in more than three years in London after India sought $1.6 billion in tax.
The company sank as much as 21%, the most since 6 February 2012, after saying a unit received the draft tax bill from authorities over restructuring carried out in preparation for the initial public offering of Cairn India Ltd in 2007.
The UK oil explorer filed a dispute under the UK-India Investment Treaty over the draft stemming from amendments in India’s 2012 Finance Act that seek to tax deals retrospectively, Cairn said in a statement on its website dated 10 March.
The company said it won’t provision for the tax assessment, citing its legal advice and protections under international law.
Cairn Energy was down 37.2 pence at 146.2 pence by 10:39am in London, valuing it at £845 million ($1.3 billion).
“There will be a period of negotiations, typically three to six months, before arbitration takes place," said Brian Gallagher, an analyst at Investec Bank Plc, lowering Cairn’s price estimate to 185 pence from 225 pence in a note. The news “was unexpected and contradicts the taxation policy soundings from the Modi administration since its election in 2014."
Cairn has the option to reply to the income tax department and may approach the dispute resolution panel, India’s ET Now TV channel reported, citing revenue secretary Shaktikanta Das.
“Cairn has consistently confirmed that it has been fully compliant with all relevant legislation and paid all applicable taxes in India," chief executive officer Simon Thomson said in the statement. “The group remains well funded to deliver all of our objectives and commitments and we look forward to moving forward with our strategy whilst this issue is resolved." Bloomberg
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