London: Cairn Energy Plc is seeking compensation for a slump in the value of its stake in an Indian oil driller after the government barred a sale of the holding, pending the resolution of a tax dispute.

“That’s all part of the international arbitration proceedings we’ve initiated," Cairn Energy chief executive officer Simon Thomson said on a conference call on Tuesday. “We’re looking forward to hearing back from the government."

The value of Cairn Energy’s 9.8% interest in Cairn India Ltd. has dropped to $530 million from more than $1 billion a year earlier, Thomson said. The loss of value is equivalent to about 40% of Cairn Energy’s market capitalization, according to data compiled by Bloomberg.

Cairn Energy received a $1.6 billion tax claim from Indian authorities in March over restructuring carried out in preparation for the 2006 initial public offering of Cairn India, operator of the nation’s biggest onshore oil field. Cairn Energy said in January 2014 that it was ordered not to sell the stake until Indian tax authorities completed an audit.

Cairn India has also been asked to pay $1.6 billion of tax and a similar amount of interest. In 2011, billionaire Anil Agarwal’s Vedanta Resources Plc acquired majority control of Cairn India for $8.7 billion.

Cairn Energy fell as much as 4.2% in London trading, the most in almost four weeks, after the company reported its loss widened in the six months through June from a year earlier. The shares have dropped 17% this year compared with the 11% decline in the FTSE 350 Oil & Gas Producers Index.

Crude has declined by more than 50% in the past year, driving down the value of oil companies around the world. Bloomberg