New Delhi: There may be a fresh twist to Vedanta Resources Plc’s plans to acquire a majority stake in Cairn India Ltd, if state-run Oil and Natural Gas Corp. Ltd (ONGC) follows through on the signal from the petroleum ministry to make a counter offer.

“The question is how to get it to ONGC. Somebody has to give a better offer," said a top functionary of the petroleum ministry, who did not want to be identified.

Game play: ONGC’s Sharma (left) and Cairn Energy’s Gammell. Ankit Agrawal/Mint.

While Vedanta plans to enter the oil business by paying up to $9.6 billion (44,832 crore) for a majority stake in Cairn India, ONGC is a partner with Cairn India in the joint venture that runs the latter’s main oil asset in the country. Cairn is the operator in block RJ-ON-90/1, the firm’s main asset in India, while ONGC is the licensee and a partner in the field with a 30% stake.

R.S. Sharma, ONGC’s chairman and managing director, said: “The government has not given us any directive."

Sharma had earlier said that ONGC was “looking into" Cairn’s announcement to see if it had the “first right of refusal" in the event Cairn planned to sell a controlling stake in its Indian assets.

Not ruling out a counter bid, Sharma said, “We have not yet decided to bid."

Mint had reported on 17 August that the acquisition will have to overcome significant regulatory hurdles and a possible challenge from a partner of Cairn India, state-run ONGC.

“ONGC is waiting for the government’s direction. Our board meeting is scheduled for 26 August," said another senior ONGC executive, who did not want to be identified.

Manu Kapoor, director of corporate affairs at Cairn India, declined to comment on the development. Vedanta also declined to comment.

“It has to come to the government and then we will take a call. A government nod is necessary and all the requirements of the production-sharing contract (PSC) need to be fulfilled. Energy security of the country is paramount," said minister of state for petroleum and natural gas Jitin Prasada.

On Monday, Edinburgh-based Cairn Energy Plc had said it would sell between 40% and 51% of its stake in its Indian arm to the Anil Agarwal-promoted Vedanta.

“We want them to pay the same price per share to the small shareholders," said the first petroleum ministry functionary, who did not want to be identified.

On 17 August, the Vedanta group issued an advertisement making an open offer to the minority shareholders of Cairn India as part of its takeover exercise. The offer was made at a price of 355 per share for 20% of Cairn India’s equity. The deal was concluded at a price of 405 per share, of which 50 goes towards non-compete fees paid to Cairn UK. Under existing guidelines, non-compete fees do not get added to the open offer price that Vedanta will have to pay.

Under India’s proposed takeover norms, non-compete fees will not be permitted. Therefore, everyone gets to sell their shares at the same price. The proposed takeover norms would have also required Vedanta to make a larger open offer had they been in force.

Realizing the challenges that face the deal, Cairn Energy’s chief executive Bill Gammell met petroleum minister Murli Deora on Tuesday.

Deora declined to comment on the meeting.

PTI quoted petroleum secretary S. Sundareshan stating that the “PSC provides for concurrence of the government when any assignment of interest in a block takes place".

The opinion of ONGC, which holds a 30% stake in the Rajasthan block, would be kept in mind, he said, and added, “ONGC has not raised any concerns yet, as there is still no official proposal before us."

“ONGC would have the first right of refusal if it was an asset deal. However, for a controlling share transaction, ONGC does not acquire such rights," said Gokul Chaudhri, partner at audit and consulting firm BMR Advisors. “However, the government has a right to approve or refuse the change of ownership."

PTI contributed to this story.