Cairn India board to discuss buyback plans next week

Move likely to help Vedanta Group incrase its stake in Cairn India

Cairn India on Friday informed the BSE its board of directors would meet next Tuesday to consider a proposal for buyback of the company’s equity shares. The move is likely to help the Anil Agarwal-led Vedanta Group increase its stake in Cairn India.

Following the news, the company’s shares rose 3.1 per cent to close at Rs 326.9 a share on the BSE. “The company has convened a board meeting on Tuesday to consider a buyback of its equity shares. We expect to be able to share the details of the proposal after the board meeting,” a Cairn India official told Business Standard.

Analysts say it is likely Cairn Plc would sell its stake of 10.27 per cent in the company. Recently, the UK-based Cairn Energy had valued its stake in the Indian company at $955.6 million. “Cairn India has net cash of $3.3 billion. This news would be sentimentally positive. The stock did not move considerably in the last six-nine months despite rupee depreciation and crude at not-so-bad levels. Now, it may inch up eight-10 per cent,” said Dhaval Joshi of Emkay Global Financial Services.

In December 2011, Vedanta had acquired controlling stake in Cairn India for $8.67 billion. Currently, it has 59 per cent holding in Cairn India.

Terming the minority stake as “available-for-sale”, Cairn Energy, in its half-yearly report filed at the London Stock Exchange, said the financial asset had a market value of $956 million as of June 30, a 22 per cent fall from the value at the date of initial recognition.

Cairn India is planning to invest Rs 16,000 crore in India for exploration and production of oil in the next three years. Of this, about Rs 13,000 crore would be towards drilling 450 wells in Rajasthan alone---about 100 exploration wells and 350 development wells. Currently, the company currently produces about 175,000 barrels of oil equivalent per day (boepd); it is expected this will increase to 200,000-215,000 boepd by the end of the year.