Anil Agarwal eyes $1-bn stake boost in Cairn India

The proposal may help Sesa Sterlite and Agarwal's other companies boost their ownership in Cairn India to more than 65% from about 59%

Billionaire Anil Agarwal’s Cairn India will spend about $1 billion to buy back shares giving him greater control over the company as environment rules derail his mining business, two people familiar with the plan said.     

The oil producer will offer to buy back shares, including Cairn Energy Plc’s 10.3 per cent stake, and extinguish them, said one of the people, who asked not to be identified before an announcement. The proposal may help Sesa Sterlite and Agarwal’s other companies boost their ownership in Cairn India to more than 65 per cent from about 59 per cent, the person said.     

“Certainly Cairn Energy’s 10 per cent stake in the company will be a natural source of shares,” Alan Greene, a Singapore-based analyst at Moody’s Investors Service, said. “Cairn Energy’s decision to sell will depend on what the offer price is and its own needs.”     

Cairn India, which runs the nation’s biggest onshore oil and gas field and has about $3 billion of cash, is critical to Agarwal when his metals earnings at Sesa Sterlite are languishing due to restrictions on iron ore and bauxite mining and a ban on exports of the steelmaking ingredient from Goa. Faced with the setbacks, Agarwal is banking on India’s energy demand, forecast to increase 14 per cent in the five years to 2015.

Decision on Tuesday

The board of Cairn India, based in Gurgaon near New Delhi, will decide on the repurchase on Tuesday, according to an exchange filing. Cairn India, which has 1.9 billion shares outstanding, gained 3.1 per cent to Rs 327.05  at the close in Mumbai on November 22, the most since September 4. The stock has risen 2.5 per cent this year, lagging the 4.1 per cent increase in the benchmark S&P BSE Sensex.