LIC might seek clarifications on merger

Life Insurance Corporation of India (LIC) may seek some clarifications on the Cairn India merger with Vedanta Group. The merger, announced on Sunday, has a 1:1 swap ratio where the minority shareholders of Cairn India, including LIC, receive one equity share for each share.

Sources said LIC will seek clarity on what would be the exact structure of the cash of Cairn India and how will it be used to cut Vedanta's debt. Company officials are expected to meet LIC soon to discuss the contours of this arrangement.

The voting of LIC in this deal will be critical since it is one of the large institutional shareholders and will decide whether this merger would be passed. The merger will need majority of minority shareholders voting, as per the Cairn India release. The release further said that they would need 75 per cent in value of shareholders present and voting at the shareholder meeting required to vote in favour of the transaction.

Post the merger, Cairn India minority shareholders will own 20.2 per cent and Vedanta minority shareholders will own a 29.7 per cent stake in the enlarged entity.

While LIC has been criticised in the past for being a passive shareholder, its officials have maintained that what they do in these situations is to engage with companies to seek solutions for their concerns.

Last year, too, LIC has sought more information on Rs 7,500-crore loan given by Cairn India to its parent. It had sought clarifications since it was of the view that this related party transaction was not in the interest of minority shareholders.