ONGC holds back consent for Cairn India restructuring

In signs of a souring relationship, state-owned Oil and Natural Gas Corp (ONGC) has withheld consent for internal restructuring of Cairn India Ltd for the past one year.

Cairn wants the stakes that its different subsidiaries, including some registered abroad, held in various oil and gas properties, including the showpiece Rajasthan oilfields, to be transfered into one India-based company.

Since ONGC is partner in six of those properties, Cairn procedurally sought a no-objection from ONGC, but the state-run oil giant has so far not agreed to the proposal, sources privy to the development said.

The restructuring is separate from London-listed mining group Vedanta Resources' $9 billion buyout of Cairn India. While the Vedanta deal, where Edinburgh-based Cairn Energy Plc is selling 40% of its interest in Cairn India, was announced in August, 2010, the restructuring began in 2009.

When contacted, two top ONGC officials were not aware why the consent was withheld.

Sources said the restructuring, which was approved by the board of Cairn India and boards of its subsidiaries in December, 2009, has no bearing on the Vedanta deal.

In December, 2009, itself, Cairn got no-objection certificates for the restructuring from the National Stock Exchange (NSE) and Bombay Stock Exchange, where it is listed, and the company's shareholders approved the scheme in February, 2010. In April last year, the Chennai High Court approved the scheme of restructuring and the Bombay High Court sanctioned the scheme in June, 2010.

But ONGC, which holds up to 90% interest in the Cairn properties, has not given its no-objection certificate yet, they said.

Cairn wants the interest held by its unit, Cairn Energy India Ltd, and other group companies in six assets to be transferred to Cairn India Ltd.

The objective behind this exercise is to bring the Indian oil and gas exploration and production business of some of its group firms incorporated abroad directly into Cairn India.

Cairn India, spun off from Cairn Energy Plc, listed on the Indian stock exchanges on January 9, 2007, although a number of its Indian assets were still held by overseas subsidiaries.

The restructuring proposed would do away with the existing multi-layered structure, involving various foreign subsidiaries and Cairn India Ltd, which is avoidable and administratively burdensome.

Cairn said the proposed scheme and assignment of participating interest would have no impact on any of its joint venture partners in the relevant blocks as the process was merely an internal reorganisation and there is no third party involved.