Cairn India hits 52-week low

Cairn India fell 3.67% to Rs 223.20 at 15:15 IST on BSE after Cairn Energy confirmed having received a draft assessment order from the Indian Income Tax Department.

Meanwhile, the BSE Sensex was down 34.27 points, or 0.12%, to 28,675.60

On BSE, so far 4.23 lakh shares were traded in the counter, compared with an average volume of 2.63 lakh shares in the past one quarter.

The stock hit a 52-week low of Rs 222.30 in intraday trade today, 11 March 2015. The stock hit a high of Rs 229.80 so far during the day. The stock hit a 52-week high of Rs 385 on 11 June 2014.

The stock had underperformed the market over the past one month till 10 March 2015, falling 8.56% compared with 1.25% rise in the Sensex. The scrip also underperformed the market in past one quarter, falling 9.77% as against Sensex's 3.16% rise.

The large-cap oil and gas exploration and production company has an equity capital of Rs 1874.83 crore. Face value per share is Rs 10.

Cairn Energy confirmed yesterday, 10 March 2015, it has instructed counsel to file a Notice of Dispute under the UK-India Investment Treaty in order to protect its legal position and shareholder interests having on 10 March 2015, received a draft assessment order from the Indian Income Tax Department. The draft order addressed to Cairn's subsidiary, Cairn UK Holdings, is in respect of fiscal year 2006-7 to the amount of $1.6 billion plus any applicable interest and penalties.

Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.82% stake in Cairn India (as per the shareholding pattern as on 31 December 2014).

Correspondence received from the Income Tax Department indicates that the assessment stems from amendments introduced in the 2012 Finance Act which seek to tax prior year transactions under retrospective legislation. The transactions subject to the assessment are those undertaken to effect the group reorganisation that was required to enable the initial public offering of Cairn India in 2007.

Since the original contact from the Income Tax Department in January 2014, Cairn has continued to confirm with its advisers that throughout its history of operating in India, the company has been fully compliant with the tax legislation in force in each year and paid all applicable taxes.

Cairn strongly contests the basis of the draft assessment and the Notice of Dispute is supported by detailed legal advice on the strength of the legal protections available to it under international law. Under the terms of the UK-India Investment Treaty, the Government of India and Cairn are now required to enter a period of negotiations to seek a resolution to the dispute. To the extent that a satisfactory resolution is not reached during that period, an international arbitration panel will be constituted to adjudicate on the matter.

Cairn continues to be restricted by the Indian Income Tax Department from selling its 10% shareholding in Cairn India, currently valued at approximately $700 million. Supported by detailed legal advice, on the strength of the legal protections available to it under international law, Cairn does not intend to make any accounting provision in respect of the draft tax assessment. In addition, Cairn will seek restitution of losses resulting from the attachment of its Cairn India stake since 2014.

Meanwhile, Brent crude oil futures edged higher after falling sharply yesterday, 10 March 2015. Brent for April settlement was up 17 cents at $56.56 a barrel. The contract had declined $2.14 a barrel or 3.65% to settle at $56.39 a barrel during the previous trading session. Fall in crude oil prices would result in lower realizations from crude sales for oil exploration firms such as Cairn India.

Cairn India's consolidated net profit fell 53.2% to Rs 1349.64 crore on 19.8% drop in total income to Rs 4020.57 crore in Q3 December 2014 over Q3 December 2013.

Cairn India is a part of the Vedanta Group, a globally diversified natural resources group with wide ranging interests in aluminium, copper, zinc, lead, silver, iron ore, etc.

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