Cairn-Vedanta merger to happen by 2016-end: Anil Agarwal

He said merger of India's biggest private oil producer with country's top producer of aluminum and copper will give India 'a natural resources company of its own'

Mining mogul Anil Agarwal on Monday said the merger of his group's cash-rich oil firm Cairn India with its parent, Vedanta Ltd is likely to be completed by year end to create India's largest diversified natural resources company.

Debt-laden Vedanta Ltd, previously known as Sesa Sterlite Ltd, had on Friday upped its offer to buy out the minority shareholders in its cash-rich subsidiary, Cairn India.

Instead of its June 2015 offer of one Vedanta share for each Cairn India share, plus a preference share worth Rs 10 that can be redeemed after 30 days or 18 months, the mining group has offered three more preference shares.

"I want to create a true natural resource company out of India that can rival the likes of Bralia's Vale SA, Rio Tinto of the US or BHP Billiton of Australia," Agarwal, Chairman of Vedanta Group, told said in an interview.

The merger of India's biggest private oil producer with the country's top producer of aluminum and copper will give India "a natural resources company of its own," he said.

The deal, he said, is likely to concluded by end-2016.

"Oil prices have fallen 27-30% and mineral prices have fallen 7-8%. The merger will help balance the risks," he said.

Agarwal, 63, who rose from running a scrap-metal business to become one of India's wealthiest tycoons with his business empire spanning across mining and petroleum, said the group will keep investing across its businesses.

"It is very important for India to create a very value creating company, risk diverse company and that is what is happening in the world and we wanted to have oil and gas, copper, zinc, iron ore, aluminium to be one company and that is what the merger proposed," he said.

In the sweetened offer announced Friday, Vedanta offered minority shareholders of Cairn India one equity share and four redeemable-preference shares with a face value of Rs 10 each. The preference shares will carry a coupon of 7.5 per cent and tenure of 18 months.

While the company said the revised deal implies a 20% premium to the one-month volume weighted-average price of Cairn shares, it translates into 9.1 per cent premium over share's Friday closing.

The bettering of the deferred cash payout translates into giving away about Rs 3,400 crore of Cairn India's cash to its shareholders. The payout is 15 per cent of Cairn's cash pile.

Vedanta is said to be wanting to use Rs 23,290 crore cash lying with Cairn to pay off part of its Rs 77,952 crore debt. It had in May rolled over a controversial $1.25-billion loan taken from the cash-rich oil explorer Cairn India in July 2014.

Vedanta Ltd is India's most-indebted base metals company.

For the merger to go through, half of the minority shareholders, who together make up for 40% of the Cairn equity, have to approve the deal.