Vedanta board may discuss Cairn merger on Tuesday

The board of mining billionaire Anil Agarwal-controlled Vedanta Ltd will meet on Tuesday amid talks of the company being forced to sweeten its offer for absorbing its cash-rich oil subsidiary Cairn India.

Vedanta has offered one share for every share of Cairn India, a deal which did not seem lucrative to minority shareholders of the oil producer, particularly its erstwhile promoter Cairn Energy Plc.

Sources said besides the merger ratio, the minority shareholders, including Cairn Energy and state-owned Life Insurance Corp (LIC), are concerned about the company not giving guidance on utilising the Rs 17,943-crore cash balance of Cairn India as of September.

The Vedanta board is set to meet on Tuesday to consider financial results for the September quarter and the issue of sweetening the deal may crop up for discussions, they said.

The deal has been approved by two stock exchanges. It is now awaiting a nod from the high court, before it goes for a shareholder vote.

Vedanta needs the deal to go through by March 2016, otherwise it will have to re-pay $1.25 billion (Rs 8,129 crore) it had taken as inter-company loan a few years ago.

When contacted, a Vedanta spokesperson said the company did not comment on market speculation.

In June, India's largest private miner Vedanta Ltd had announced it would absorb oil firm Cairn India in a $2.3 billion (Rs 14,957 crore) all-share deal to create the country's largest diversified natural resources firm.

In 2011, Vedanta Group acquired 58.5 per cent controlling interest in Cairn India from its UK parent, Cairn Energy Plc. Twenty per cent of this was acquired by Vedanta Ltd and 38.5 per cent by Twinstar Mauritius Holdings Ltd (TMHL) — a special purpose vehicle wholly owned by Vedanta Resources Plc (VED).

The acquisition by TMHL was funded by $4.43 billion of bank loan guaranteed by Cairn India shares and guarantee/loan from VED. In August 2013, Vedanta Ltd acquired TMHL from VED.

Vedanta Ltd had in its April-June quarter earnings presentation stated that: "As on June 30, 2015, debt at Cairn acquisition SPV comprises Rs 8,926 crore of bank debt and Rs 16,564 crore of inter-company debt from Vedanta Resources Plc.

There was accrued interest of Rs 405 crore on the inter-company debt as on 30 June 2015."

London-based Vedanta Resources had a debt of USD 7.7 billion as on March 31, 2015 while its Indian arm Vedanta Ltd had another USD 4.57 billion debt. While Zero-debt Cairn India, on the other hand, has USD 2.85 billion cash reserve.