Vedanta and Cairn India dropped by 0.57% to 1.92% at 10:00 IST on BSE on profit booking after the boards of Vedanta and Cairn India sweetened the terms of the deal for the merger of Cairn India with Vedanta.
Vedanta, Cairn India and the parent company, Vedanta Resources plc announced revised and final terms to the recommended merger between Vedanta and Cairn India after market hours on Friday, 22 July 2016.Meanwhile, the S&P BSE Sensex was down 43.27 points or 0.16% at 27,759.97.
Vedanta (down 1.92% to Rs 165.70) and Cairn India (down 0.57% to Rs 190.90) declined.
Shares of Vedanta had surged 7.44% to Rs 168.95 on Friday, 22 July 2016 ahead of the announcement. Shares of Cairn India jumped 11.59% in four sessions to Rs 192 on 22 July 2016 from a low of Rs 172.05 on 18 July 2016,
The merger between Vedanta and Cairn India was announced on 14 June 2015. The boards of Vedanta and Cairn India approved revised and final terms for the transaction, taking into account prevailing market conditions and having regard to underlying commercial factors. Pursuant to the revised and final terms, each Cairn India minority shareholder will receive for each equity share held in Cairn one equity share in Vedanta and four redeemable preference shares with a face value of Rs 10 in Vedanta with a coupon of 7.5% and tenure of 18 months from issuance and implied premium of 20% to one month volume weighted average price (VWAP) of Cairn India share price. As per the original terms of the deal announced in June 2015, Cairn India shareholders were to get one equity share of Vedanta for each share held in the company and one 7.5% redeemable preference shares (RPS) of Vedanta of the face value of Rs 10 each with tenure of 18 months for each share held in Cairn India. The recent commodity price environment has further strengthened the strategic rationale for the merger, the two Vedanta group companies said in a joint statement.
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The appointed date for the scheme has been revised to 1 April 2016 from 1 April 2015 earlier. The transaction is expected to close in the first quarter of calendar year 2017.
The transaction offers significant benefits for Cairn India shareholders such as de-risked earnings and stable cash flows supporting investment and dividends through the cycle, driving long term value, attractive transaction terms, exposure to Vedanta's world class metals and mining assets, low cost, long life and well invested, delivering strong growth through production ramp ups, improved optionality to allocate capital and increased participation in cost savings, increased free float and trading liquidity and potential re-rating of the merged company.
The Jurisdictional High Courts have convened the shareholder meetings for Vedanta and Cairn India on 8 September 2016 and 12 September 2016 respectively. Following completion of the transaction, Vedanta plc ownership in Vedanta is expected to decrease to 50.1% from its current 62.9% shareholding. Cairn India minority shareholders will own 20.2% and Vedanta minority shareholders will own 29.7% stake in the merged entity.
Sudhir Mathur, CFO and Acting CEO of Cairn India said in a statement that Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets of Vedanta. Tom Albanese, CEO of Vedanta said that the strategic rationale for merging Vedanta and Cairn India remains highly compelling. Diversified resources companies have delivered superior returns for shareholders historically, Albanese said.
Completion of the transaction will be conditional on receipt of the approvals of Vedanta and Cairn India shareholders, approvals at a High Court directed meetings scheduled for 8 September 2016 for Vedanta and 12 September 2016 for Cairn India, approval of Ministry of Petroleum & Natural Gas, approval of Jurisdictional High Courts where the registered offices of Vedanta and Cairn India are situated, Foreign Investment Promotion Board's approval and regulatory and other approvals as may be required.
Vedanta reported consolidated net loss of Rs 11181.26 crore in Q4 March 2016 compared with consolidated net loss of Rs 19228.12 crore in Q4 March 2015. Net sales fell 10.7% to Rs 15829.13 crore in Q4 March 2016 over Q4 March 2015.
Cairn India's consolidated net profit fell 28.3% to Rs 359.55 crore on 28.2% fall in net sales to Rs 1885.11 crore in Q1 June 2016 over Q1 June 2015.
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