Cairn India today reported its biggest quarterly loss of Rs 10,948 crore in the quarter ended March 31 mainly because of impairment loss on goodwill and non-producing oil and gas assets due to drop in oil prices.
Net loss of Rs 10,948.22 crore in January-March compared with a net loss of Rs 240.82 crore in the same period a year ago, the company said in a statement.
"Due to decline in crude oil prices in the international market, the Group has recorded an impairment on the carrying value of goodwill and some of its non-producing oiland gas assets aggregating to Rs 11,389.63 crore and Rs 284.17 crore respectively," it said.
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Cairn said the impairment of Rs 11,674 crore largely reflects the lower crude price, prevailing discount on oil produced from Rajasthan block as well as adverse long term impact of revised cess.
"All the company's projects including Bhagyam and Aishwariya enhanced oil recovery (EOR), Aishwariya Barmer Hill as well as the Raageshwari deep gas project remain viable at the price assumptions taken for impairment," it said.
Production dipped 8 per cent to 206,170 barrels of oil and oil equivalent gas in the fourth quarter of 2015-16. Its mainstay Rajasthan field produced 5 per cent less oil at 164,826 barrels per day.
Turnover fell 36 per cent to Rs 1717 crore on lower oil prices.
The company realised an average of USD 27.8 per barrel for oil it produced in January-March, down 43 per cent from USD 48.6 per barrel a year ago. Gas price realisation was however up 19 per cent at USD 7.4 per million standard cubic feet.
For the full 2015-16 fiscal, the company posted a net loss of Rs 9,432 crore as compared to Rs 4,480 crore profit in the previous year.
The loss did not prevent the company board from declaring a Rs 3 per share dividend by dipping into cash reserves of Rs 19,521 crore.
Mayank Ashar, Managing Director and CEO of Cairn India said, "The Cairn team has delivered a resilient performance in a challenging year. Drive for cost efficiency and rationalisation of capital investment have aided free cash generation despite crude prices plummeting to a 12 year low."
The company has successfully executed one of the world's largest EOR project at Mangala oilfield in Rajasthan block.
"The company continues with its pre-development activities to be future ready to tap the resource base," he said.
Cairn India, he said, is engaged with the Government on extension of Rajasthan license beyond 2019 for further investment in the prolific Rajasthan block.
Originally, the deal was to close by March 2016 but a
lingering retrospective tax issue and winning over half of the minority shareholders have proved to be a stumbling block.
The biggest among the minority shareholders are Life Insurance Corp of India (LIC) and Cairn Energy Plc of UK, the erstwhile owner of Cairn India. The two together control some 20 per cent shares in Cairn India.
"The Boards of Vedanta Ltd and Cairn India have today approved revised and final terms for the transaction, taking into account prevailing market conditions and having regard to underlying commercial factors," the two firms said in a joint statement.
Shareholder meetings of Vedanta Ltd and Cairn India will be convened on September 8 and September 12, respectively to get a minority vote on the merger.
Following completion of the transaction, Agarwal's London-listed flagship Vedanta plc's ownership in Vedanta Ltd is expected to decrease to 50.1 per cent from its current 62.9 per cent shareholding.
Cairn India minority shareholders will own 20.2 per cent and Vedanta Ltd minority shareholders will own a 29.7 per cent stake in the enlarged entity.
After consistently maintaining that the offer of 1:1 share plus one preference share was a fair offer, the Vedanta Group said the sweetened deal "offers significant benefits for Cairn India shareholders by de-risking earnings and stable cash flows supporting investment and dividends through the cycle, driving long-term value".
Terming transaction terms as "attractive," it said the deal offer exposure to Vedanta Ltd's world-class metal and mining assets, increased free float and trading liquidity and potential re-rating of the merged company.
Anil Agarwal, Chairman of Vedanta Resources plc, said: "The simplified corporate structure will better align interests between all shareholders for the creation of long term sustainable value."
Sudhir Mathur, CFO and Acting CEO of Cairn India, said: "Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets with significant growth."
"We are confident that the financial strength and diversified portfolio of tier-I assets will provide de-risked earnings and stable cash flows, driving long-term value. Cairn India shareholders will benefit from the revised terms announced today, while retaining the upside from Cairn's strong oil & gas assets," Mathur said.
Tom Albanese, CEO of Vedanta Ltd, said the strategic rationale for merging Vedanta Ltd and Cairn India remains highly compelling.
Stating that companies with diversified resources have delivered superior returns for shareholders historically, he said, "The transaction consolidates our portfolio of attractive tier-I assets and simplifies the group structure, better positioning the group to deliver superior value to all shareholders over the longer term.
