Shareholders oppose Cairn­-Vedanta merger

The opposition to Vedanta’s proposal to merge Cairn India with itself seems to run deeper than it did when a United India Insurance representative first spoke against it on the sidelines of Cairn India’s annual general meeting in Mumbai in July.

The opposition to Vedanta’s proposal to merge Cairn India with itself seems to run deeper than it did when a United India Insurance representative first spoke against it on the sidelines of Cairn India’s annual general meeting in Mumbai in July.

Cairn India Ravval oil exploration site.(HT Archive)

Letters seen by the HT suggest two of the largest minority shareholders of Cairn India have raised concerns about a ₹8,375 crore loan to THL Zinc Ltd, a subsidiary of Vedanta Group.

Cairn Energy and Mondrian Investment Partners have written to the independent directors of Cairn India, objecting to the extension of this loan’s tenure. Originally granted in May 2014 by Cairn India, the loan’s tenure was extended by another two years in May.

Their letters say their opinions were not sought during the tenure extension.

Cairn Energy holds 9.82% and Mondrian 3.76% stake in Cairn India. The two have said that if the proposed merger goes through, the “loan may never be repaid”.

The Vedanta Group, in an email from its corporate communications department to HT on Monday, stood its ground: “The inter-company loan given to Vedanta is for a period of two years and it has been taken into consideration in Cairn India’s valuation.

Hence there is no under mining Cairn’s valuation.” Asked when, given the concerns of the minority shareholders, did it see the merger going through, the company said meetings of the shareholders of Vedanta Resources Plc, Vedanta Limited and Cairn India are slated for September and the merger completion timeline is March 2017.

Vedanta Resources acquired Cairn India in 2011 from its British promoters, Cairn Energy Plc. This merger is crucial for the debt-ridden Vedanta as Cairn India is flush with cash.

London-based Vedanta Resources had a debt of $7.7 billion (almost ₹52,000 crore) as on March 31, 2015 while its Indian arm Vedanta Ltd had another $4.57 billion (almost ₹31,000 crore). Zero-debt Cairn India, on the other hand, has $2.85 billion (just over ₹19,000 crore) of cash reserves.

Vedanta has already offered sweeter terms to shareholders of Cairn India Ltd to push through the merger.

For each share they hold, Cairn India minority shareholders will receive one equity share and four redeemable preference shares in Vedanta under the revised terms. The original offer, made on 14 June 2015, was of one equity share and one redeemable preference share for each share.

Vendanta, in its email to HT, said it is engaged with all shareholders and they appreciate the revised offer, and that it may not sweeten the offer further. “Vedanta firmly re-iterates it is the final offer,” the company said.