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Cairn India may buy out UK parent

Sitting on a cash pile of over $2.5 billion (Rs 13,750 crore), Cairn India - controlled by Anil Agarwal-led Vedanta Resources - is evaluating the possibility of taking over its parent, the UK-based Cairn Energy.

business Updated: Mar 11, 2013 23:28 IST
HT Correspondent

Sitting on a cash pile of over $2.5 billion (Rs 13,750 crore), Cairn India - controlled by Anil Agarwal-led Vedanta Resources - is evaluating the possibility of taking over its parent, the UK-based Cairn Energy.

Cairn India owns the country's largest onland oil producing field at Barmer in Rajasthan.

Speculations of a takeover by Cairn India boosted Cairn Energy's stock on the London Stock Exchange last Friday. The share price has gone up by more than 11% since January.

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While Cairn India officially refused comments on any such move, sources within the group confirmed that bankers have approached Cairn India with a host of takeover proposals including the one to acquire Cairn Energy UK, currently valued at close to $2 billion (Rs 10,900 crore).

Aided by a recent spurt in global crude oil prices, Cairn India is expected to generate over $1 billion (R5,450 crore) every year from the sale of oil produced from its Rajasthan block. This would to a cash kitty of over $2.5 billion, and the company is in a comfortable position to consider attractive takeover propositions.

Global brokerage house CLSA said in a recent report that the move to buy Cairn Energy "could be a panacea for all strategic ills of Cairn India." The acquisition could give the Indian company access to 50 prospective oil and gas exploration blocks across Asia, Africa, Greenland and Europe, it added.

"We recommend Cairn India's management to consider the acquisition of Cairn Energy as we see it as a one-shot solution to several worries of Cairn," the CLSA report said.

"The report referred is a recommendation from CLSA, as a company policy we do not comment on such recommendations," said an official spokesperson of Cairn India. "We keep evaluating possibilities."

According to CLSA, Cairn Energy's market value of $2.6 billion is less than its cash chest ($1.6 billion) and the value of its 10.3% stake in Cairn India (worth $1.1 billion) put together.