Ending the 10-month-long uncertainty over one of the biggest merger and acquisition deals in India, the government has conditionally allowed Vedanta Resources to gain control of Cairn India, the Indian arm of Cairn Energy plc of the UK.
The approval to the $8.74bn (Rs39,330 crore) bid on Thursday will mark NRI entrepreneur Anil Agarwal’s metals and mining major Vedanta Resources’ entry into India’s oil and gas sector.
In August 2010, Cairn Energy agreed to sell majority stake to Vedanta in a $9.6bn deal. But it got stuck due to protests from state-owned ONGC, which has a 30% stake in Cairn India’s oilfields in Rajasthan.
Finance minister Pranab Mukherjee told reporters after the cabinet committee on economic affairs cleared the deal: “This will create an appropriate sentiment in the market.”
Under the conditional approval, all private shareholders of the Rajasthan oilfields, including Cairn Energy, Cairn India and Vedanta, will have to share the R17,000-crore royalty — a state government levy on oil exploration companies.
At present, ONGC, original licensee of the Rajasthan oilfields, bears the entire royalty burden, although Cairn India holds a majority interest of 70% in the oilfields.