Non-resident Indian Anil Agarwal-promoted Vedanta Resources is understood to have formally opposed some of the important pre-conditions set by the petroleum ministry for clearing the $9.6 (Rs 43,200 crore) billion acquisition of Cairn India Ltd by the London-based mining firm.
Out of the charter of 11 of pre-conditions set by the ministry to clear the deal, sources said that Vedanta has refused to accept the condition relating to sharing of royalty payments by Cairn India on the crude oil produced from the Rajasthan block. The condition to withdraw all litigations filed by Cairn India against state-owned ONGC has also not found favour with Vedanta.
The impact of agreeing to this condition would mean that Vedanta would have to shell out close to R15,000 crore to the government on account on royalty and cess on the oil produced from the Rajasthan block.
While the Vedanta spokesperson refused to give any comments, sources close to the group told Hindustan Times that the mining firm has written to the ministry stating “It (Vedanta) is not in a position to accept these conditions over royalty and litigations.”Sources said that Vedanta has also conveyed that till such time the deal is cleared, it was not a shareholder in Cairn India. It is also understood to have told the ministry that it is Cairn and its subsidiaries (and not Vedanta) that are signatories of the various production sharing contracts (PSCs) signed with the government.
Acceptance of the condition over royalty sharing would mean a significant departure from the terms of the existing contracts entered into between Cairn and the government. “Besides, this will also have a negative impact on Cairn India’s value thus negatively impacting the interest of all shareholders including the minority shareholders,” the source said.
Acceptance of the conditions over royalty and litigations can also be challenged by Cairn India’s minority shareholders under the Companies Act and therefore, cannot be accepted.
Cain India has over 2 lakh retail investors besides other minority shareholders. Sources said Vedanta is, however, agreeable to accept other conditions such as giving financial and performance guarantees, complying with all SEBI conditions, retaining the technical capability of Cairn India as a company even after it is taken over by Vedanta besides complying with the field development plans and work programmes for the Rajasthan and other oil and gas fields of Cairn.
“Vedanta is also open to furnishing all information on shareholding pattern, status of proceedings and prosecutions as asked by the petroleum ministry,” the source said.
Vedanta over-paying for Cairn stake?
Oil and Natural Gas Corp (ONGC) on Monday said it would have offered around Rs 310 per share for acquiring Cairn India, much lower than the Rs 405 a share Vedanta Resources is paying for a majority stake in the firm. “Obviously, Vedanta is over-paying... perhaps because they have been kept in dark on issues like statutory levies,” a source said.