Cairn India, Vedanta boards to consider merger on Sunday

13 Jun 2015

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The boards of Vedanta Ltd, the Indian arm of London-listed Vedanta Resources plc, and subsidiary oil producer Cairn India will meet on Sunday 14 June to consider a proposal to merge Cairn and Vedanta in India.

In separate notices to the Bombay Stock Exchange (BSE) today, the companies said their boards would meet to "consider and evaluate" a merger.

Vedanta this week signalled it was considering a merger of the two Indian units, as it tries to resolve a mismatch between its debt, held at the top of the group, and its cash, largely generated by subsidiaries, including Cairn.

The Anil Agarwal-led Vedanta Resources, had, in a regulatory filing earlier this week, said, "should a transaction with Cairn India proceed, it could potentially be considered a reverse takeover."

A reverse merger would mean Vedanta would merge into cash cow Cairn India. Such a merger will help Vedanta lower its debt as it will own Cairn India's Rs16,000 crore cash reserves.

According to a recent Edelweiss report, Vedanta Ltd has a debt of Rs75,800 crore. Vedanta had reported standalone debt, excluding liabilities of subsidiaries, of Rs37,636 crore as of 31 March 2015.

News of the possible merger of Cairn India with Vedanta Ltd has also angered the minority shareholders of Cairn India who feel that their company's cash reserves are the main reason for the merger with parent company Vedanta Ltd.

On Friday, Reuters had quoted oil minister Dharmendra Pradhan as saying that he had met Cairn executives this week to discuss the potential merger and that the deal could be announced as early as Sunday.

Senior officials of Cairn India and Vedanta Ltd, including Cairn chief executive Mayank Ashar and chief financial officer Sudhir Mathur, had met Pradhan to brief him about the companies' plan.

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