New Delhi: Billionaire Anil Agarwal-led group plans to merge its cash-rich oil firm Cairn India Ltd with its flagship metals and mining company Vedanta Ltd in an all-share deal aimed at trimming the group’s huge debt. The merger will help cut Vedanta’s Rs 37,636 crore gross debt by using Rs 16,870 crore cash lying with Cairn as well as over Rs 14,000 crore of cash the firm generates every year.
Shareholders of Cairn India, which has seen stock prices plunge from Rs 385 in June last year to Rs 172.60 at close of trading on BSE today, will be issued shares of Vedanta Ltd – formerly Sesa Sterlite, sources with direct knowledge of the development said.
Boards of the two firms are likely to consider the merger proposal soon and the transaction is targeted for completion by March next year, they said.
Agarwal’s London-listed Vedanta Resources in a regulatory filing said: “Should a transaction with Cairn India Ltd proceed, it could potentially be considered a reverse takeover.”
Vedanta had in 2011 acquired majority control of Cairn India for USD 8.67 billion. It held 59.9 per cent in the oil explorer through its various units as on March 31.
As a prelude to the merger, Vedanta had this month bought some of the shares held by Agrawal’s Twin Star Mauritius Holdings to raise its stake in Cairn India to 23.71 per cent from 18.73 per cent. Twin Star now holds 34.43 per cent in Cairn India.
To local bourses, Vedanta said, “Company’s stated strategy is to simplify and consolidate its corporate structure. Management reviews options to deliver this strategy on an on-going basis.”