Shares of Vedanta, Cairn India surge by 5% after NCLT approves merger

Fri Mar 24, 2017 - 6:44am GMT+0000
Shares of Vedanta, Cairn India surge by 5% after NCLT approves merger
A worker working at Cairn Energy

Shares of Cairn India and Vedanta rose up by 5 percent on the BSE after the National Company Law Tribunal (NCLT) approved their merger plans on Thursday.

According to a statement from Cairn India, “NCLT, Mumbai Bench has today approved the scheme of arrangement between Cairn India and Vedanta, and their respective shareholders and creditors. The certified copy of the order is awaited from the Tribunal.”

The deal was first revealed on 14 June 2015, with the terms and conditions of the merger continuously revised and finalized in the month of July 2016.

As per the scheme, minority shareholders of Cairn India will get one equity share in Vedanta and four redeemable preference shares with a face value of Rs. 10 each, at a coupon rate of 7.5 percent.

The merger will also give Vedanta the access to Cairn’s oil and gas assets, including the prolific onshore fields in Barmer, Rajasthan. While Cairn’s hydrocarbon production sharing contracts with the government will also be shifted to the merged entity.

With this, Vedanta can now proceed with its existing restructuring projects to enhance domestic hydrocarbon operations including the adoption of fresh technology for enhanced oil and gas recovery.

While the balance sheets of both companies will be merged, the Cairn brand will continue to exist for oil and gas operations. “Cairn brand will be preserved and investment will continue as usual, as projects have been identified,” Cairn India said.

The merger will be positive as it will generate value for the shareholders and de-risk Cairn India by providing access to a portfolio of diversified assets in a volatile market and deliver significant near term value. As stated by Tom Albanese, CEO of Vedanta Ltd, on various occasions, the group is focused on growing its oil and gas business and Cairn will continue to be supported on its growth path.

Vedanta Limited is a diversified natural resources company, whose business primarily involves producing a diversified range of natural resources. The company has a presence across India, South Africa, Namibia, Australia, and Ireland.

While Cairn India is one of the largest independent oil and gas exploration/ production companies in India with a market capitalization of more than US$4 billion. With the merger, Cairn India will become part of Vedanta, an important strategic step to simplify the group structure.

As Cairn merger is now on track, Vedanta is hopeful to see fresh investments in FY18 for both existing projects and fresh acreages.

By Vivian Foo, VCNewsNetwork