The boards of Cairn India ltd and Vedanta ltd are likely to meet on Sunday to consider merger of cash-rich oil firm with the metal and mining company as billionaire Anil Agarwal looks to consolidate businesses and cut debt.
Separate meetings of the boards of Vedanta and Cairn are being called on June 14 in Mumbai to consider an all share merger, sources privy to the development said.
The merger will help cut Vedanta's Rs37,636 crore gross debt by using Rs16,870 crore of cash lying with Cairn as well as over Rs1,320 crore of profit the firm generates every year. Sources said the boards will consider the share swap ratio and decide on timelines for completion of the merger. The meeting will be finalised once Agarwal confirms his availability, they said.
Shareholders of Cairn India will be issued shares of Vedanta ltd - formerly Sesa Sterlite, in a ratio to be decided on Sunday, they said adding the transaction is being targeted for completion by March next year.
Agarwal's london-listed Vedanta Resources in a regulatory filing on Tuesday stated that “should a transaction with Cairn India ltd proceed, it could potentially be considered a reverse takeover.”
Vedanta in 2011 acquired majority control of Cairn India for $8.67 billion. It held 59.9 per cent in the oil explorer through its various units as on March 31, 2015. As a prelude to the merger, Vedanta had this month bought some of the shares held by Agarwal'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.
British oil explorer Cairn Energy, which had sold majority of its stake in Cairn India to Vedanta, still holds 9.8 per cent stake in Cairn India. It has, however, been restrained by the Income Tax department from disposing of its shares pending Rs10,247-crore tax demand.
Sources, however, did not see this as an impediment in the merger as Cairn Energy will get shares of Vedanta ltd in proportion to the merger ratio.