Vedanta expecting approval of Cairn India deal in days

Published on Monday 4 April 2011 18:53

Vedanta Resources expects the Indian government to approve its long-pending deal to take control of Cairn India in the next few days, its chairman said yesterday.

An oil ministry official said India's cabinet was expected to rule on the deal today. The Indian markets regulator has approved an open offer to buy shares in Cairn India in an issue to be launched next week, Vedanta chairman Anil Agarwal told reporters.

The market regulator's approval of the offer comes seven months after Edinburgh-based Cairn Energy, headed by chief executive Sir Bill Gammell, agreed to sell up to 51 per cent in its Indian unit to Vedanta in a deal valued at up to $9.6 billion (5.9bn).

The deal has been delayed due to a dispute over royalty payments by state-run Oil and Natural Gas Corp (ONGC), which has a 30-per cent holding in the Cairn-operated Rajasthan fields in western India but pays 100 per cent of the royalties.

Agarwal said he believed the royalty payments issue should be treated separately.

Alok Deshpande, an energy sector analyst with Mumbai-based brokerage Elara Capital, said: "The uncertainty about the royalty issue will play on investors' minds during the open offer if the deal is cleared without settling the royalty part."

The deal still needs federal approval, which is crucial for completion of the biggest acquisition in the Indian oil sector.

"It will come within a few days. We are waiting for that," Agarwal said, when asked about the government approval. "The government has assured us the decision will come very soon."

India's oil ministry has maintained it has nothing against the deal but it would strive to protect ONGC's interests.

Last month, Gammell said he expected the company to receive approvals for the deal by 15 April, a deadline set by both companies to seal the transaction.