The price cut is set to pave the way for a settlement with the Indian government over oil royalties that has vexed the deal for nearly a year.
Both Cairn and Vedanta attributed the cut to a waiver of the "non-compete" clause in the initial agreement struck in August. As a result, gross proceeds for the sale of a 40 per cent interest in Cairn India fall from just under $6.7bn to a little over $6bn, with net proceeds expected to be approximately $5.4bn in cash, noted Cairn.
The Edinburgh-based firm has also agreed to sell the shares in Cairn India in two tranches: a further 10 per cent to Vedanta, bringing the latter's stake up to 28.5 per cent, which leaves a remaining 30 per cent holding to be sold subject to the government of India's agreement.
The government is withholding its approval of the deal until Cairn India agrees to pay a greater share of royalties on the oil recovered from its fields in western India.
Under the current terms of Cairn India's operations, its partner, the state-run oil and gas explorer Oil and Natural Gas Corporation (ONGC), has a 30-per cent holding in the fields but pays 100 per cent of the royalties.
The government's hard stance on changing the terms of the royalty payments before it allowed Cairn to sell its shares to Vedanta led to warnings that it would have a "significant impact" on the Indian oil producer's value and possibly even jeopardise the deal.
An Indian ministerial panel said last month it would refer the deal back to the cabinet, but did not disclose its recommendations. Sources said the panel would only recommend government support on the basis of a royalty sharing deal.
Sir Bill Gammell, the chief executive of Cairn, is keen to close the deal. Recently the founder of the Scots firm announced he would become the non-executive director of Cairn but would remain in charge of the sale of the Indian stake.
Yesterday, Gammell welcomed the "adjustment" to the terms of the deal
"Cairn is pleased to have secured this adjustment to the agreement with Vedanta," he said.
"Cairn continues to believe the necessary approvals to complete the Vedanta transaction will be received and is working with the Government of India in a positive and constructive manner."
Vedanta will buy the further 10 per cent stake announced yesterday on or before 11 July, adding them to shares it has already bought through an open offer and from Malaysia's Petronas.Anil Agarwal, chairman of Vedanta, said: "Vedanta believes this initial 10 per cent purchase is a further demonstration of its commitment to India."
Cairn Energy is now focusing much of its efforts on oil exploration in Greenland.