The proposed merger of oil and gas explorer Cairn India with its parent firm Vedanta will get delayed by at least a quarter.
On June 14, 2015, a merger was announced between Vedanta and Cairn India. In November 2015, Anil Agarwal-led Vedanta Resources had said that the merger would be completed by April-June quarter instead of January-March 2016.
However, during an analyst conference call last Friday hosted by Cairn India post its third quarter results, it was revealed that the proposed transaction will further get delayed by ‘at least a quarter’. “The management has given to understand that the merger is running behind schedule and the companies are still awaiting a date from the high court to convene a meeting of shareholders,” said an analyst who participated in the conference call.
Another analyst closely tracking the transaction said that the meeting to be held post the court’s order would be most crucial for the merger to sail through. At the high court directed meeting — majority of shareholders are required to vote in favour of the transaction; and 75% in value of shareholders present and voting at the shareholder meeting required voting in favour. Vedanta PLC and Vedanta Limited can vote at the meetings for Vedanta Limited and Cairn India, respectively.
“With regard to proposed merger with Vedanta Limited, the company is seeking directions of the Bombay High Court for convening meeting of all our relevant stakeholders,” Cairn India said in its statement on January 22. Minority shareholders of Cairn India will receive for each equity share held — one equity share in Vedanta Limited and another one redeemable preference share in Vedanta Limited with a face value of Rs 10. The stock exchanges — BSE and NSE — have given the ‘no objection’ for the merger on September 10, 2015.
“The potential merger with parent Vedanta remains a key concern. The proposed swap ratio at Vedanta’s current share price implies value for Cairn of only Rs 84/share, implying 30% downside potential to the current price,” Nomura said in a January 18 note.
On January 22, Cairn India stock closed at Rs 112.90, up Rs 2.90, or 2.64%. The 52-week high of the share was Rs 262.50 and the 52-week low was Rs 106.60. Shares of Cairn India have lost more than 50% of their value since 2015, while the benchmark Sensex is down more than 10% during the period. In fact, on the back of 3.2% decline on January 19 when the global crude oil prices fell to their new 13-year low, at Rs 110.90, the Cairn stock traded at its lowest level since its secondary market listing.
* Cairn India seeking Bombay High Court order to hold meeting of all stakeholders
* Majority of shareholders are required to vote in favour of the transaction
* In November last year, Vedanta Resources said merger to happen in April-June
* 75% in value of shareholders present and voting at the shareholder meeting required voting in favour
nAnalysts say merger delayed by at least a quarter