The ‘Cairn India’ brand will continue to exist even after the private oil and gas explorer merges with parent Vedanta. London-based Anil Agarwal controlled Vedanta expects regulatory clearances to be completed expeditiously, unlike in 2010 when it had announced the taking over of controlling stake in Cairn India from its then parent, the Edinburgh-based Cairn Energy, but faced regulatory hurdles.  With a view to enhancing shareholder value, Tom Albanese, CEO of Vedanta Resources and Vedanta, in an interview with Siddhartha P Saikia, says considerable funds will be utilised for the oil and gas business. Excerpts:

Do you need Cabinet approval for the merger?

This is not a change of control at Cairn India. This is different from when Vedanta bought the stake from Cairn Energy. We expect the approvals to be expeditious.

ONGC is your partner in the country’s biggest onshore field. When do you expect to seek their approval for the merger?

I am in Mumbai this week. I would expect that our team at Cairn meets ONGC. I would also look forward to meeting them in due course. We have good engagement at all levels with ONGC and we expect it to remain that way.

How will the merger change operations at Cairn India?

The Cairn India board will continue to run the business till the transaction is complete. The strategy for Cairn would remain unchanged. From my own perspective, I am quite excited about opportunities in the Rajasthan block. Note that oil resources in Rajasthan are tighter formations, which require certain technology and clear vision.

What about the leadership at Cairn India?

The management team, including the CEO, will remain unchanged.

And would you change the brand, from Cairn India to Vedanta?

We will continue with the Cairn India brand and name. We want to protect the local business. The brand name has a lot of personal and emotional attachment. Stakeholders believe that Cairn India is a very strong brand. The Indian government places considerable pride in the Cairn brand as a leader providing technology to the Indian oil and gas sector. The commitment we have made is that the brand remains unchanged.

Investors feel the reason for the merger is the over $2-billion cash balance with Cairn India, which Vedanta wants to leverage and pare its debt with.

We have said clearly that Vedanta is making cash flows and generating capital on its own, and we expect that to continue. Cairn India has a robust balance sheet. We have repaid debt last year at the Vedanta Resources level.

The idea is to continue to pay rising dividends to shareholders, grow our businesses and provide the best opportunities. The boards will consider opportunities to use the capital.

My ambition is to spend a considerable amount on the oil and gas business. And I feel that is fundamental to the answer.

Can you throw some light on the potential post-deal dividend policy?

Vedanta has a progressive dividend policy. This should give assurance to both Cairn and Vedanta shareholders that dividends will be high on the priority list of the board and the management.

What is the rationale behind issuing preference shares to Cairn’s minority investors? What will be its impact on future EPS for shareholders?

The idea is to provide them an additional asset that can be of better value it its own right, when they make consideration for the value of the transaction. The additional value comes from partners as they hold it for 18 months.

Recently, Cairn India offered its parent a loan. How will that impact valuations?

Yes, both have factored in the loan for valuation. The exchange ratio takes full value of the loan.

What kind of legal recourse can Vedanta take in the tax liability issue?

I do not see any change one way or the other. In my opinion, the tax issue is unhelpful as far as India projecting itself as an investment destination is concerned. Cairn has already said it will pursue all the avenues. The merger deal is independent (of the tax dispute).

Cairn has halved its capex for the Barmer block. What’s the outlook for the asset?

Engineers at the Barmer hill project have been told that they need to improve the yield. We are working with them to prove the economics at Barmer. We have been encouraged with the technical progress over the past two months.

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