The Board of mining billionaire Anil Agarwal-controlled Vedanta Ltd will meet on Tuesday amid talks of the company being forced to sweeten its offer for absorbing its cash-rich oil subsidiary Cairn India.
Vedanta has offered one share for every share of Cairn India, a deal which did not appear lucrative to minority shareholders of the oil producer particularly its erstwhile promoter Cairn Energy plc.
Sources said besides the merger ratio, the minority shareholders including Cairn Energy and state-owned Life Insurance Corp (LIC) are concerned about the company not giving guidance on utilising the Rs 17,943 crore cash balance of Cairn India as of September 2015.
Vedanta board is scheduled to meet on October 27 to consider financial results for July-September quarter and the issue of sweetening the deal may crop up for discussion, they said.
While the deal has been approved by the two stock exchanges, it is now awaiting a nod from the High Court before it goes for a shareholder vote.
Vedanta needs the deal to go through by March 2016 as otherwise it will have to repay USD 1.25 billion it had taken as inter-company loan couple of years back.
When contacted, a Vedanta spokesperson said the company does not comment on market speculation.
In June, India’s largest private miner Vedanta Ltd had announced it will absorb oil firm Cairn India in a USD 2.3 billion all-share deal to create the country’s largest diversified natural resources firm.
In 2011, Vedanta Group acquired 58.5 per cent controlling interest in Cairn India from its UK parent, Cairn Energy plc, 20 per cent of this was acquired by Vedanta Ltd and 38.5 per cent by Twinstar Mauritius Holdings Ltd (TMHL) – a special purpose vehicle wholly owned by Vedanta Resources plc (VED).
The acquisition by TMHL was funded by USD 4.43 billion of debt made up of bank debt sured by Cairn India shares and parent company guarantee/loan from VED. In August 2013, Vedanta Ltd acquired TMHL from VED.
Vedanta Ltd had in its April-June quarter earnings presentation stated that: “As on June 30, 2015, debt at Cairn acquisition SPV comprises Rs 8,926 crore of bank debt and Rs 16,564 crore of inter-company debt from Vedanta Resources Plc.
There was accrued interest of Rs 405 crore on the inter-company debt as on 30 June 2015.”
London-based Vedanta Resources had a debt of USD 7.7 billion as on March 31, 2015 while its Indian arm Vedanta Ltd had another USD 4.57 billion debt. While Zero-debt Cairn India, on the other hand, has USD 2.85 billion cash reserve.