Cairn, Vedanta Get All Approvals For Merger Except RBI Nod

New Delhi: Cairn India and Vedanta Ltd have received all regulatory approvals for their merger, except the Reserve Bank of India's nod for issue of preference shares, the two companies said today. Unlike in 2011, when mining baron Anil Agarwal bought over Cairn India for USD 8.7 billion, no apparent conditions have been set for the approvals by the government.

The approvals include transfer of participating interest of Cairn India in fields like the giant Rajasthan oilfield and Ravva oil and gas fields in Krishna Godavari basin to Vedanta Ltd.

"The company has now received all the required approvals in relation to the Scheme of Arrangement between Vedanta Ltd and Cairn India Ltd, and their respective shareholders and creditors, save and except the approval of RBI for issuance of Redeemable Preference Shares to the non-resident shareholders of Cairn," the two companies said in separate but identical statements.
 
The approvals will accelerate the process of combining the two companies controlled by Agarwal.
The merger will be made effective upon receipt of the RBI approval, the statements said. In 2011 the government had set stringent conditions for approving Vedanta's takeover of Cairn India. It made Cairn agree to royalties paid by state-owned Oil and Natural Gas Corp (ONGC) on its most important Rajasthan oilfields, being cost recoverable from oil sales.

ONGC owns 30 per cent interest in the Rajasthan oilfields but used to pay royalty at the rate of 20 per cent of crude oil price realised on all of output including 70 per cent share of Cairn.

Also, the government made Cairn withdraw the arbitration against levy of oil development cess on it and made it agree to pay its share as the second pre-conditions for approval.

This time around no condition was set despite a Rs 20,495 crore tax demand pending against Cairn India for failing to deduct withholding tax on alleged capital gains by its erstwhile promoter Cairn Energy on gains made from an internal group reorganisation in 2006-07.
 
Sources said the government could have made Vedanta takeover the tax liability following the merger.

The tax department has frozen 9.8 per cent remaining stake of Cairn Energy in Cairn India over the alleged capital gains made in 2006-07 internal business reorganisation. In July last year, Vedanta had sweetened its merger proposal to win over minority shareholders like LIC.

Shareholders of Cairn India will now get one equity share of Vedanta and four redeemable preference shares of face value Rs 10 and coupon 7.5 pre cent, as against the proposal of one equity share and one preference share earlier.

The two companies announced plans of the merger in June 2016, which would give the metals and mining company Vedanta access to the cash of Cairn India, helping it cut debt.
 

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