The way New Delhi handles Cairn Energy’s proposed $9.6bn sale to Vedanta of a controlling stake in its Indian energy business is a crucial litmus test for foreign investment in India, the UK oil and gas explorer has warned.
Sir Bill Gammell, Cairn chairman, said New Delhi’s attitude to the “high profile” deal would be a signal to other major international companies of India’s approach to its investors, especially those who potentially might wish to disinvest in Indian operations.
“It’s important this transaction be seen to be a smooth transaction from an investment point of view,” Sir Bill told the Financial Times on Monday. “People will be watching very carefully as to how it takes place.”
India’s government has insisted on its right to approve the transaction, which involves strategically important oilfields.
It has so far been muted in its response to Cairn’s surprise August decision to sell a majority stake in its Indian subsidiary to Vedanta, the London-listed mining and metals group founded by Anil Agarwal, the Indian-born billionaire.
Sir Bill said he hoped New Delhi would give its blessing by the end of the year.
Cairn began its Indian foray in the 1990s, acquiring the then struggling local exploration operations of the Anglo-Dutch oil company Shell. It subsequently made India’s biggest onshore oil discovery of the last two decades in Rajasthan’s desert sands and listed on the Bombay Stock Exchange four years ago.
However, some of Cairn India’s minority shareholders have been angered by Vedanta’s plan to pay Rs405 per share to Cairn Energy, which holds a 62 per cent stake in Cairn India, while offering them just Rs355 per share in a mandatory open tender.
Mr Agarwal appears undaunted. He has ruled out any increase in the offer price to minority shareholders.
“We have given a very lucrative offer – that offer will stand,” he said on Monday.
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