Cairn India, Vedanta get approvals for merger except RBI ratification

New Delhi: Cairn India and Vedanta have received all regulatory approvals for their merger, except the Reserve Bank of India’s (RBI) nod for issue of preference shares, the two companies said on Tuesday.

Unlike in 2011, when mining baron Anil Agarwal bought over Cairn India for $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.

“The company has now received all the required approvals in relation to the Scheme of Arrangement between Vedanta and Cairn India, 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% interest in the Rajasthan oilfields but used to pay royalty at the rate of 20% of crude oil price realised on all of output including 70% 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.

Sources said the government could have made Vedanta takeover the tax liability following the merger.

Waiting for nod
The Central bank is yet to give permission for issuing preference shares
The company wants approvals for transfer of participating interest of Cairn India in vairious fields
The approvals will accelerate the process of combining the two companies controlled by Agarwal