After resisting for almost a year, UK's Cairn Energy Plc has said it will accept all pre-conditions of the government to get approval for selling stake in its Indian arm to mining group Vedanta Resources.
After resisting for almost a year, UK's Cairn Energy Plc has said it will accept all pre-conditions of the government to get approval for selling stake in its Indian arm to mining group Vedanta Resources.
The Edinburg-based firm on August 3 wrote to oil secretary GC Chaturvedi saying it along with Vedanta has 80% shareholding in Cairn India, which is more than enough to get any precondition accepted.
The government has pre-conditioned its approval for the stake sale on Cairn or its successor accepting to share royalty and pay cess on all important Rajasthan oil fields.
"Cairn UK Holdings Ltd (a wholly owned subsidiary of Cairn Energy), holding 52.11% of the issued share capital of Cairn India and Vedanta Resources plc group holding an aggregate of 28.5% of the issued share capital of Cairn India, shall both be voting in favour of acceptance" of these conditions, Cairn Energy chairman Bill Gammell wrote.
The board of Cairn India is opposed to accepting the rider as it will erode company's profitability and was against interest of minority shareholders and so Cairn Energy wants these conditions to be voted by the company shareholders.
Cairn Energy together with Vedanta can overrule any objection from Cairn India to see any proposal through.
Gammell said Cairn India will seek vote of company shareholders through a postal vote.
"We expect the results of the shareholder vote to be announced in September and hope thereafter to be in a position to comply with all of the conditions set," he wrote.
Since its parent announced the $9.6 billion deal with Vedanta in August last year, Cairn India has been opposed to making royalty payments recoverable from the sale of oil and the company being made liable to pay a Rs2,500 per ton cess, as this was not in line with the Production Sharing Contract (PSC).
A change in the contract was neither in the interest of the company, nor its minority shareholders.
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