BUSINESS
Company forms committee of independent directors even as retail shareholders seek similar premium being paid to the promoters by Vedanta Resources.
VM Vaidya, an advocate by profession and a minority shareholder of Cairn India since the last three years was disappointed as he left the annual general meeting on Wednesday.
Vaidya, like most of the retail shareholders of the company, feels the minority shareholders should be given fair compensation in Cairn’s deal with Vedanta Resources.
Vedanta is offering Cairn Energy Plc, the promoters of Cairn India Rs405 per share for 40% stake which includes the premium of Rs 50 as non-compete fee for not undertaking any venture for next
3 years in India and a few other countries.
However, it is offering Rs355 to general shareholders of Cairn India. The open offer opens on October 11.
Cairn India has now formed a committee of two independent directors, Omkar Goswami and Edward Story, to ensure the interests of minority shareholders.
Goswami said, “We both are not present in either of the boards (Cairn Energy Plc and Vedanta Resources) and as this deal involves a joint venture our responsibility is to make sure that there is absolute transparency in way of dealing, minority shareholders interests are taken care of and corporate governance norms are followed throughout the entire procedure.”
Though shareholders were not too sure whether the independent directors’ committee would yield any result, analysts were divided in their opinion of whether minority shareholders should also be paid a premium of Rs50 per share as non-compete fee.
Goswami said, “Under section 20 (8) of Sebi Takeover Code, up to 25% premium can be given as non-compete fee. The present amount of Rs50 is just 14% of the per-share offer, so there is no legal issue in it.”
An analyst with a domestic brokerage said, “The retail investors should also be paid the same amount as the promoters and unless the independent committee comes up with this resolution it is all farce and we are reading too much into it. They have received a lot of flak from the investors and thus they have introduced this diplomatic move as investment community’s sentiments are hurt and the Cairn’s stock has taken a beating.”
However, another analyst from a domestic brokerage said, “The stock is today at Rs331 and it has rallied recently in the wake that the shareholders would be paid Rs355 per share, so there is no wiping-off of the minority stakeholders.”
Bill Gamell, chairman of Cairn India, said, “We believe it was important to have an independent committee that the shareholders could talk to in any discussions that may relate to the Securities and Exchange Board of India, and different pricing based on our receiving an additional price for a non-compete within India.”
Rahul Dhir, managing director, Cairn India, said, “It is a corporate transaction and the team of 1,300 personnel in India remains the same and the subsidiaries will all remain the same and perform their functions.”
Gamell said that the deal leaked even before they could reach the governments for talks.
“We were maintaining a lot of secrecy but it leaked to the media. However, by 2012-2013 Vedanta has an option of increasing its stake by 5% every year and we will reduce it by 10% at the end of the period.”
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