Anil Agarwal-controlled Vedanta Resources would consider paying banks up to $1 billion by divesting a small stake in one of its subsidiaries to be able to complete the $9.6 billion Cairn India deal.

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A senior executive of the company said it “remains hopeful” New Delhi would stamp its approval to the deal without making any changes, even as the LSE-listed Vedanta starts its global roadshow on Monday to tap into bond markets, expecting to raise up to $1.5 billion.

“There is no parent company equity, which is to be used in financing,” said a senior executive at Vedanta, which is doggedly pursuing what could be the country’s largest cross-border acquisition, now pending government approval for over 10 months.

“There is a $1 billion facility, which can be paid from various sources, including equity issue, if any, at a subsidiary,” said the executive, who did not wish to be identified. The executive declined to share other details.

Mining giant Vedanta has a complex structure under which it has six direct subsidiaries —- where the parent company has 100% ownership —- and 61 indirect subsidiaries.

Vedanta has an 18.5% stake in Cairn India, after its iron-ore subsidiary, Sesa Goa spent $2.7 billion of its cash reserves helping the company get a stake in the Rajasthan-focused oil major. BSE-listed Sesa Goa spent $1.5 billion buying a 10.4% stake from Malaysia’s Petronas in April and later bought an 8.1% stake through a mandatory open offer to Cairn India’s minority shareholders for another $1.2 billion. 

“The world community is watching this deal having taken so long. We remain hopeful it will be approved soon without any changes,” the executive said, describing Sesa Goa’s investment in Cairn India as a “financial investment.”

A group of ministers headed by finance minister Pranab Mukherjee meets on May 27 to decide the fate of the deal.

Cairn India is locked in a messy royalty dispute with state-controlled Oil and Natural Gas Corporation (ONGC) and New Delhi is debating if the resolution of the issue should be set as a precursor to country’s biggest cross-border acquisition. ONGC, which pays 100% royalty on production from Cairn’s Rajasthan block to the Rajasthan government despite holding only 30% stake, wants the agreement to be tweaked. Both Cairn and Vedanta strongly disagree with the suggestion, saying any change in financials would make the deal less appealing for their investors.

Vedanta also ruled out any plan to spin off its Zambian copper mining business during the first quarter of the 2012 fiscal. It deferred the listing plans in December last year —- closing the Cairn deal is top priority right now.

Analysts had expected that funds raised from the flotation of Konkola Copper Mines —- initially expected by June-end —- would have helped Vedanta is its other capex plans.

“Traditionally, Vedanta’s preferred funding route has been convertible bonds. So, this (the bond issue) comes as no surprise,” said a Mumbai-based executive at a global ratings agency.

Barclays, Citigroup, Credit Suisse, Royal Bank of Scotland Group and Standard Chartered are managing the bond issue.

The Vedanta executive also clarified that removal of put and call options from the deal agreement initially announced on August 16 last year are not a setback to either of the companies.

“Cairn (Energy) selling the shares was always dependent on the response to the open offer. So, where is the question of any setback?” the executive asked. Sebi had asked the companies to scrap this clause as the market regulator believed it violated the securities regulations.

Cairn Energy holds a 62% stake in Cairn India and the Scottish oil explorer was to sell up to 51.4% of its holding in Cairn India with Vedanta agreeing to buy a 10.6% stake in two tranches in 2012 and 2013.