Cairn India today said the results of a shareholders’ vote for acceptance of conditions imposed by the government on parent firm Cairn Energy’s sale of a majority stake in the Indian subsidiary to Vedanta Resources will be declared on September 14.
Cairn Energy, which holds a 52.11 per cent stake in Cairn India, has already informed the government and its partner ONGC that it will vote along with Vedanta (which has an 18.5 per cent stake), for accepting conditions that include Cairn India agreeing to pay royalty and cess on the mainstay Rajasthan oil block.
“Cairn India has written to all of you to seek your views on accepting the conditions put in place by the government for them to finally clear this transaction,” Cairn India Non-Executive Director Jann Brown told shareholders here today.
“The board views the ballot, which will be declared on September 14, 2011, as the most appropriate and democratic way to determine this decision,” she said.
Cairn Energy is selling a 40 per cent stake in Cairn India at Rs 355 a share to fetch $6.02 billion from London-listed mining group Vedanta. Vedanta has already acquired an 18.5 per cent stake in Cairn India from minority shareholders and Malaysia’s Petronas.
She said the government has approved the transaction and “has imposed certain conditions“.
Cairn India currently does not pay any royalty on its 70 per cent interest in the Rajasthan fields.
The Cabinet Committee on Economic Affairs (CCEA) had on June 27 given consent to the Cairn-Vedanta deal, but subject to Cairn or its successor agreeing to charging or deducting the royalty paid by ONGC from revenues earned from the sale of oil before profits were split between partners.
This cost-recovery of royalty will lower Cairn India’s profitability.
The CCEA also said Cairn India must pay a Rs 2,500 per tonne cess on its 70 per cent share of oil production. Cairn has challenged this liability through international arbitration, but will now have to withdraw its suit to get the nod for its parent’s stake sale.