The revolving door at Cairn India’s top management office has been spinning ceaselessly in recent years. The oil-and-gas major, which was once considered the Vedanta Group’s prized asset in India, has seen three CEOs resign in the past four years, which counts as an extraordinary churn rate at the top.

The most recent CEO to quit was Mayank Ashar, who took over in 2014; he succeeded P Elango (who served as CEO from 2012 to 2014), and Rahul Dhir, who served as first CEO, but resigned within months of Anil Agarwal’s Vedanta Group acquiring a majority stake in Cairn India from its Edinburgh-based promoter Cairn Energy in December 2011-January 2012.

The Group and the outgoing CEOs have remained tight-lipped about the reasons for the churn, but industry watchers attribute it to a ‘change in operational style’

“If the business is family-owned, however professionally it may be run, there is always some level of interference in the daily management – a sort of board room outside the board room,” says Pavan Kumar Vijay, former President of the Institute of Company Secretaries of India, who now heads Corporate Professionals Pvt Ltd, a corporate consultancy.

Crude, commodities downturn In Cairn India’s case, the churn in the top management has been compounded by adverse market conditions, principally a sharp fall in crude oil prices in recent years. The company laid off over 200 employees in 2015.

Other businesses in the Vedanta Group have been similarly affected by the steep fall in commodities prices and the restrictions on mining in the country.

And while the recent recovery in global commodity prices (from their December 2015 lows) provides some relief, they are still significantly lower than they were even a year ago.

Industry analysts reckon that the Group’s businesses are not quite out of the woods. While they acknowledge Vedanta’s efforts to focus on the better-off businesses, analysts remain wary of the sustainability of this turnaround.

Other questions too continue to haunt the group: among them, some relate to Agarwal’s style of management; others wonder whether having a diverse commodity portfolio actually works to Vedanta’s advantage.

More fundamental questions about Agarwal’s interest in Cairn India and the intent to merge it with Vedanta Ltd linger. Tom Albanese, Chief Executive Officer of Vedanta Resources plc, has long maintained that Cairn “has not been an opportunistic acquisition.” The purpose behind the merger has been to simplify the business, he said.

Problems run deep Cairn India’s problems relate not just to executive churn; it has had to take an “impairment charge” of ₹11,389 crore due to the low oil prices in 2015-16, which led to the company reporting a net loss of ₹9,431 crore that fiscal.

This was on top of the impairment charge of ₹19,180 crore that Vedanta Ltd had taken in 2014-15 for its acquisition of Cairn India.

If commodity prices fall further, the Group’s companies may be forced to take more such hits. According to Albanese, “In international accounting practices, there are set methodologies for review of assets and carrying values. These are conducted across all our assets in every reporting period, so we would have assessed them at the end of the year, taking into account what would be seen as consensus market trends for these businesses and our own operating plans.”

Talking specifically of Vedanta Ltd, the group’s BSE-listed entity which owns most of its international zinc, copper and aluminium businesses, analysts at Mumbai-based brokerage firm Motilal Oswal say the company is trying to reduce costs and preserve cash.

Inefficient capital structure However, there are still concerns. “Although Vedanta Ltd has high-quality operating assets, the capital structure is highly inefficient with huge cash flow and liability mismatch,” the brokerage said in a recent report.

An analyst at another foreign brokerage firm said, “The recovery in global commodity prices is still infirm. Chinese PMI again contracted in April, which means volatility in the global markets won’t ease.”

As on May 25, metal prices apart from zinc closed in the red on the Shanghai Metals Market. Aluminium closed at $1,539 a tonne on the LME, much lower than ayear ago.

The Group’s Indian zinc business has been a rare bright spot. Not only have global zinc prices fared better than other commodities, the low cost of production at Hindustan Zinc has helped the group’s overall performance.

This is also a business that the Group is investing in to ensure it keeps providing value to shareholders. However, analysts are concerned that Vedanta’s plans to acquire the Centre’s stake in Hindustan Zinc remains in limbo because of a Supreme Court ruling.

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