As P. Elango gets ready to face the Cairn India board on Monday in his new capacity as the interim CEO, the first challenge before him will be whether the shareholders will get the Diwali bonanza — maiden dividend.
The company’s dividend policy was approved by the board in April 2012. As part of this policy, the company aimed at a dividend payout ratio of around 20 per cent of the annual consolidated net profits to its shareholders.
The dividend payout was dependent on certain regulatory approvals, according to company officials. The company had formulated a scheme of arrangement between Cairn India and some of its subsidiaries to simplify and consolidate the multi-layered structure comprising foreign subsidiaries.
The scheme has been approved by the High Courts of Madras and Bombay, shareholders and joint venture partners.
Expecting approvals
“We are actively pursuing the matter with the regulatory authorities and these approvals are expected soon. As you will appreciate, it is only after the regulatory authorities’ approval that your company will be able to declare and pay dividend,” Cairn India Chairman, Navin Agarwal, had said at the company’s AGM recently.
Increasing output
Elango may have to address the issue of increasing output from the company’s premium asset — the Barmer oilfields, Rajasthan. The company was looking at closing last fiscal with an output of 190,000 barrels of oil per day (bopd) and hit 200,000 bopd subsequently, but it remained at 175,000 bopd for want of regulatory approvals.
The company’s further investment plan of $600 million over the next two years in Rajasthan exploration, which will also increase output from the oilfields, is also awaiting the Petroleum Ministry approval.
Based on the revised estimates, the total Rajasthan resource base now supports a potential production of 300,000 bopd, subject to approvals from the Government and joint venture partner, ONGC and further investments.
Stock performance
Expectations of increase in output, buoyant crude oil prices, and hopes of quicker approvals due to the improved working relationship with joint venture partner has benefited Cairn India on the bourses.