Cairn India expects to merge with Vedanta by fiscal-end

Cairn India Ltd, the oil exploration arm of London-listed Vedanta Resources Plc, is expected to merge with the parent company Vedanta Ltd by end of the current financial year (April-March 2016-17). The merger of Cairn India Ltd with Vedanta Ltd was planned in June last year, but was held up opposition from minority shareholders.

Vedanta Ltd had planned the complete merger of Cairn India with itself by June. But amidst opposition from minority shareholders, the merger got delayed beyond the stipulated period.

State-run insurance giant Life Insurance Corp of India (LIC), a key shareholder in both Vedanta and Cairn India, is yet to give its approval for the merger (See: Cairn Energy may join LIC to vote against Vedanta-Cairn India merger: reports).

''Your company continues to work towards completion of merger with Vedanta,'' Agarwal told shareholders at the firm's 10th annual general meeting in Mumbai. ''Your company will get access to Vedanta's Tier I metal and mining assets, which are well-invested, low-cost and have a long life,'' he said.

The merger plans hit a roadblock after the income-tax department froze Cairn Energy Plc's 9.5 per cent stake in Cairn India.

In January 2014, the tax department slapped a Rs.10,247-crore tax claim on Cairn Energy for alleged capital gains of Rs.24,503.50 crore made in 2006 while restructuring the business of Cairn India (Now, Cairn India hit with Rs 10,247-cr tax notice).

The tax department said the merger can happen only after the freeze is lifted and tax issues addressed.

In 2011, Cairn Energy Plc sold 58.5 per cent of Cairn India to Anil Agarwal's Vedanta Resources, for $8.67 billion. Currently, Vedanta holds 59.88 per cent in Cairn India.

While Cairn India has approached Delhi high court, Cairn Energy is contesting the matter through an international arbitration.

LIC, which owns 9.06 per cent in Cairn India and 3.9 per cent in Vedanta, has in the past expressed concerns over valuation and debt of the merged entity. As recently as 13 July, LIC issued a statement denying it had given its approval for the merger. LIC is the single largest domestic minority shareholder in Cairn India and its approval is crucial for the merger.

In 2014, Cairn India Holdings Ltd had granted a loan of $1.25 billion to THL Zinc Ltd, a unit of Vedanta for a period of two years. This loan was rolled over for another two years.

Over the last two years, Cairn India's market cap has halved- slipping from Rs.69,485 crore on 13 June 2014 to Rs33,110 crore on Thursday. Vedanta Ltd announced the merger with Cairn on 15 June 2014.

On Thursday, shares of Cairn India rose 0.54 per cent to Rs176.60 while Vedanta fell 2.78 per cent to Rs157.25 on BSE.

(See: Cairn India says India investment plans intact)