New Delhi, Feb 7 (PTI) With time running out, a scramblehas began to find a solution on how London-listed mining groupVedanta Resources can get government approval for its USD 9.6billion deal to acquire majority stake in Cairn India.
The deal, involving Vedanta acquiring 40 to 51 per centstake from UK''s Cairn Energy Plc and thereafter making an openoffer to buy for an additional 20 per cent from minorityshareholders of Cairn India, is to be completed by April 15.
For Vedanta to complete the open offer well within thedeadline approved by its and Cairn Energy shareholders, thegovernment must this week give its approval to thetransaction. The deal is facing a challenge from ONGCover royalty payments on Cairn India''s mainstay Rajasthanoilfields.
Sources in know said Oil Secretary S Sundareshancancelled his February 9-11 trip to Calgary (Canada) forpromoting oil blocks offered for bidding in the IXth round ofNELP in order to meet chief executive of Vedanta Resources andCairn Energy again.
D N Narasimha Raju, Joint Secretary (Exploration), whowas to accompany Sundareshan for the roadshow in Calgary andthen proceed to Houston for another promotional show, too willstay back to discuss the finer points of the deal.
Market regulator SEBI has not permitted Vedanta to makethe open offer to Cairn India shareholders in absence ofgovernment approval to its deal with Cairn Energy.
As per SEBI regulation, an open offer requires 55-60 daysto complete and Vedanta was expecting the nod by today so asto have a small buffer for any contingency.
But the approval is stuck as ONGC by virtue of its stakein 8 out of the 10 oil and gas properties held by Cairn India,claims pre-emption rights .
It wants the issue of excess royalty it has to pay onCairn India''s mainstay Rajasthan block to be addressed beforegiving its no-objection.
Sources said oil ministry has made resolution of theroyalty issue one of the 11 pre-conditions for giving its nod.
Sundareshan had yesterday met chief executives of Vedantaand Cairn, who opposed three of the 11 conditions, they said.
Cairn/Vedanta are opposed to ONGC''s demand for recoveringthe royalty before profits from sale of Rajasthan oil as itwill lower Cairn India''s profitability and valuation.
Sundareshan was to meet the Cairn Energy head BillGammell, Cairn India CEO Rahul Dhir and Vedanta officials M SMehta (Group CEO) and Tarun Jain (CFO) again today but themeeting could not take place, sources said.
The Rajasthan block, which gives Cairn India 90 per centof its valuation, is a losing proposition for ONGC, as it hasto pay 20 per cent royalty to the state government on theentire output from the field, even though its share fromproduction is only 30 per cent.
Cairn India does not pay any royalty on the crude and haseven contested the payment of Rs 2,500 per ton cess on its 70per cent share. .