Corporate Valuation Assignment – M&A

Vedanta – Cairn India

Ltd.

Group No: 22
Sanket Gaikwad - 18-S-037
Prathmesh Hiremath - 18-S-044
Anurag Mahankar - 18-S-069
Ashish Metkar - 18-S-073
 Contents
1. Industry Overview………………………………………………………………………………………………………….3
2. Vedanta Resources (CoA) ………………………………………………………………………………………………5
3. Cairn India (CoT) ……………………………………………………………………………………………………………6
4. Reasons for M&A……………………………………………………………………………………………………………7
5. Post-Merger Effects……………………………………………………………………………………………………….8
6. Valuation of Cairn India………………………………………………………………………………………………….9
7. Assumptions…………………………………………………………………………………………………………………11
8. Synergy Valuation…………………………………………………………………………………………………………13
9. Stock Market’s Reaction……………………………………………………………………………………………….14
10. Legal Aspects………………………………………………………………………………………………………………..15
11. Current Status………………………………………………………………………………………………………………17
Industry Overview

1. Mining Industry (Vedanta India)

a. Introduction
India holds a fair advantage in cost of production and conversion costs in steel and alumina.
Its strategic location enables convenient exports to develop as well as the fast-developing
Asian markets. India produces 95 minerals– 4 fuel-related minerals, 10 metallic minerals, 23
non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and
other minerals). Rise in infrastructure development and automotive production are driving
growth in the sector. Power and cement industries are also aiding growth in the metals and
mining sector. Demand for iron and steel is set to continue, given the strong growth
expectations for the residential and commercial building industry.

b. Market Size
India is the 3rd largest producer of coal. Coal production in the country stood at 688.8
million tonnes in FY18. It stood at 576.00 million tonnes between Apr 2018 -Mar 2019.India
ranks 4th in terms of iron ore production globally. In FY18, production of iron ore stood at
210 million tonnes. India has around 8 per cent of world’s deposits of iron ore. India
became the world second largest crude steel producer in 2018 with output 106.5 million
tonnes. According to Ministry of Mines, India has the 7th largest bauxite reserves- around
2,908.85 million tonnes in FY17.

c. Future Scope
There is significant scope for new mining capacities in iron ore, bauxite and coal and
considerable opportunities for future discoveries of sub- surface deposits. Infrastructure
projects continue to provide lucrative business opportunities for steel, zinc and aluminium
producers. Aluminium production is forecasted to grow to 3.33 million metric tonnes by
FY20. Iron and steel make up a core component of the real estate sector. Demand for these
metals is set to continue given strong growth expectations for the residential and
commercial building industry.
2. Oil and Gas Industry (Cairn India Ltd.)
a. Introduction
The oil and gas sector are among the eight core industries in India and plays a major role in
influencing decision making for all the other important sections of the economy. India’s
economic growth is closely related to energy demand; therefore, the need for oil and gas is
projected to grow more, thereby making the sector quite conducive for investment. The
Government of India has adopted several policies to fulfil the increasing demand. The
government has allowed 100 per cent Foreign Direct Investment (FDI) in many segments of
the sector, including natural gas, petroleum products, and refineries, among others. Today,
it attracts both domestic and foreign investment, as attested by the presence of Reliance
Industries Ltd (RIL) and Cairn India.

b. Market Size
India is expected to be one of the largest contributors to non-OECD petroleum consumption
growth globally. Oil imports rose sharply to US$ 87.37 billion in 2017-18 from US$ 70.72
billion in 2016-17. India retained its spot as the third largest consumer of oil in the world in
2017 with consumption of 4.69 mbpd of oil in 2017, compared to 4.56 mbpd in 2016. India
was the fourth-largest Liquefied Natural Gas (LNG) importer in 2017 after Japan, South
Korea and China. LNG imports increased to 26.11 bcm in 2017-18 from 24.48 bcm in 2016-
17. Gas pipeline infrastructure in the country stood at 16,226 km at the beginning of
February 2019.

c. Future Scope
Energy demand of India is anticipated to grow faster than energy demand of all major
economies, on the back of continuous robust economic growth. Consequently, India’s
energy demand as a percentage of global energy demand is expected to rise to 11 per cent
in 2040 from 5.58 per cent in 2017. Crude oil consumption is expected to grow at a CAGR of
3.60 per cent to 500 million tonnes by 2040 from 221.76 million tonnes in 2017. Natural Gas
consumption is forecasted to increase at a CAGR of 4.31 per cent to 143.08 million tonnes
by 2040 from 54.20 million tonnes in 2017.
Vedanta Resources Plc - (Co. A)

Vedanta Plc is a diversified natural resources company specializing in the production and mining
of Zinc, Lead, Silver, Copper, Iron Ore, Aluminium, Power and Oil & Gas. Through its
subsidiaries, Vedanta Plc has operations across India, Zambia, Namibia, South Africa, Liberia,
Ireland and Australia.
Vedanta is a subsidiary of Vedanta Plc which holds 62.9% of its voting capital. Vedanta was
formed as a part of Vedanta Plc’s group strategy to consolidate and simplify its corporate
structure. Vedanta, formerly known as Sesa Sterilite Ltd, was a product of the merger of Sesa
Goa Ltd and Sterlite Industries (India) Ltd.9 Vedanta is listed on the BSE and the NSE10, and has
ADRs listed on the NYSE.
The resources processed are used to improve and enhance people’s lives and deliver long-term
value. Vedanta demonstrates world-class standards of governance, safety, environment,
sustainability and social responsibility.
The company is primarily owned by the family of Anil Agarwal through Volcan Investments, a
holding vehicle with a 61.7% stake in the business. Vedanta limited(formerly Sesa Goa / Sterlite)
is one of the many Indian subsidiaries of Vedanta resources and operates iron ore mines in Goa.
Vedanta was listed on the London Stock Exchange and was a constituent of the FTSE 250
Index until Chairman, Anil Agarwal's offer to take the company private went unconditional in
September 2018.
Vedanta is ranked 6th among the global diversified natural resources companies, and the only
one with majority of its sales to the growing Indian market. This merger would consolidate
Vedanta’s position as one of the world’s largest diversified natural resources companies, with
world-class, low-cost assets in Metals & Mining and Oil & Gas. The merged company will have a
larger pro forma market cap of $15.6 bn, and higher free float of 49.9%. Vedanta will have one
of the strongest balance sheets in the Indian corporate sector with flexibility to balance capital
allocation to the highest return projects while providing a strong and stable dividend.
Vedanta helps in providing the metals and energy to build India and fuel its growth. The
combined entity is uniquely positioned to unlock India’s wealth of world-class energy and
mineral resources.
Cairn India Ltd - (Co. T)

Cairn India is an Indian oil and gas exploration and production company, headquartered
in Gurgaon, India. Cairn India is one of the largest independent oil and gas exploration and
production companies in India. Cairn and its JV partners’ account for more than a fifth of India’s
domestic crude oil production. It has been operating in India for more than fifteen years with a
unique working culture of on average 4 days a week working. Cairn India’s producing assets are
in Rajasthan, Cambay and Ravva. Cairn India has a portfolio of nine blocks, that it operates,
which are located in four strategically focused areas: one in Rajasthan; two on the west coast of
India; five on the east coast of India (including one in offshore Sri Lanka) and one in offshore
South Africa.
Cairn produces oil and gas from three blocks in India: Ravva in Andhra Pradesh, CB-OS/2
in Gujarat and RJON-90/1 in Rajasthan. In 2007, Cairn India was listed on the National Stock
Exchanges and as on date has a market capitalisation of ~$14 billion and amongst the top 25
Indian company in the NIFTY 50 index. Top 250 Global Energy Company Rankings by Platts,
ranked Cairn India for being the World's fastest-growing energy company in 2011. Now the
Company plans to invest $3 billion in the next three years in finding more oil and raising output
from Rajasthan oilfields.
In early 1999, Cairn made the first Rajasthan discovery – Guda field, followed by Saraswati in
2001. Mangala was their biggest discovery in 2003, followed by Raageshwari, Bhagyam,
Aishwariya, Kaameshwari and GR-F fields in Rajasthan. In 2003, Cairn acquired 100% of the
exploration interest and took over as the operator of the block.
Cairn India has maintained a low-cost operating base by focusing on life-cycle planning,
continuous monitoring and control of operational costs and the innovative application of
operating technologies. Pioneering the use of cutting-edge technology, the company began
production from its Mangala oilfield in Aug 2009. Cairn India has identified more than 35
prospects in the license area and it is building a comprehensive and growing inventory, based
upon analysis of the 2D and 3D seismic data and various wells. In addition to its existing
exploration portfolio, Cairn is seeking out new exploration opportunities through organic
growth, acquisition opportunities and by participating in New Exploration Licensing Policy
(NELP) rounds.
In India, Cairn has made 40 oil and gas discoveries. In Jan 2004, Cairn discovered the largest
onshore oilfield in India since 1985 – the Mangala field, 25 discoveries has been made in
Rajasthan.
Reasons For M&A

The main reason for the merger of Vedanta Ltd with Cairn India was that Vedanta had a debt of
Rs 77,752 crores whereas Cairn (I) was sitting on a cash reserve of $ 2.85 billion (Rs 17,838
crores). Another reason for the merger was Vedanta’s strategy to create a world-class metals
and mining company, using world class approaches.
It looks for opportunities where it can leverage its transactional, operational skills and
experience and project execution and also complementary businesses too, such as coal mining
and oil and gas. Vedanta Resources thus wanted to acquire Cairn India to diversify into Oil &
Gas from its core business of developing mines and smelters. It believes it can earn a better
return in Investment than the market rate of return in long term.
Vedanta Ltd is taking a leaf from the success of BHP Billiton; mining major BHP Billiton’s Ltd.’s
similar diversification has proved to be good for the company as its petroleum exploration
business contributed 17% of its half year’s revenue and 27% of its segment profit. Another
reason being, Cairn India is India’s 4th largest Oil and Gas company, which has little net debt
and positive cash flows.
The reason Cairn allowed for this merger to happen was that Vedanta Ltd had excellent track
record of inorganic growth of assets acquired in India and also Vedanta’s management and
business was be going to be the same. Hence, Cairn allowed for the merger.
Cairn India would be able to utilize Vedanta Ltd. core skills in project management and
development of resources and reserves. Oil prices were plummeting and it was good idea to
diversify the portfolio into minerals. Thus, merger with Vedanta Ltd makes sense.
Post-Merger Effects
1. Effects on Vedanta

Post-merger, Vedanta will have access to the oil and gas assets of Cairn. This is possible
because the share prices of Cairn have fallen sharply over the last one year. Also, large
amount of Cairn’s cash reserves of nearly USD 1.2 billion would help improve Vedanta’s
financial flexibility. This will help Vedanta to allocate capital to the highest return
projects and also reduce overall costs which would also in turn help sustain strong
dividends for all shareholders. Most importantly, this merger will help Vedanta build a
strong balance sheet which will also help improve the credit rating of the combined
entity, which will help Vedanta with an opportunity for refinancing.

2. Effect on Cairn

Cairn’s merger with Vedanta will help Cairn to generate additional value by providing
access to Vedanta’s portfolio which consists of diversified metals and mining assets. This
will help Cairn assist in combatting the cyclical downturn of oil prices and also ensure
stable cash flows. Cairn can also gain access to capital which will help it further to invest
in oil and gas research and development. This Transaction would provide an opportunity
for Cairn to benefit from economies of scale and also help to participate in the upside
potential of Vedanta, and all these while still retaining its core management team and
decision-making framework.

3. Analysts’ Views

Analysts are of the view that whether this merger will result in any real benefits for
Cairn’s shareholders. Despite Cairns’ repeated efforts to highlight the mutually
beneficial aspects of the merger, the reality remains that both Vedanta Plc and Vedanta
are substantially debt laden, while Cairn is profitable with significant cash reserves.
Specifically, as of March 2015 Vedanta Plc had a net debt of USD 7.7 billion, while
Vedanta had stand-alone debt of approximately USD 5.7 billion. In contrast, Cairn had
cash reserves of approximately USD 2.7 billion. Based on these figures, analysts believe
that one of the driving factors behind the merger is Vedanta’s attempt to socialize its
debt across the minority shareholders of both Vedanta and Cairn.
Valuation of CAIRN India (the acquired company)
Coefficients
Intercept 0.01275603
X Variable 1 0.823088523

30.00%

20.00%

10.00%
on Index

0.00%
Y
-30.00% -20.00% -10.00% 0.00% 10.00% 20.00% 30.00%
Return

Predicted Y
-10.00%
Linear (Predicted Y)

-20.00%

-30.00%

-40.00%
Return on Share

Rf 8.25
Rm - Rf 3.61 Weightage
Beta 0.823088 Equity 0.96
COE 11.22135 Debt 0.04

WACC 11.0022 COD 8.5

 Steady
2011 2012 2013 2014 2015 2016 State CF

Revenue 10406.72 11551.46 12822.12 14232.55 15798.13 17061.98

Less Operating Expenses 1517.02 1683.892 1869.12 2074.724 2302.943 2487.179

Unsuccessful Exploration
Less Costs 166.68 185.0148 205.3664 227.9567 253.032 273.2745
Less Staff Costs 11.04 12.2544 13.60238 15.09865 16.7595 18.10026
Less Admin Expenses 265.05 294.2055 326.5681 362.4906 402.3646 434.5537
Less Depreciation & Amortisation 1192.95 1324.175 1469.834 1631.515 1810.982 1955.861

EBIT 7253.98 8051.918 8937.629 9920.768 11012.05 11893.02

Less Tax 1813.495 2012.979 2234.407 2480.192 2753.013 2973.254
NOPAT 5440.485 6038.938 6703.222 7440.576 8259.039 8919.762 8919.762

Add Depreciation & Amortisation 1192.95 1324.175 1469.834 1631.515 1810.982 1955.861 1564.219

Less Increase in NWC 1008.83 1119.801 1242.979 1379.707 1490.084 1609.29 1308.449

Operating FCFF 5624.605 6243.312 6930.076 7692.384 8579.938 9266.333

Less Capex 2564.7 2846.817 3188.435 3571.047 3856.731 4165.27 3365.5

Op FCFF 3059.905 3396.495 3741.641 4121.337 4723.207 5101.063 5810.033

Continuity Val 86320.49
Final FCFF 3059.905 3396.495 3741.641 4121.337 4723.207 91421.56

Value of firm 62,644.74

Debt 2678.21
Cash 4484.73
Value of Equity 64,451.26

Value of Equity at 46.7 Rs./$ is $13.8B.

Vedanta acquired 58.8% for $8.67B i.e. $14.74B for 100% of equity.
Assumptions:
The terminal growth rates typically range between the historical inflation rate (2%-3%) and the
average GDP growth rate (4%-5%) at this stage. The terminal growth rate is a constant rate at
which a firm’s expected free cash flows are assumed to grow at, indefinitely. This growth rate is
used beyond the forecast period in a discounted cash flow model, from the end of forecasting
period until perpetuity, we will assume that the firm’s free cash flow will continue to grow at
the terminal growth rate, rather than projecting the free cash flow for every period in the
future. We have assumed a terminal growth rate of 4%.

Cairn India believes that there remains significant and as yet untested prospective resource
potential to pursue in the Barmer basin. The Company and its JV partner, ONGC, continue to
develop the hydrocarbon resources in Rajasthan with focus on cost and the application of
innovative technologies. Over the last two to three years, the Company has undertaken a
comprehensive re-evaluation of the Barmer basin. All 170 exploration and appraisal wells
were re-examined, new studies were started and more than 2,700 km2 of 3D seismic data
was reprocessed and reinterpreted. The use of high density 3D seismic surveys has
enhanced the understanding of the reservoir and helped to precisely identify well locations.
Thus we have assumed growth rate of 11% for the next 5 years.

The MAT for a company is calculated as per S. 115JB of the Income Tax Act,1961, and if the tax
calculated as per normal provisions of the Income Tax Act (corporate taxes on taxable income-
25 % or 30%) is lower than the amount of 18.5% of the book profits of the company for that F.Y.
(explained below) then the company will pay the latter as MAT. Even though, this system of
taxation has drawn a fair amount of criticism, this paper will talk about an aspect even more
controversial- that of the MAT Credit system. As per S. 115JAA of the Income Tax Act,1961,
MAT credit is the difference between the tax paid on MAT provisions and the normally
computed corporate tax liability. A company is entitled to set off this amount in a subsequent
A.Y. only when it pays tax according to the normal provisions. The set off is to the extent of the
difference between the normal corporate tax liability paid and the tax liability calculated under
MAT provisions for that A.Y. The effective tax rate is 25% owing to MAT credit entitlement,
Deferred tax charge/(credit).

Global crude price forecasts tend to have low confidence levels, given the increased volatility
and influence of variables other than traditional demand and supply. Growing oil demand led
by a recovering global economy and concerns that oil supply may not keep pace continue to
provide a bullish backdrop to crude.

Brent has hovered around US$100/bbl for the last few weeks – yet, we note that the last time it
averaged US$100/bbl (US$97.7/bbl in CY08), the global economy took a beating and oil
demand fell materially. The causalities may be debated, but sustained high oil prices and high
global GDP growth may not coincide for long. For example, we estimate that oil moving from
US$80/bbl to US$100/bbl will increase India’s oil import bill by close to 1% of GDP.
Crude output at Mangala has grown faster in 2010 than expected, yet, we believe that
CAIL’s highlighting of large resource potential in Rajasthan (in March 2010) and a concomitant
vision to produce 240 kbopd of oil had the more significant impact.
Cairn has now outlined expectations of resource potential in:
(a) Discovered smaller fields in Rajasthan, including the tight formations of the Barmer Hill (1.9
bn boe of STOIIP),
(b) Undiscovered, prognosticated potential within Rajasthan (2.5 bn boe STOIIP)
(c) Undiscovered, prognosticated potential in total – for all its blocks, including Rajasthan
(Unrisked resource potential of 2.2bn boe).

CAIL now has a number to all parts of its resource (present and future) portfolio and to some
extent has anticipated the performance of its drilling program.

This is compounded by the fact that CAIL has spelled out a vision to produce 240 kbopd at
Rajasthan. We believe this has already been incorporated in most analyst models. This higher
production outlook is contingent on CAIL finding, proving up and developing the currently
expected resource potential. The geological risk still exists – expected hydrocarbon resources
may not be there; or, given potentially low permeability, may not be commercially exploitable.

Unless CAIL makes a hydrocarbon discovery materially larger than the currently prognosticated
numbers, news flow of successes at its drilling program will be subsumed in the guidance
provided last year and may not have much stock impact.
Synergy Valuation
Synergy due to combination of functional strengths is possible as energy produced by Cairn (I)
can be used by Vedanta Ltd and the metal products by Vedanta Ltd can be used by Cairn (I) in
its projects. Similarly, combing functional areas like marketing can bring in synergies. Here the
challenge is managing the cultural differences between the companies. Employees of Cairn (I)
are anxious about what the Indian conglomerate would do to their work culture that evolved
under suave managers and British owners. Many cherish the flat, non-hierarchical structure of
Cairn India, where executives are bonded with training and team-building sessions at refreshing
locations and have delivered effectively - developing India's biggest on-shore oilfield faster than
expected and at a lower cost than expected.

Synergy due to higher growth potential is a certainty. Cairn (I) by merging with Vedanta Ltd is
going to get that push. For Vedanta, acquisitions is a way of life. Vedanta Ltd has made 10
acquisitions since 1995 and has transformed the once-sluggish Hindustan Zinc into the world's
biggest integrated zinc producer after investing Rs 12,000 crore since it acquired the firm nine
years ago. Aggressive and growth-hungry Agarwal's business acumen would help the Cairn (I)
grow and overcome hurdles like the government's refusal to allow it to boost production.

For the same reason, synergy due to higher growth in new or existing markets can be expected
post-merger between Vedanta and Cairn (I) as the merger entity under the brand of Vedanta
can access brand image of Vedanta. Apart from the operational synergies mentioned above,
the following financial synergies can be expected:

• Since the merger of cash rich Cairn (I) with debt ridden Vedanta Ltd., the increase in the
value comes from the projects which Vedanta Ltd couldn’t have taken up otherwise.
• Debt capacity of the combined entity will increase as the revenue of the combined
entity will be higher, more stable and predictable.
Stock market reaction:
Date Vedanta Cairn Index
06-Aug-10 366.33 344.18 4539.85
09-Aug-10 370.74 339.98 4579.65
10-Aug-10 378.68 339.19 4557.7
11-Aug-10 373.04 333.07 4535.4
12-Aug-10 356.42 339.31 4544.7
13-Aug-10 354.29 352.48 4576.4
16-Aug-10 331.87 347.5 4554.45
17-Aug-10 321.16 337.65 4558.5
18-Aug-10 320.78 342.18 4600.55
19-Aug-10 329.24 344.28 4631.85
20-Aug-10 329.16 343.74 4629.55
23-Aug-10 329.59 342.58 4655.75
24-Aug-10 323.83 356.06 4624.85
25-Aug-10 322.9 345.87 4582
26-Aug-10 322.34 339.95 4592.75

Price Movement 10 days before & post announcement

105

100

95

90

85

80

75

Vedanta Cairn Index

Legal Aspects:
The approvals needed for the merger were
• From stock exchanges (NSE and BSE) and Sebi
• High Court and other regulators for scheme arrangement
• Ministry of petroleum and natural gas
• Vedanta and Cairn India’s shareholders
• Majority of the minority shareholders have to agree to the deal
• Foreign Investment Promotion Board
Some approvals were not a problem, but nonetheless, the merger between Cairn India and
Vedanta was not a smooth ride, after the merger was announced, LIC, which owned about 9%
stake in Cairn India had raised issues over the valuation of the merger as well as the debt of
merged entity. For the merger to go through, at least 50% of minority shareholders should
approve the deal and hence, approval of LIC and Cairn energy was crucial.
Hence, because of this pressure, Vedanta offered a better deal
On completion, minority shareholders of Cairn India will receive for each equity share held will
get:
• One equity share of Vedanta Limited of face value INR 1.
• One 7.5% Redeemable Preference Share (RPS) in Vedanta Limited with a face value of
INR 10 each.
RPS would have the following key terms:
• Dividend of 7.5% per annum payable annually at the end of each financial year
• Tenure – 18 months from issuance
• Redeemable at face value of INR 10 per share for cash at the end of the tenure
• Listed on the NSE
Earlier the Appointed date was 1st April 2015.

Pursuant to the revised and final terms, each Cairn minority shareholder will receive each
equity share held:
• One equity shares in Vedanta Limited
 • 4 Redeemable Preference Shares with a face value of INR 10 each in Vedanta Limited,
with a coupon of 7.5% and tenure of 18 months from issuance

That's not all. The demand made by the income tax department on Cairn India was another
hurdle that Agarwal will have to clear during the merger. The department has slapped a tax
demand of Rs. 20,495 crore on the company for failing to deduct withholding tax on alleged
capital gains made by its erstwhile promoter, Cairn Energy. After the merger was announced,
the department said it will defend the tax claim it has made on Cairn India, even after the
company is merged with its parent. Given that any transfer of shares held by Cairn Energy in
Cairn India had been frozen by the tax authorities, Vedanta needed to seek permission from the
authorities to issue Cairn Energy new shares to give effect to the merger.
India's laws require Vedanta to take the High Court's permission before the merger, which
some feel could pose a few problems. Vedanta had to provide adequate comfort to the courts
that it has sufficient resources to make good the tax liability.
The tax issue is still going on in the court and has become an International issue with even PM
of UK asking it to be resolved quickly. The tax department had frozen the 9.8% stake of Cairn
energy till the tax dispute is sorted. Though, recently it has sold a part of its shares for $216
million while a part of its shares still remain with the tax department.
The third crucial approval will have to come from the Union ministry of petroleum.
Vedanta had to seek the ministry's approval for changing ownership of all Cairn India's oil and
gas assets, including the Barmer block in Rajasthan and the Ravva oil and gas field in the
Krishna-Godavari basin. The Barmer block in Cairn's portfolio is the biggest revenue generator
and its contract for the block is coming to an end in 2020. If the contract is not renewed, Cairn
would have to return the field to state-run Oil and Natural Gas Corporation, which is the
original licensee and holds 30 per cent stake.
The ministry would be concerned over the energy security of the country and would also want
to know the merged entities' plans to invest in the sector and add reserves, especially when the
motive of the merger is seen as access to Cairn India's cash to lower Vedanta's debt of over Rs
75,000 crore.
State-run Oil & Natural Gas Corp (ONGC) decided to give its consent toVedanta Resources
taking over Cairn India after a valuation by SBI Caps showed that Cairn India's share was best
priced at Rs 330 a share — Rs 25 short of Vedanta's offer of Rs 355. Before it issues the NOC,
ONGC wanted an assurance from Cairn that it will pay Rs 2,500 per tonne cess on its share of
production from RJ-ON-90/1 and also make royalty payments cost-recoverable.
Later however, the ONGC board agreed to the deal without any conditions.
Current Status
The acquisition of 60% stake was completed in 2011, however in 2017, Cairn India was merged
into Vedanta Ltd. With the merger being concluded recently, it is too early to say whether it
was a success or not. There is even the case pending with the tax department. The merger is
largely thought to be a positive thing for Vedanta with Moody’s reporting that it will be credit
positive, but according to them there would be no immediate impact on the credit rating of the
company. The merger has provided Vedanta Ltd a better access to the cash reserves of Cairn
India.
The merger is said to increase the appeal of Vedanta Ltd to global investors as it simplifies the
structure and increases the size and free float of the company.