Sharemasterindia.com: Shares of Cairn India and Vedanta Ltd traded mixed on Thursday as speculation about their merger grew louder. Reports citing sources said the boards of Cairn India and Vedanta Ltd are likely to meet on Sunday to consider merger of the cash-rich oil firm with the metal and mining company as billionaire Anil Agarwal looks to consolidate businesses and cut debt.
However, analysts said the institutional investors of the Cairn India could oppose the merger with Vedanta Ltd, on fears that the merger could adverse impact the cash-rich oil company.
Andrew Holland, CEO of Ambit Investment Advisors, said British oil explorer Cairn Energy, which owns 9.82 per cent stake in Cairn India, could closely look at the merger proposal. Public sector insurance giant LIC also holds over 9 per cent stake in Cairn India.
A potential merger will give Vedanta Ltd access to Cairn's cash and help reduce its debt. Vedanta in 2011 acquired majority control of Cairn India for $8.67 billion. It held 59.9 per cent in the oil explorer through its various units as on March 31, 2015. Cairn Energy reported cash and cash equivalents of Rs 16,867 crore as on March 31. On the other hand, the standalone net debt of Vedanta Ltd was at Rs 36,796 crore as on March 31.
UBS said a merger could mean that Cairn's cash will be unavailable for growth or higher dividends. Cairn India also could be weighed down by an unfavourable merger ratio, the brokerage added.
Reacting to media reports, Vedanta Ltd in a statement to stock exchanges said that the company's stated strategy is to simplify and consolidate its corporate structure. "Management reviews options to deliver this strategy on an on-going basis," it added.
At 10:58 a.m., Cairn India shares were down 1.6 per cent at Rs 181.80 while Vedanta rose 0.50 per cent.
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