Mining giant Vedanta Resources is looking to buy a stake in Cairn India, the Rajasthan-focused subsidiary of Scottish oil explorer Cairn Energy, it emerged yesterday.
Both sides confirmed talks were taking place after media speculation that Cairn Energy itself was an acquisition target.
Cairn, based in Edinburgh, said: “There can be no certainty the contemplated disposal will occur or as to the terms of any such disposal. A further announcement will be made when appropriate.”
Vedanta’s brief statement confirming its participation in the talks was almost identical.
Buying into Bombay-listed Cairn India, which is 62.37% owned by the Scottish parent, would be the diversified mining company’s first move into oil and gas.
Industry experts questioned Vedanta’s ability to afford another big acquisition.
According to Credit Suisse, which has already predicted capital expenditure of nearly £6.5billion by Vedanta over the next three years, funding will be a big issue because there would be limited room for additional debt.
Analysts at the financial service group added: “A move into oil would be a very strange shift away from Vedanta’s core business of developing mines and smelters. We, therefore, struggle to see any strategic fit or synergies.”
BHP Billiton is the only large mining company to have a significant interest in oil.
Richard Rose, analyst at Oriel Securities, said selling a minority stake in Cairn India would leave Cairn Energy a controlling interest and about £1billion for exploration opportunities.
Mr Rose added that the risks in a deal would likely include concerns over any cash requirement, given Vedanta’s relatively stretched balance sheet.
Cairn India was valued at £8.73billion at the close of trading on Wednesday, with Cairn Energy’s stake in the business worth about £5.5billion.
Indian engineering will play a role in the design of new Jaguar Land Rover engines, Tata Motors chief executive Carl-Peter Forster said yesterday.
Tata Motors bought Jaguar Land Rover from Ford in 2008.
As part of that deal, Tata entered into a series of contracts to buy vehicle components and technology from Ford but these begin to expire around 2015.
Mr Forster said he intended to renew them but would like to engineer new Jaguar Land Rover engines in-house, combining the expertise of the firm’s engineers in India and the UK.