Cairn Energy’s plan to sell a majority stake of its Rajasthan-focused business to Vedanta Resources remains on track, despite fears that the Indian government would block the sale.
Edinburgh-based Cairn agreed in August to sell a majority stake in Cairn India to the mining giant for up to £6billion. The deal is awaiting approval from the Indian government and signs emerged yesterday that it could be completed by April 15 – the target date being eyed by both Cairn and Vedanta.
India’s oil secretary, S. Sunderashan, said he was hopeful of finding a “positive solution”, adding that discussions between the government and representatives from both Cairn and Vedanta were constructive.
Mr Sunderashan said steps were being taken to expedite the deal but did not give a specific timeframe.
His comments followed speculation over the past few days that Vedanta may back out of its acquisition, causing Cairn’s share price to fall by 11.7p to 426.3p on Friday.
Cairn – now focused on exploration in Greenland – also described the meeting with Indian officials as constructive, adding it was confident of sealing the deal by April 15.
Indian government approval will pave the way for the biggest merger and acquisition deal in that country’s oil industry and could boost investor sentiment about the business climate in Asia’s third largest economy.
State-owned Oil and Natural Gas Corporation, which has a 30% stake in the Cairn-operated Rajasthan fields and pays royalties on the entire output, has said it would not block the planned deal.
But it has also said it wants the royalty issue to be resolved as soon as possible.
India’s oil ministry has maintained it has nothing against the deal but insisted it would protect the state-owned company’s interests.
At the end of last month, its chairman, R.S. Sharma, said his firm would end up paying royalties of £1.9billion on crude output from the Rajasthan fields under a production plan submitted to the government.