Mumbai: Minority shareholders of Cairn India on Tuesday raised concern over the company not getting a “fair valuation” in the $2.3 billion all-share merger with parent Vedanta and the use of its over Rs 24,000 crore of cash pile. At firm’s annual general meeting (AGM) of shareholders here, minority shareholders, including United India Insurance, raised the issue of valuation being unfair to minority shareholders in the offer of one ordinary share and 7.5 per cent redeemable preference share of Vedanta for very share they hold in Cairn India, sources said.
Cairn India shares had less than halved from Rs 382.75 they were trading in June, 2014 when the merger was announced in June. Though much of the decline has been attributed to slide in oil prices, the shares would have been much higher if Vedanta were to publicly state that it will not absorb Cairn for next three years or touch its cash. Sources said the minority shareholders wanted to know the basis of valuation which was explained in details by Mr Omkar Goswami, independent director on Cairn India board.
After the meet, Cairn India chief executive Mayank Ashar said the merger was “on track”. The company, he told reporters, had received a “variety of perspectives” on the deal, a majority of which were positive. “At the end of the day, the shareholders will make up their mind. What I saw was fairly positive reaction to the merger,” he said. The merger needs approval of half of the non-promoter shareholders. Life Insurance C holds 9.06 per cent and Cairn Energy plc of UK another 9.82 per cent of Cairn India. Vedanta owns a 59.88 per cent stake in Cairn India.
Sources said some shareholders do not want debt laden Vedanta to have unfettered access to Cairn’s cash. Promoters have to repay next year a $1.2 billion of loan they had taken from Cairn India. Overall, Vedanta Group has Rs 77,752 crore debt, a part of which can be paid using Cairn India cash. Shareholders say Vedanta has not given a guidance for the utilisation of Cairn’s cash.
