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Vedanta buys 10.5% stake in Cairn India from Petronas

Sesa Goa, a unit of Vedanta, bought 200 million equity shares at Rs 331 a piece from Malaysia's state oil firm Petroliam Nasional Bhd, which exited totally from the Cairn India.

twitter-logoPTI | April 19, 2011 | Updated 20:03 IST

Mining group Vedanta Resources Plc, which is struggling to get government nod to take over Cairn India, on Tuesday bought 10.5 per cent stake in the company from Malaysia's Petronas.

Malaysia's state oil firm Petroliam Nasional Bhd (Petronas) in a statement said it has "sold all of its 14.94 per cent holding (283.4 million shares) in Cairn India ... for a total consideration of approximately $2.1 billion."

About 200 million shares (or 10.5 per cent) of these were bought by Sesa Goa, a unit of Vedanta, at Rs 331 apiece, sources in know of the development said.

Petronas' remaining stake of up to 4.4 per cent was picked up by Indian and foreign institutions in a sale arranged by Bank of America Corp.

Vedanta had in August last year announced buying of 40 to 51 per cent stake in Cairn India from Edinburgh-based Cairn Energy Plc but the deal is yet to get government approval.

As part of the transaction, Sesa Goa made an open offer to buy an additional 20 per cent stake in Cairn India at Rs 355 per share.

The open offer which opened on April 11 was not expected to get much response because of the very narrow difference in price that Vedanta group is offering and Cairn India's trading price on the bourses.

Cairn India stocks closed 2.29 per cent higher at Rs 344.25 on the Bombay Stock Exchange.

Analysts said income earned from off-market share sale like tendering shares in an open offer, is subject to higher tax rate when compared to a market sale like the one done by Petronas. So investors would offer their shares in the open offer only when Cairn scrip is trading below Rs 325.

Sources said by buying Petronas shares, Vedanta has ensured it will have majority stake in Cairn India irrespective of the outcome of the open offer that closes at month end.

For Petronas, one of the first to invest in Cairn India, it was a desperate sale. It had been frustrated at growth of the company being stiffled by bureaucratic hurdles like the one oil ministry had erected in not allowing company to raise output from its mainstay Rajasthan block.

Cairn India is producing 125,000 barrels of oil per day from the Mangala oilfield, the largest in Rajasthan block.

Output can be raised to 150,000 bpd without any investment but oil ministry has been sitting on approval for months now.

Also, it has thrown new challenges in form of seeking to change contract for the Rajasthan fields to make Cairn India pay a part of royalty on crude oil produced which otherwise is purely a liability of state-owned Oil and Natural Gas Corp.

The royalty dispute has primarily held up approval for Vedanta.

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