London-listed Vedanta now holds 58.5 per cent of Cairn India, of which 20 per cent is held through its Sesa Goa unit.
Cairn Energy, which will retain a 22 per cent stake in Cairn India, confirmed it would return around $3.5bn to shareholders – with Gammell’s 3.2m shares ensuring him a healthy payday.
Simon Thompson, who took over as chief executive from Gammell in July, will receive around £1m for his shares.
He said: ‘This transaction... crystallises the very significant value creation that we have delivered from our Indian business.”
The company added: “Our remaining 22 per cent shareholding in Cairn India, retained cash and balance sheet strength provide financial flexibility and an excellent platform for future growth opportunities.”
Cairn Energy agreed in August last year to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India’s energy sector, was delayed for months due to a disagreement over royalty payments.
“The closure of the deal marks a key milestone for Vedanta as it puts to bed a deal drawn out for well over a year that has contributed to underperformance on fears of deal terms uncertainty and balance sheet stress,” analysts at Liberum said in a note.
“Oil has been a solid performer over the course of 2011 ... we see the Cairn India inclusion as the key factor in repairing Vedanta’s balance sheet and boosting bottom-line performance.”