CAIRN ENERGY’S £5.9bn deal to sell most of its Indian business to Vedanta suffered another setback yesterday when the Indian government referred the deal to a panel of ministers for further scrutiny.
The Indian cabinet unanimously said the royalties related to the deal need to be looked at before the purchase can be approved, and “such a decision should not be taken in a hurry”, one minister added.
The move causes further frustration for Cairn and Vedanta, who first agreed what could be India’s biggest oil and gas deal last August and had expected the government to make a final decision in a matter of days.
Cairn has set an internal deadline of 15 April to secure the deal. No timetable has been set for the Indian committee investigation.
Cairn’s partner in India, state-run ONGC, currently pays all royalties on its oil operations, but India has been pushing to share the royalty burden between ONGC and Cairn. Both Cairn and Vedanta oppose the move.
“We will continue to work with the government of India in a constructive fashion to secure all the necessary conditions and approvals,” said a Cairn spokesperson in London last night.
Vedanta declined to comment. It issued a statement yesterday saying that its offer would open on 11 April and close on 30 April regardless.
“It is surprising that they are going ahead with the open offer, because if the government gives a conditional acceptance, then it will be value-destructive for Vedanta,” said Deepak Pareek, sector analyst at Mumbai brokerage Prabhudas Lilladher.
The news knocked both companies’ shares, with Cairn closing down 2.8 per cent at 456.4p and Vedanta losing 0.8 per cent to £24.97.