After close to a year of talks with regulators, mining group Vedanta has been permitted to buy a controlling stake in Cairn India, with certain pre-conditions.
Cairn Energy agreed last August to sell a majority stake in Cairn India to Vedanta in a deal that was initially valued at up to $9.6bn.
But the sale, one of the largest in India’s energy sector, has been delayed due to a disagreement over royalty payments linked to Cairn India’s onshore oil assets.
Vedanta must now share the burden of paying royalties on the sites with state-run Oil and Natural Gas Corp, which has a 30 per cent holding in the fields but currently pays 100 per cent of the royalties.
Earlier this week, Cairn and Vedanta agreed to cut the price of a 40 per cent stake by more than $600m in a hint that the firms would accept the costly royalty burden was part of the deal. The total royalty payments over the life of the asset are estimated at 180bn rupees (£2.5bn).
Vedanta shares closed up three per cent at £20.94, having stayed roughly flat before the announcement, while Cairn gained 2.1 per cent to 414.8p.
Vedanta, which aims to own 28.5 per cent of Cairn India within the next two weeks, can now buy up further tranches through an open offer and from large shareholder Petronas, using the £1bn it raised in a bond issue last year.