VEDANTA Resources is in talks to buy part of Cairn Energy’s Indian spin-off oil firm, both companies confirmed yesterday.
Vedanta is already focused on mining in India, but is keen to move into oil and gas operations in the country.
Aberdeen-based Cairn, which has a 62.37 per cent stake in Mumbai-listed Cairn India, emphasised in a statement that “there can be no certainty the contemplated disposal will occur or, as to the terms of any such disposal”.
Cairn India is the fourth-largest oil and gas company in the country, and was valued at £8.92bn at the close of trading yesterday, valuing Cairn Energy’s stake at £5.56bn.
“The big question now is how big this stake is going to be and how are they going to structure the deal,” said Liam Fitzpatrick, an analyst at Credit Suisse. “It will probably be more of a minority interest,” he said, noting that Vedanta is already relatively highly geared.
Other analysts voiced concerns about the possible purchase. “A move into oil would be a very strange shift away from Vedanta’s core business of developing mines and smelters,” analysts at Credit Suisse said in a note. They added: “We therefore struggle to see any strategic fit or synergies.”