Cairn Energy Yet to Decide on Revised Terms of Vedanta-Cairn India Merger

Cairn India Ltd’s (CIL) largest public shareholder, Cairn Energy, is yet to take a final decision on the revised terms of the Vedanta-Cairn India merger, the UK-based company said in an email statement. Cairn Energy holds 9.82 percent in its erstwhile Indian subsidiary through Cairn U.K. Holdings Ltd.

A Cairn Energy spokesperson told BloombergQuint in an email statement, that it will take a decision on the merger in due course.

Arbitration with Indian Govt

Cairn Energy has been locked in arbitration with the Indian government arising out of a retrospective tax demand made in January 2014 on an internal re-organisation of its India unit.

The U.K.-based company sold 40 percent stake in its Indian arm to Anil Agarwal’s Vedanta Resources for nearly $5.5 billion in 2011. It retained 22 percent stake in the company after the sale. In 2012, it divested nearly half that stake – 11.5 percent – for nearly $1.3 billion, retaining approximately 10 percent stake in the company.

Cairn Energy’s plans to divest the remaining stake hit a hurdle in January 2014, when the company received a notice from the Income Tax Department seeking tax liability under the retrospective tax legislation of 2012. The Income Tax department, also attached the nearly 10 percent stake in Cairn India, then valued at $1 billion. The current value of Cairn Energy’s stake in CIL is around $540 million. The tax demand was related to the group’s re-organisation in 2006, ahead of Cairn India’s IPO in 2007.

Cairn Energy Plc is currently contesting the claims of Income Tax department. It has filed a notice of dispute under the UK-India Investment Treaty, after it received a draft assessment order from the tax authority, in March 2015. Arbitration proceedings are underway.

Also Read: Vedanta Sweetens Terms of Merger with Cairn India