InGovern Opinion: Merger of Vedanta and Cairn India

The Boards of Vedanta Limited (Vedanta) and Cairn India Limited (Cairn) approved the proposal of merger of Cairn into Vedanta. As per the proposal, minority shareholders of Cairn will receive one equity share and one 7.5% redeemable preference share of face value Rs. 10 in Vedanta for each equity share held in Cairn. Minority shareholders own 40.12% stake in Cairn India while Vedanta owns the remaining 59.88% in Cairn India.

Summary of our comments on the proposed merger:

  • While continuing to maintain control of Vedanta Limited, Vedanta Plc. has managed to socialize the debt of Rs.74,000 Crore debt of Vedanta Limited, as the number of minority shareholders have increased from 365,905 to 626,783.
  • The problems of Vedanta Aluminum would cascade onto the minority shareholders of Cairn India.
  • Out of the acquisition debt of Rs.26,850 Crore of Vedanta Limited, Cairn India would have paid for Rs.25,000 Crore.
  • The minority shareholders of Vedanta Limited gain at the detriment of the minority shareholders of Cairn India.

The full report, prepared by InGovern, can be downloaded from here: Report on Vedanta-Cairn India Merger