Life Insurance Corp. of India (LIC), State-run insurer said it will cast its vote in favour of the merger between Vedanta Ltd and Cairn India Ltd.
Sources familiar with this development said that this merger, which comes after Vedanta sweetened a previous offer for Cairn India’s shareholders to salvage the merger — is crucial as LIC holds a 9.06 per cent stake in Cairn India. For the merger to complete, approval from at least 51 per cent of Cairn India’s minority shareholders is necessary.
LIC's decision comes after Vedanta made the earlier offer sweeter for Cairn India’s shareholders to salvage the merger that would give open the door for Vedanta to Cairn India’s $3.5 billion cash pile. This cash pile will potentially help Vedanta repay debt and reduce interest costs.
The report showed people privy to development as saying that the insurer believes that a merger with Vedanta will insulate Cairn India from the potential risks which might arise from the company’s single line of business based on one single commodity (crude oil).
Apart from LIC, Cairn UK Holdings Ltd is the other big minority shareholder in Cairn India. Its parent Cairn Energy Plc. sold a controlling stake in its Indian unit to Vedanta Resources Plc. in the year 2011 but retained a 9.82 per cent stake.
Total public shareholding in Cairn India stood at 40.12 per cent at the end of June.
At the end of today’s trading session Cairn share price closed at 199.25, up by 0.96 per cent. A total of 39,47,154 shares of the Company have been traded on NSE in today’s trading session.
On the other hand, Vedanta share price dropped by almost 2.77 per cent and closed at Rs 171.25. 81,31,372 shares of the Company have exchanged hands on the counter of NSE in today’s trading session.
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