Options open to state firms for Cairn India bid - source

NEW DELHI/MUMBAI Mon Aug 23, 2010 10:09pm IST

Cairn India employees work at a storage facility for crude oil at Mangala oil field at Barmer in Rajasthan August 29, 2009.  REUTERS/Parth Sanyal/Files

Cairn India employees work at a storage facility for crude oil at Mangala oil field at Barmer in Rajasthan August 29, 2009.

Credit: Reuters/Parth Sanyal/Files

Related Topics

NEW DELHI/MUMBAI (Reuters) - All options are open for Indian state energy firms to make a counter-bid to London-based Vedanta Resources' $9.6 billion offer for control of Cairn India, an oil ministry source said.

The senior oil ministry official, who declined to be identified, was speaking to Reuters after a media report, citing unnamed sources, said Oil and Natural Gas Corp (ONGC), GAIL and Oil India were considering a joint bid for Cairn India, a unit of the UK's Cairn Energy.

ONGC, Oil India and GAIL have held informal talks on a joint bid for Cairn India even as the ministry is looking at legal options to deny Vedanta approval for its planned deal, a Press Trust of India (PTI) report carried on NDTV Profit's website said on Monday, citing sources familiar with the development.

PTI said the oil ministry was uncomfortable with billionaire Anil Agarwal-owned Vedanta Group buying a majority stake in Cairn India while India's Mint newspaper, citing an unnamed petroleum ministry official, said the government wanted ONGC to be given a chance to buy the holding.

The oil ministry has not given any direction to state firms to make a counter bid for Cairn India, the oil ministry source told Reuters.

A banking source familiar with the matter told Reuters that ONGC, Oil India and GAIL - all state-controlled - were considering a joint bid for Cairn India. The companies had not yet mandated any banks for a deal, the source said.

ONGC, Oil India and GAIL declined to comment.

S.P. Tulsian, an independent investment analyst and petroleum sector expert, said a state consortium bid for Cairn India was unlikely.

"The (Vedanta) deal is not undervalued, and if someone is going to pay more than 405 rupees a share, then it will be too expensive," he said.

Cairn India shares closed slightly lower on Monday at 343.35 rupees. Shares in its parent firm were about 1 percent higher in London trade on Monday, while Vedanta shares were flat.

ONGC IN FRONT?

The government consortium would be led by ONGC, which would take at least a 50 percent stake, while GAIL and Oil India would hold stakes of 20-25 percent, the PTI report said.

ONGC has informal commitments for up to $10 billion in funding, the report said, citing another source.

On Aug 16, Vedanta Resources said it had agreed to spend up to $9.6 billion to buy a majority stake in Cairn India from its UK-based parent.

Cairn India has been viewed in the industry as a possible takeover target. In August 2009, the company began pumping crude from its block in the Mangala oil field in the western Indian state of Rajasthan, the first major crude oil discovery in the energy-hungry nation in two decades.

"Cairn India has been looking for a buyer for quite some time and the company must have sent feelers to the state-run energy firms before striking the deal with Vedanta," Tulsian said.

Cairn India holds a 70 percent stake in the Rajasthan oil block, called RJ-ON-90/1, while ONGC holds the balance.

The Vedanta deal needs Indian government approval because Cairn India has production-sharing contracts (PSCs) with the government for oil and gas exploration blocks. According to the agreement, any ownership change will need federal approval.

Approval from partner ONGC is also required for any change of ownership.

(Additional reporting by Sumeet Chatterjee; Editing by Surojit Gupta and Tony Munroe)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.5 percent to an all-time high of 27,759.01. The broader Nifty gained as much as 1.49 percent to a record of 8,291.65.  Full Article 

REUTERS SHOWCASE

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage