Sharemasterindia.com: Shares of Cairn India rebounded over 5 per cent on Wednesday to Rs 181 after slumping over 8 per cent in the previous two sessions.
News reports citing sources had earlier said that oil exploration and production company Cairn India could be merged with another Vedanta group firm Vedanta Ltd. The merger will give Vedanta Ltd access to Cairn's cash and help reduce its debt. Vedanta holds 59.88 per cent stake in Cairn India.
Vedanta Ltd shares were trading flat today.
A potential merger of Cairn with Vedanta Ltd (formerly Sesa Sterlite) could adversely impact the oil exploration and production company, brokerage firm UBS said.
Cairn Energy reported cash and cash equivalents of Rs 16,867 crore as on March 31. On the other hand, the standalone net debt of Vedanta Ltd was at Rs 36,796 crore as on March 31.
UBS said that a merger could mean that Cairn's cash will be unavailable for growth or higher dividends. Cairn India could be weighed down by an unfavourable merger ratio, the brokerage added.
Further, a possible institutional investors' steps to block the merger could impact sentiment, UBS added. Foreign institutional investors hold 14.26 per cent stake in Cairn India while other institutions 10.35 per cent.
Andrew Holland, CEO of Ambit Investment Advisors, said British oil explorer Cairn Energy, which owns 9.82 per cent stake in Cairn India, could also closely look at the merger proposal.
Reacting to media reports, Vedanta Ltd in a statement to stock exchanges said that the company's stated strategy is to simplify and consolidate its corporate structure. "Management reviews options to deliver this strategy on an on-going basis," it added.
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