Cairn-Vedanta merger to go ahead if asset value is set aside in escrow a/c


Anil Agarwal’s plan to merge subsidiary Cairn India with flagship firm Vedanta Ltd, which recently hit a roadblock after the government expressed apprehensions about the proposed merger, may finally see the light of the day.

Following a dispute, the income tax department froze shares held by Cairn Energy in Cairn India in 2014.

The I-T department has said that the merger can happen only after the freeze is lifted and tax issues are resolved. Sources, however, told HT that if Cairn Energy agrees to set aside the value of its shareholding in Cairn India in an escrow account, the government will have no objection against the merger.

“The government is concerned about the attached shares in Cairn India and is opposed to the merger,” sources said.

The company has set June 2016 as the date of the merger.

Vedanta Group had acquired Cairn India from British promoters Cairn Energy Plc in 2011 and proposed a merger last year. In January 2014, the tax department slapped a R10,247-crore notice on Cairn Energy on alleged capital gains made in a 2006 business reorganisation it carried out in its India unit before getting it listed. The total tax due after including interest comes over `29,000 crore. Cairn India is facing a tax demand of `20,495 crore in the same case. While Cairn India has approached the Delhi High Court, Cairn Energy is contesting the matter through an international arbitration.

Cairn Energy holds 9.5% stake in Cairn India, valued at `1,950 crore, according to analysts.

London-based Vedanta Resources’ debt stood at $7.7 billion as on March 31, 2015, and its Indian arm Vedanta Ltd’s at $4.57 billion. Zero-debt Cairn India, on the other hand, has $2.85-billion in cash reserve.