In a fresh twist to the Cairn-Vedanta tale, Cairn India on Tuesday decided to seek shareholders' nod on the government's riders for approving the deal. It formally received a letter from the government on Tuesday, allowing a conditional stake sale.
"Cairn India reached a conclusion that it would be appropriate to hold a postal ballot of all shareholders to consider the conditions imposed by the government of India," said a company announcement. The company had last week also received a requisition from the parent company, Cairn UK Holdings, to convene an extraordinary general meeting to consider the conditions.
What reforms meant for the government and its finances
The government last month approved the stake sale in Cairn India to Vedanta Resources only if the company accepted treatment of royalty from its Barmer block in Rajasthan as cost-recoverable. In addition to royalty, the cess of Rs 2,500 per tonne on Barmer output that is being paid by Cairn India under protest, will also have to be made cost-recoverable. Further, Cairn India will have to give up its right to challenge the above two conditions in future.
However, if Cairn India accepts these conditions its profits will be impacted. For the current quarter, the company estimated its profit would be lower by Rs 1,291 crore, if it accepts these conditions.
STRONG Q1 PERFORMANCE
For the quarter ended June 30, Cairn India reported an 869 per cent jump in net profit, riding on higher crude output.