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INTRODUCTION

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Cairn India Cairn India started in 1979. The Founder and Chairman of Cairn India is Sir Bill Gammel.

As the Indian oil and gas market deregulated in the early 1990s,Cairns focus turned to this region, acquiring Command PetroleumLtd in 1996, an Australian-quoted company with interests in South

Asia. In January 2004, Cairn added the Mangala oil field in Rajasthan to

its assets and this, along with the other discoveries in Rajasthan,will form the core of the future developments in India.

Cairn India, along with its joint venture partners, has invested

billions of dollars in a variety of projects and developments in thisregion.

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Vedanta Resources

Vedanta resources is an exceptional diversified miningcompany with a world class resource base.

Its principle operations are in India, Zambia, and Australia.

The Major Metals produced are aluminum, copper, lead,

zinc and Iron ore.

Vedanta resources is the Indias Largest non-ferrous metals

and mining company based on revenues.

The Co. made a significant growth in recent years through

various expansions projects for copper, zinc and aluminum

business and our acquisition of Sesa Goa in April 2007,

which enabled them to enter the iron ore business.

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Cairn India Vedanta Resources Deal

London-listed mining group Vedanta Resources, which iscontrolled by ambitious Indian billionaire Anil Agarwal, is

all set to acquire a controlling stake in Cairn India, in a bid

to diversify into oil business. Cairn India operates in the

countrys largest producing oil fields in Barmer, Rajasthan. The deal was announced in August 2010,and has been since

then awaiting approvals from SEBI and Government.

Any deal involving acquisition of 15 per cent or more stake

in a listed company requires the acquirer to make an openoffer for 20 per cent stake purchase from public

shareholders and this offer needs to be approved by SEBI.

http://www.vedantaresources.com/http://www.vedantaresources.com/http://www.vedantaresources.com/http://www.vedantaresources.com/

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Open Offer Rule

The Rule says that an open offer for a minimum of 20% in

the target company is required to be made by any entity thatpurchases 15% equity, either from the promoters or from

the open market.

Please note the steps :

Step A) Company "A" aquires 15% stake in Company "B"

Step B) Company "A" opens a public offer to buy

minimum 20% share of Company "B" from public.

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What exactly Happens in Vedanta-Cairn

deal

First SESA GOA offers to buy 20% stake from public.Then based on response Vedanta will buy 40-51%

stake from Cairn.

The logic given Vedanta wants to hold only 60% stake.

if suppose that they buy 51% from cairn and then float

minimum 20% public buy tender, and they get more

than 20%, they will end up holding more than 71%

which is out of reach of Vedanta Resources.

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Legal hurdles for Cairn selling it stake to

Vedanta

In the fields of Rajasthan where Cairn India is the mainoperator (to the extent of 70%), ONGC is a partner

with Cairn India holding 30% stake in field.

If Cairn want to sell its stake, it might have to offer

Right of First refusal to ONGC. Already ONGC is

against Vedanta into oil filed. ONGC might consider

that they should acquire the stock if Cairn Energy

wants to leave.

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Government permission

One of the condition is the arbitration. The CairnIndia agrees to pay cess which is around 250cr

annually.

Cairn India claims that ONGC should also bears the

same.

The second condition is to concede to ONGCs stand

that the royalty to be paid for the Gujarat project

should be equally borne by Cairn India.

This may further increase the burden by Rs1,400cr.

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Possible claims against INDIA Article 3 of the India-UK BIPA requires India to

give a fair and equitable treatment to all foreigninvestments by the UK nationals and companies.

Article 7 also provides for easy transferability of

investment. Indias rigid pre-conditions and delayin giving approval to the transaction may be apotential violation of these Articles in letter andspirit.

Although Vedanta Resources has not yet madeinvestments here, as defined under the India-UKBIPA, it can claim protection under Article 3(1) ofIndian-UK BIT claiming failure to providefavourable conditions to make investment.

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Contd.

The situation is graver than one can imagine and IndiaInc. is sitting on a potential powder keg due to delays

in decisions and imposition of unreasonable conditions

on the entry and exit of foreign investment.

Governments GOM( group of ministers) threw the

deal in CCEAS court.

The CCEA approved the deals with the conditions

stated by ONGC.

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Vedantas future problems after buying

Cairn

Tata Steel acquisition of Corus 3 years back..

At that point of time, Corus was bigger than Tata Steel.

That means Tata Steel was trying to swallow a bigger

fish than its throat could accommodate. They could not

spit, nor swallow for 3 years.

Vedanta is intending to buy 60% of Cairn India which

is bigger than total market cap of Vedanta. They are

simply manipulating excel sheets by bringing in Sesa

Goas cash reserves and remaining as debt funds to

finance the deal.

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