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Case Code: CLFIN003
Case Length: 5 pages 
Period: -  
Pub Date: 2016
Teaching Note: Not Available
Subject : Finance
Price:Rs.100
Organization :Vedanta Resources plc and Cairn India
Industry : Oil and gas exploration
Countries : -

Should Cairn India Merge with Vedanta?

 

ABSTRACT

This case discusses whether Vedanta Resources plc (Vedanta Resources), India’s biggest diversified natural resources company, should merge two of its businesses — India’s largest private miner, Vedanta Ltd. (Vedanta), and oil and gas exploration and production firm, Cairn India Ltd. (Cairn India). The move was intended to cut debt at Vedanta and simplify the group structure of Vedanta Resources. Where Cairn India was concerned, the deal would help diversify earnings from oil and gas to electricity and an array of commodities from copper to zinc to aluminum. The shareholders of Cairn India would also gain from Vedanta’s asset base and output-increase forecast compared to Cairn India’s moderate output-growth plan. The deal came in for severe criticism from the minority shareholders of Cairn India. The case discusses that while Vedanta would be able to reduce its debt, how would Cairn India tackle Vedanta’s legacy issues associated with Vedanta Aluminum such as problems with refinery expansion in Odisha, human rights violation charges at the Lanjigarh refinery, and challenges over Vedanta’s bauxite mining plans in Odisha.
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Issues:

  • Analyze whether Vedanta’s merger with Cairn India will tackle the former’s debt issues.
  • Discuss the synergies of the merger.
  • Understand the issues and challenges faced by minority shareholders of Cairn India.
Introduction
In June 2015, India’s biggest diversified natural resources company, Vedanta Resources plc (Vedanta Resources), announced its plans to merge two of its businesses – India’s largest private miner, Vedanta Ltd. (Vedanta), and oil and gas exploration and production firm, Cairn India Ltd. (Cairn India). The merger through a Rs. 146.12 billion all-share deal would create India’s largest diversified natural resources company. The move was intended to cut debt at Vedanta and simplify the group structure of Vedanta Resources....

Keywords

Vedanta Resources plc,Cairn India Ltd.,Merger,Debt burden,Cash reserves,Human rights violation,Mining,Lanjigarh refinery,Valuation,Swap Ratio,Minority Shareholders,Synergy



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