Shares of Cairn India surged by nearly 3% in morning trade on the Bombay Stock Exchange after the government gave its approval for the sale of a stake to UK-based mining firm Vedanta, 10 months after the deal was first announced.
The Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Manmohan Singh yesterday gave its approval to Cairn Energy for selling its Indian unit to Vedanta Resources, but with riders.
The company opened on a weaker note on the BSE but then regained the lost ground and touched a high of Rs 319.10. The scrip was later trading at Rs 315.65, up 1.58%, at 1040 hours.
"The uptrend in the stock is because the deal hangover which was there for the last 10 months is finally over and the uncertainty and regularity hurdles are now all clear," Ashika Stock Brokers Research Head Paras Bothra said, adding that the cost-based royalty issue has also been factored in.
Meanwhile, Vedanta gained 3.1% to 2,094 pence in London yesterday.
Marketmen said yesterday's decision was also positive for ONGC and it was visible in the stock movement today as shares of ONGC were trading at 278.90, up 1.81% on the BSE, after witnessing a high of Rs 290.55 in morning trade.
The approval comes with the precondition that Cairn or its successor has to treat the royalty paid by ONGC on the entire crude output from the Rajasthan oilfield as recoverable from oil sales.
Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay a Rs 2,500 per tonne oil cess on its 70% share in the fields. Besides, the approval will be subject to ONGC and would also need security clearance.