Ahead of a planned merger of Cairn India and Vedanta Ltd, top officials of the oil firms including chief executive Mayank Ashar met Oil Minister Dharmendra Pradhan to brief on the transaction.
Cairn CEO Ashar and CFO Sudhir Mathur met Pradhan on Wednesday to brief about the reverse merger planned by billionaire Anil Agarwal.
The boards of Cairn India Ltd and Vedanta Ltd are likely to meet on Sunday to consider a 'reverse' merger aimed at cutting debt on Vedanta books.
Confirming the meeting, Pradhan said his ministry's only concern was investment in exploration has to increase so that oil and gas production rises.
Officials of Cairn, which had cut capex by 60 per cent to USD 500 million for current fiscal, told the minister that the company was focused on raising output.
Agarwal's London-listed Vedanta Resources in a regulatory filing earlier this week stated that "should a transaction with Cairn India Ltd proceed, it could potentially be considered a reverse takeover."
Industry sources said in a reverse merger, Vedanta should merge with Cairn India Ltd.
This, they said, was less cumbersome process as getting approval of 50 per cent of the minority shareholders of Vedanta was much easlier than getting nod of Cairn's former promoter, Cairn Energy plc and LIC, which together hold about 18.88 per cent stake out of the public shareholding of 39.41 per cent of the company.
Also, if Cairn was to merge with Vedanta, the company would have to seek government approvals for changing ownership of all its oil and gas assets including the prime Barmer block in Rajasthan and the KG basin Ravva oil and gas fields.
If Vedanta was to merge with Cairn, such a requirement would not arise, they said.
The merger objective of cutting Vedanta's Rs 37,636 crore gross debt by using Rs 16,870 crore of cash lying with Cairn as well as over Rs 1,320 crore of profit the firm generates every year can be met in a reverse merger as well.
British oil explorer Cairn Energy, which had sold majority of its stake in Cairn India to Vedanta in 2011, still holds 9.8 per cent stake in Cairn India. It has, however, been restrained by the Income Tax department from disposing of its shares pending Rs 10,247-crore tax demand.
In case of a reverse merger, Cairn Energy will continue to remain a shareholder in Cairn India with its frozen shares. However, in case Cairn was to merge with Vedanta, it would get shares of Vedanta in the ratio decided on Sunday.
Considering the fact that Cairn Energy was willing to sell its holding in the share buyback Cairn India announced last year at Rs 354 per share but couldn't because of Income Tax ruling, it remains to be seen if it will be willing to accept valuation of Rs 180.75, the closing price of Cairn India stock today.
