Cairn India slips on merger plans

The market is not happy with the decision of Vedanta to merge with itself Cairn India. This will surely give Vedanta access to Cairn’s cash which will help bring down its debt but then that puts the health of Cairn under some stress. Vedanta’s performance in Q4FY15 was pretty bad - Falling crude prices, poor performance of Cairn India and exceptional expense of Rs.19956 crore, pushed the company into a loss. The company ended the quarter with a net loss at Rs.19,228 crore v/s net profit of Rs.1587 crore in Q4FY14. But before taking into consideration the exceptional expense, the company’s net profit was at Rs.491 crore, down 72% (YoY) and down 69% (QoQ). The exceptional expense includes a one-time non-cash impairment charge of acquisition goodwill (Cairn India), largely relating to the oil & gas business (Rs 19,180 crore) and the Sri Lanka block (Rs 505.20 crore) on account of a steep fall in crude oil prices. Forex loss for the quarter was at Rs.184 crore. Vedanta ended FY15 with a loss of Rs.15,646 crore v/s net profit of Rs.1587 crore.

As at end of FY15, standalone debt of Vedanta stood at Rs.37,636 crore and Cairn India, where Vedanta holds 59.9% stake held cash of about Rs.17,000 crore.

All eyes will now be on the swap ratio and market grapevine, based on average of stock prices over past six months indicates that Cairn shareholders could get 11 shares of Vedanta for every 10 Cairn share held.

Cairn India is currently amongts the top three losers on the bourses, hitting a new low today at Rs.170.60.