Cairn India to sell 5.37% stake for Rs 2,534cr

Petronas will buy 63.3 mn shares and Tamarind 49.7 million.

Cairn India, the Indian arm of British oil and gas company Cairn Energy, has decided to sell 5.37 per cent stake to Malaysian state oil and gas firm Petroliam Nasional, or Petronas, and Singapore-based Orient Global Tamarind Fund for Rs 2,534 crore ($625 million) to fund expansion plans.

The company will sell a total 113 million shares – 63.3 million shares to Petronas and 49.7 million shares to Tamarind, New Zealand billionaire Richard Chandler’s investment group – at Rs 224.30 each.

The share sale price is 1.8 per cent lower than Cairn India’s closing price on March 14 and a 40 per cent premium to its listing price of Rs 160.

The Cairn India share lost 6.15 per cent (Rs 14.05) to close at Rs 214.35 on the Bombay Stock Exchange today, the day the benchmark Sensex dropped more than six per cent.

Following the share sale, Petronas’ stake in Cairn India will rise to 12.7 per cent, while Orient Global Tamarind will own 2.6 per cent. Cairn India’s holding will be reduced to 64 per cent.

The share sale proposal was approved by Cairn India’s board of directors today and will be taken up for shareholders’ approval on April 16.

The shares will be locked-in for one year from the date of allotment. “The stake has been sold at a fair price considering that Cairn India’s floating price of the IPO was at Rs 160,” a company spokesperson said.

Petronas had picked up its existing stake in Cairn India ahead of the IPO in 2006. The company’s market capitalisation stood at Rs 24,464 crore when it listed in January 2007.

Cairn India plans to utilise the sale proceeds to fund its expansion plans and ongoing projects, which includes production of oil at Mangala, Rajasthan, by next year. ONGC is Cairn’s partner in the project.

“The company is confident of producing commercial oil from Rajasthan in 2009. The private placement will help the company to meet its investment plans and provide greater financial and operational flexibility,” Cairn India Chief Executive Rahul Dhir said in a statement.