Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The CCEA could not take a final decision on the deal and the matter has now been referred to a
GOM to be headed by the finance minister. We believe the real threat right now comes from
delays in approval to raise production (rather than non-approval of the takeover deal) which could
reduce FY12-13F EPS by 11-17%.
The CCEA (Cabinet Committee on Economic Affairs) met yesterday but could not take a final
decision on the Cairn-Vedanta deal.
The matter has now been referred to a Group of Ministers (GOM) to be headed by the
Finance Minister. The group hasn't been constituted yet and no time frame has been given to
the GOM to submit its recommendations. The petroleum Minister has said that the GOM
would broadly look into the matters related to royalty & cess. Further he said that though there
were "nuanced differences" in the reactions of various ministries, there was "no difference"
over making royalty cost recoverable. For detailed discussion on the impact of making royalty
cost recoverable on Cairn India, please refer our last note on Cairn India, Evaluating 'what if'
scenarios dated 18 February 2011.
We note that it's only a GOM and not EGOM (Empowered Group of Ministers) which means
that it will review the matter and give its recommendations back to CCEA which then will take
a final decision on the deal.
In terms of impact on Cairn India, we believe the real threat right now is from delays in
approval to raise production pending a final decision on the deal rather than non-approval of
the takeover deal. From the point of view of the minority shareholders, the deal is no longer a
concern given the rise in global oil prices subsequent to the deal announcement. Hence if the
PSC remains untouched, then the value of the assets have gone up irrespective of whether
the deal is approved or not. The biggest risk, in our view, is that unless the issue is resolved
to the satisfaction of ONGC, CIL's growth plans in the Rajasthan block could well be impacted
as all investment decisions relating to raising the approved oil production level or to carry out
further exploration work need to be pre-approved by ONGC & then GOI.
Our current forecasts assume MBA production rising to 156,250bpd in FY12 & 207,500bpd in
FY13. If CIL is forced to produce only as per current approved production plan of 175kbd
((Mangala- 125, Bhagyam- 40, Aishwariya- 10), then our EPS estimates for FY12-13F would
drop by 11-17%.
Separately, earlier yesterday Sesa Goa had said that the open offer would start on April 11th
and close on April 30th, 2011.
Also CNBC reported yesterday that Petronas in looking to sell its 14.9% stake in CIL in the
open market ahead of the open offer.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The CCEA could not take a final decision on the deal and the matter has now been referred to a
GOM to be headed by the finance minister. We believe the real threat right now comes from
delays in approval to raise production (rather than non-approval of the takeover deal) which could
reduce FY12-13F EPS by 11-17%.
The CCEA (Cabinet Committee on Economic Affairs) met yesterday but could not take a final
decision on the Cairn-Vedanta deal.
The matter has now been referred to a Group of Ministers (GOM) to be headed by the
Finance Minister. The group hasn't been constituted yet and no time frame has been given to
the GOM to submit its recommendations. The petroleum Minister has said that the GOM
would broadly look into the matters related to royalty & cess. Further he said that though there
were "nuanced differences" in the reactions of various ministries, there was "no difference"
over making royalty cost recoverable. For detailed discussion on the impact of making royalty
cost recoverable on Cairn India, please refer our last note on Cairn India, Evaluating 'what if'
scenarios dated 18 February 2011.
We note that it's only a GOM and not EGOM (Empowered Group of Ministers) which means
that it will review the matter and give its recommendations back to CCEA which then will take
a final decision on the deal.
In terms of impact on Cairn India, we believe the real threat right now is from delays in
approval to raise production pending a final decision on the deal rather than non-approval of
the takeover deal. From the point of view of the minority shareholders, the deal is no longer a
concern given the rise in global oil prices subsequent to the deal announcement. Hence if the
PSC remains untouched, then the value of the assets have gone up irrespective of whether
the deal is approved or not. The biggest risk, in our view, is that unless the issue is resolved
to the satisfaction of ONGC, CIL's growth plans in the Rajasthan block could well be impacted
as all investment decisions relating to raising the approved oil production level or to carry out
further exploration work need to be pre-approved by ONGC & then GOI.
Our current forecasts assume MBA production rising to 156,250bpd in FY12 & 207,500bpd in
FY13. If CIL is forced to produce only as per current approved production plan of 175kbd
((Mangala- 125, Bhagyam- 40, Aishwariya- 10), then our EPS estimates for FY12-13F would
drop by 11-17%.
Separately, earlier yesterday Sesa Goa had said that the open offer would start on April 11th
and close on April 30th, 2011.
Also CNBC reported yesterday that Petronas in looking to sell its 14.9% stake in CIL in the
open market ahead of the open offer.
No comments:
Post a Comment