Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cairn Energy and Vedanta have amended the terms of the proposed sale of Cairn India (CIL)
shares which includes waiver of the non compete fee. This leads us to believe both parties are
fully committed to the transaction and have reconciled to royalty being made cost recoverable.
Cairn Energy and Vedanta have agreed to remove the non-compete provision and related
non-compete fee of Rs50/share, reducing the effective sale price to Rs355/share. This leads
us to believe that both parties now view royalty cost recoverability as pre-condition to
government approval of their transaction.
The two companies have also agreed to restructure the transaction so that it will take place in
two tranches. Vedanta will acquire 10% stake in CIL on or before 11 July 2011, raising their
stake to 28.5% and reducing Cairn Energy stake to 52.2%. The acquisition of the balance
30% stake will take place as and when the transaction is approved by the government.
In our view, the amended terms show that both parties are now fully committed to the
transaction, irrespective of government pre-conditions.
Our current valuation for CIL of Rs360/share would drop to Rs295/share if we assume that
royalty payments are made cost recoverable, all other assumptions remaining unchanged.
This would be positive for ONGC. Our current valuation of ONGC (Rs325/share) includes
Rs5/share coming from the Rajasthan block assuming 15% project IRR. If royalty is made
cost recoverable, then the value of the block for ONGC would increase to Rs24/share and
ONGC's overall valuation would rise to Rs344/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cairn Energy and Vedanta have amended the terms of the proposed sale of Cairn India (CIL)
shares which includes waiver of the non compete fee. This leads us to believe both parties are
fully committed to the transaction and have reconciled to royalty being made cost recoverable.
Cairn Energy and Vedanta have agreed to remove the non-compete provision and related
non-compete fee of Rs50/share, reducing the effective sale price to Rs355/share. This leads
us to believe that both parties now view royalty cost recoverability as pre-condition to
government approval of their transaction.
The two companies have also agreed to restructure the transaction so that it will take place in
two tranches. Vedanta will acquire 10% stake in CIL on or before 11 July 2011, raising their
stake to 28.5% and reducing Cairn Energy stake to 52.2%. The acquisition of the balance
30% stake will take place as and when the transaction is approved by the government.
In our view, the amended terms show that both parties are now fully committed to the
transaction, irrespective of government pre-conditions.
Our current valuation for CIL of Rs360/share would drop to Rs295/share if we assume that
royalty payments are made cost recoverable, all other assumptions remaining unchanged.
This would be positive for ONGC. Our current valuation of ONGC (Rs325/share) includes
Rs5/share coming from the Rajasthan block assuming 15% project IRR. If royalty is made
cost recoverable, then the value of the block for ONGC would increase to Rs24/share and
ONGC's overall valuation would rise to Rs344/share.
No comments:
Post a Comment