Sesa Goa= Govt’s CCEA Approves Vedanta’s Cairn Acquisition::Morgan Stanley Research,

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Sesa Goa
Govt’s CCEA Approves
Vedanta’s Cairn Acquisition,
But With Riders
Quick Comment – Impact on our views:  Assuming the
deal goes through, this is overall slightly negative for
Sesa Goa stock. We estimate earnings downside of
4.5% for F2012e and 5% for F2013e. Our price target
for Sesa would also be lowered by about 6.6%.
However, the sentimental relief is that Sea Goa’s
investment of 18.5% in Cairn India will not end up
being just a strategic one and instead the Vedanta
Group will take control of Cairn India once its stake is
increased to 58% post the deal completion (Sesa
Goa is a subsidiary of Vedanta).
What's new: India’s Cabinet Committee on Economic
Affairs (CCEA) has endorsed the Group of Minister's
(GOM's) earlier recommendations and has given
approval to Vedanta’s proposal to acquire up to 58.5%
of the shares in Cairn India Ltd, but with conditions.
• Condition 1 – Royalty to be made cost
recoverable
• Condition 2 – Arbitration related to cess (a tax
payable to the government per ton of oil
produced) should be withdrawn.
Some other approvals (e.g. from SEBI – Securities and
Exchange Board of India) are still to be taken. CCEA has
said that it has no issues with Vedanta group's technical
and financial capabilities in relation to the acquisition.