Vedanta to take 10 per cent stake as Cairn rejigs deal

India-focused miner Vedanta Resources PLC has taken another 10 per cent stake in Cairn Energy's Indian assets as part of the overhaul of an agreed but long-delayed deal that will also cut the price tag by more than $600 million.

As part of the changes announced on Monday, the deal will complete in two tranches, with Vedanta buying an initial 10 percent stake on or before July 11. This will add to shares bought through an open offer and from Malaysia's Petronas, lifting Vedanta's stake in Cairn India to 28.5 percent.

Vedanta will acquire the remaining 30 per cent stake it has agreed to buy once it has necessary consents and approvals from the Indian government.

Vedanta and Cairn said in two statements that they had agreed to remove the non-compete provision and a related fee of 50 rupees per share, cutting the price tag for the total 40 per cent stake being sold to $6.02 billion from $6.65 billion.

"Vedanta believes this initial 10 per cent purchase is a further demonstration of its commitment to India," Chairman Anil Agarwal said.

Cairn Energy agreed last August to sell a majority stake in Cairn India to Vedanta in a deal worth up to $9.6 billion but it has been held up over issues with state-run oil and gas explorer ONGC, which has a 30-per cent holding in the Cairn-operated fields in western India, but pays 100 per cent of the royalties.

India's oil ministry has been pushing to share the royalty burden between ONGC and Cairn India, a move opposed by both Cairn and Vedanta. Analysts had said any change in the royalty structure would impact valuations and could jeopardise the deal.

A ministerial panel said in May it would refer the deal back to the cabinet, but did not disclose its recommendation, which it said was 'unanimous'.

A government source told Reuters the panel would recommend that the operators of Cairn Energy's key Indian oil field share the royalty burden in proportion to their stake in the project.