Cairn to go in for IPO

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It may be 25-80 per cent of Indian arm's equity

Our Bureau

The gameplan

To come

out with IPO by 2008.

IPO proceeds

may be returned to shareholders either in the form of a special dividend or by buy back.

Kolkata, March 14

Barely two weeks after Oil and Natural Gas Corporation Ltd (ONGC) expressed its interest in acquiring Cairn Energy Plc's Indian assets, the UK-based exploration and production company has announced growth plans for India.

Cairn will float part of its Indian business through an IPO to be listed on the Bombay Stock Exchange latest by 2008. The IPO will be for between 25 and 80 per cent of the Indian arm's equity.

The UK company may return the IPO proceeds to its shareholders either in the form of a special dividend or by buying back its shares. "It's too early to say, but if we do come out with an IPO, we have to issue an IPO of a minimum of 25 per cent and a maximum 80 per cent. But it depends on market conditions, appetite and on value," Sir Bill Gammell, Chief Executive, said.

He said, "We have had a substantial increase in reserves in Rajasthan. I see the opportunity to create two world-class businesses, one based in India and the other in the UK."

On ONGC's offer, he said that it is one of Cairn's business partners in India and the two companies constantly have discussions. "But I have no comments to make on any particular issue".

When contacted, a senior ONGC official admitted that the company no longer has any discussion on the proposed acquisition with Cairn. "As on date we are not having any discussion," the official said.

Sir Bill rejected any plan to sell the Indian assets. "It's just the opposite," he said. "For a long time we believed Asia is an emerging market. We entered there early. We built a strong strategic position and now want to take that business forward in India and South Asia."

Indian assets

Cairn has more than 3.5 billion barrels of oil at its Rajasthan fields and the figure may increase. Peak production at the Mangala, Bhagyam and Aishwariya fields could be as much as 1.5 lakh barrels of oil a day.

The Cairn stock, part of the FTSE 100, on Tuesday jumped by 7 per cent to 2071 pence on the London Stock Exchange after the announcement, with over 38 lakh shares changing hands till 7.20 p.m. IST.

The anticipated total cost of development in India is around $2 billion in gross terms. But the cost of actually bringing the fields on stream is estimated to be about $800 million on a gross basis. Of that, Cairn's share is 70 per cent. Cairn currently has $100 million cash on its books and an un-drawn credit facility $240 million.

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Cairn consortium block ONGC combine beats HPCL for crude oil purchase
Cairn consortium block HPCL emerges front-runner for crude oil purchase

(This article was published in the Business Line print edition dated March 15, 2006)
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