Cairn India shares surged by nearly 3 per cent in the morning trade on the Bombay Stock Exchange after the Government gave its approval for the sale of stake to the UK-based mining firm Vedanta, 10 months after the deal was first announced.

The Cabinet Committee on Economic Affairs (CCEA) headed by the Prime Minister, Dr Manmohan Singh, has given its approval to Cairn Energy for selling its Indian unit to Vedanta Resources, but with riders.

The scrip opened on a weaker note on the BSE but then regained the lost ground and touched a high of Rs 319.10.

During the pre-noon session, the scrip was trading higher by 4.01 per cent at Rs 323.20 on the BSE and up by 4.04 per cent at Rs 324.35 on the NSE.

“The uptrend in the stock is because the deal hangover, which was there for the last 10 months, is finally over and the uncertainty and regularity hurdles are now all clear,” the Ashika Stock Brokers Research Head, Mr Paras Bothra, said, adding that the cost-based royalty issue has also been factored in.

Meanwhile, Vedanta gained 3.1 per cent to 2,094 pence in London yesterday.

Marketmen said the CCEA decision was also positive for ONGC and it was visible in the stock movement today as the shares of ONGC were trading at 278.90, up 1.81 per cent on the BSE, after witnessing a high of Rs 290.55 in the morning trade.

The approval comes with the precondition that Cairn or its successor has to treat the royalty paid by ONGC on the entire crude output from the Rajasthan oilfield as recoverable from oil sales.

Cairn India will have to withdraw the arbitration it has initiated disputing its liability to pay a Rs 2,500 per tonne oil cess on its 70 per cent share in the fields. Besides, the approval will be subject to ONGC and would also need security clearance.

Related Topics
comment COMMENT NOW