Cairn India top brass will seek the confidence of shareholders for reappointment on September 15 at the companys annual general meeting,even as experts remained divided on whether the proposed $8.48-billion sale of majority stake to UK-based Vedanta Resources would be through by then.
Some experts said the new shareholders are expected to assure others that management continuity would be maintained to ensure unhindered operations.
Cairn executives told FE that Bill Gammell,chief executive of the companys UK parent,will also attend the AGM in Mumbai. Cairn India MD and CEO Rahul Dhir and CFO Indrajit Banerjee will retire by rotation and being eligible,will offer themselves for reappointment,Cairn India informed the Bombay Stock Exchange on Thursday.
While the company sounds confident about taking the $8.48-billion majority stake sale in Cairn India to Vedanta to its logical conclusion before the AGM,sources told FE that Cairn is also in the process of seeking the intervention of Prime Ministers office (PMO) to diffuse the simmering tension and in securing government approval for the deal. It is being pointed out that with the petroleum ministry non-committal on giving its nod for the deal,the company could seek PMO intervention to pacify state-run ONGC,which apprehends that the deal puts its interest in the Rajasthan oilfield at stake.
The intention is to convince the government that the transaction would not affect its interests or those of state-owned ONGC in any way. People close to Cairn India,however,denied any move to seek PMO intervention at this stage. The office of the principal secretary to Prime Minister,TK Nair,said that Cairn has not sought any meeting.
The new majority owners,as in the case of any such transaction,are expected to retain the current management to ensure continuity in operations. It is necessary to retain certain key officials who have the knowledge of certain areas of operations so that these functions are not affected by the ownership change, said HDFC Securities vice-president (institutional research) Ranjit Kapadia. He also said that the new owners are expected to justify the transaction and tell other shareholders how the integration with the acquirer will benefit all.
Another expert tracking the oil and gas sector,who did not wish to be named because he is associated with one of the companies,said the reappointment of Rahul Dhir and Indrajit Banerjee was long overdue. The proposed new owners are unlikely to be present at the AGM because nothing would go through by then without the governments approval, he said.
When directors on the board retire by rotation,their reappointment,term and remuneration have to be approved by the AGM as per the Companies Act,said Priti Malhotra,executive director,Spice Mobility and former president of Institute of Company Secretaries of India (ICSI).
While ONGC is still to break the silence on its concerns,the petroleum ministry has said it would examine the deal in the light of the production sharing contract and ONGCs views. Petroleum secretary S Sundareshan has said that prior written consent of the government was mandatory for the deal to go through. ONGC,which now pays royalty for the entire output from Cairns Rajasthan block RJ-ON-90/1 despite having only 30% participation in the venture,wants Cairn India to pay royalty proportionate to its interest.