Cairn India faces serious corporate governance issues

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5 Jun, 2011, 11.21AM IST,PTI
Cairn India faces serious corporate governance issues


NEW DELHI: With a ministerial panel proposing stringent conditions for approving Cairn Energy's stake sale in its Indian unit to Vedanta Resources, Cairn India may face serious corporate governance issues if either its parent firm or the buyer were to accept the riders.

The board of Cairn India has on at least two occasions rejected oil ministry condition that royalties paid by ONGC on its most important Rajasthan oilfields, be cost recoverable from oil sales saying this was against contractual provisions and not in the interest of the company and its shareholders.

But now if Cairn Energy or its successor Vedanta were to accept this condition, which has been ratified by a Group of Ministers headed by Finance Minister Pranab Mukherjee, a serious corporate governance issue will arise for Cairn India, analysts tracking the USD 9.6 billion Cairn-Vedanta deal said.

"Can Cairn India compromise other shareholders' interest just because one shareholder (Cairn Energy) is selling its stake to other (Vedanta)," one of them asked.

Cairn Energy has always maintained that it is just a shareholder in Cairn India and the expertise, skills and management vests in Cairn India. So can the UK firm or its successor impose conditions which are detrimental to Cairn India's interest, he asked.

"I think there is a larger corporate governance issue involved. It is true that it is a corporate transaction involving share transfer between two entities. But can someone sell a majority stake in a company without taking that company into confidence," another person asked.

Accepting the condition would mean about USD 900 million dent in revenues of Cairn India annually.

Another analyst said minority shareholders can take the board of directors of Cairn India to court for jeopardising their interest by compromising on their interest.

Of the four independent directors on Cairn India, two of them have conflict of interest (they are also on the board of Vedanta Resources). It is the job of the independent directors to protect minority shareholders' interest.

Oil and Natural Gas Corp (ONGC) owns 30 per cent interest in the Rajasthan oilfields but has to pay royalty at the rate of 20 per cent of crude oil price realised on all of the 240,000 barrels per day of expected peak output.

At USD 70 per barrel oil price, it has to pay Rs 12,600 crore in royalties on Cairn India's behalf over the 12-year life of the field, making India's largest onland fields a losing proposition for it.

ONGC had cited certain contractual provisions in July last year, which was a month before the Cairn-Vedanta deal was announced, to demand that royalty like other taxes and levies be first deducted (recovered) from sale proceeds of oil before profits are split between partners.

[bobded]

Cairn Inde est confrontée à de graves problèmes de gouvernance d'entreprise
5 juin 2011, 11h21 CEST, PTI
Cairn Inde est confrontée à de graves problèmes de gouvernance d'entreprise


NEW DELHI: Avec une table ronde ministérielle proposant des conditions strictes pour l'approbation des ventes enjeu Cairn Energy, dans son unité indienne de Vedanta Resources, Cairn India peuvent faire face à de graves problèmes de gouvernance d'entreprise si l'une sa société mère ou de l'acheteur sont d'accepter les coureurs.

Le conseil de Cairn India a au moins deux reprises rejeté condition ministère du pétrole que les redevances versées par ONGC sur ses plus importants champs pétrolifères du Rajasthan, le recouvrement des coûts des ventes de pétrole en disant que c'était contre les dispositions contractuelles et non pas dans l'intérêt de la société et ses actionnaires .

Mais maintenant, si Cairn Energy ou son successeur Vedanta ont été d'accepter cette condition, qui a été ratifiée par un groupe de ministres dirigé par le ministre des Finances Pranab Mukherjee, une question de gouvernance d'entreprise graves se poseront pour Cairn India, les analystes de suivi du USD 9,6 milliards Cairn- face Vedanta dit.

"L'intérêt peut actionnaires Cairn compromis l'Inde d'autres tout simplement parce qu'un actionnaire (Cairn Energy) est la vente de sa participation à d'autres (Vedanta), l'un d'eux a demandé.

Cairn Energy a toujours soutenu que c'est seulement un actionnaire de Cairn India et de l'expertise, les compétences et gilets de gestion de Cairn India. Ainsi, l'entreprise peut-Royaume-Uni ou son successeur imposer des conditions qui sont préjudiciables à l'intérêt Cairn India, il a demandé.

«Je pense qu'il ya une question plus vaste de gouvernance d'entreprise concernés. Il est vrai qu'il s'agit d'une transaction commerciale impliquant le transfert de parts entre deux entités. Mais quelqu'un peut-il vendre une participation majoritaire dans une société sans prendre cette compagnie en confiance», une autre personne a demandé.

Accepter la condition signifierait environ 900 millions de dollars en chiffre d'affaires de Dent Cairn India chaque année.

Un autre analyste a déclaré actionnaires minoritaires peut prendre le conseil d'administration de Cairn India devant les tribunaux pour atteinte à leur intérêt, en compromettant leur intérêt.

Parmi les quatre administrateurs indépendants sur Cairn India, deux d'entre eux ont des conflits d'intérêt (ils sont aussi sur le conseil d'administration de Vedanta Resources). C'est le travail des administrateurs indépendants pour protéger les intérêts des actionnaires minoritaires.

Oil and Natural Gas Corp (ONGC) détient 30 pour cent d'intérêt dans les champs pétrolifères du Rajasthan, mais doit payer une redevance au taux de 20 pour cent du prix du pétrole brut réalisé sur l'ensemble des 240.000 barils par jour de production de pointe prévue.

A 70 dollars le baril de pétrole, il doit payer Rs 12,600 crore de redevances pour le compte Cairn Inde au cours de la durée de vie de 12 ans du champ, ce qui rend le plus grand de l'Inde champs onland une proposition perdante pour elle.

ONGC a cité certaines dispositions contractuelles en Juillet l'année dernière, qui a été un mois avant l'accord Cairn-Vedanta a été annoncé, à la demande que la royauté, comme les autres impôts et taxes déduits d'abord (recouvrés) de produit de la vente de pétrole avant les profits sont répartis entre les partenaires .

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5 JUN, 2011, 11.21AM IST,PTI
Cairn India faces serious corporate governance issues

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NEW DELHI: With a ministerial panel proposing stringent conditions for approving Cairn Energy's stake sale in its Indian unit to Vedanta Resources, Cairn India may face serious corporate governance issues if either its parent firm or the buyer were to accept the riders.

The board of Cairn India has on at least two occasions rejected oil ministry condition that royalties paid by ONGC on its most important Rajasthan oilfields, be cost recoverable from oil sales saying this was against contractual provisions and not in the interest of the company and its shareholders.

But now if Cairn Energy or its successor Vedanta were to accept this condition, which has been ratified by a Group of Ministers headed by Finance Minister Pranab Mukherjee, a serious corporate governance issue will arise for Cairn India, analysts tracking the USD 9.6 billion Cairn-Vedanta deal said.

"Can Cairn India compromise other shareholders' interest just because one shareholder (Cairn Energy) is selling its stake to other (Vedanta)," one of them asked.

Cairn Energy has always maintained that it is just a shareholder in Cairn India and the expertise, skills and management vests in Cairn India. So can the UK firm or its successor impose conditions which are detrimental to Cairn India's interest, he asked.

"I think there is a larger corporate governance issue involved. It is true that it is a corporate transaction involving share transfer between two entities. But can someone sell a majority stake in a company without taking that company into confidence," another person asked.

Accepting the condition would mean about USD 900 million dent in revenues of Cairn India annually.

Another analyst said minority shareholders can take the board of directors of Cairn India to court for jeopardising their interest by compromising on their interest.

Of the four independent directors on Cairn India, two of them have conflict of interest (they are also on the board of Vedanta Resources). It is the job of the independent directors to protect minority shareholders' interest.

Oil and Natural Gas Corp (ONGC) owns 30 per cent interest in the Rajasthan oilfields but has to pay royalty at the rate of 20 per cent of crude oil price realised on all of the 240,000 barrels per day of expected peak output.

At USD 70 per barrel oil price, it has to pay Rs 12,600 crore in royalties on Cairn India's behalf over the 12-year life of the field, making India's largest onland fields a losing proposition for it.

ONGC had cited certain contractual provisions in July last year, which was a month before the Cairn-Vedanta deal was announced, to demand that royalty like other taxes and levies be first deducted (recovered) from sale proceeds of oil before profits are split between partners.