Will pay all India, UK taxes on stake sale to Vedanta: CairnSeptember 17, 2010
New Delhi: British energy firm Cairn Energy Plc on Thursday said it will pay all taxes due, both in India and the United Kingdom, on the USD 8.48 billion it will gain from selling a majority stake in its Indian arm to Vedanta Resources.
"We will pay all the taxes (due) in UK and India," Cairn Energy Plc Chief Executive Bill Gammell said here today.
Cairn Energy is selling between a 40 and 51 per cent stake in Cairn India -- the operator of the nation's largest onland oilfield -- to London-listed Vedanta for USD 6.65 billion to USD 8.48 billion.
"Tax will be paid in both India and UK," he said. The tax will be "several hundreds of millions of dollars."
Averaged across both countries on the gross proceeds, "It will be in the low teens. What is paid will be determined eventually by the final proceeds," he said.
He did not elaborate, but analysts said the 'low teens' being referred to by Gammell may be the 13-14 per cent tax liability on gross proceeds of the sale.
If Cairn Energy was to eventually sell only 40 per cent out of its 62.38 per cent stake in Cairn India for USD 6.65 billion, the combined tax liability in India and UK would be around USD 868 million. But if it was to sell 51 per cent for USD 8.48 billion, the tax liability would be USD 1.1 billion.
Vedanta is to acquire a 40 per cent stake from Cairn Energy and make an open offer for an additional 20 per cent to minority shareholders of Cairn India. In case the open offer is not fully subscribed, Cairn Energy will sell the additional shares, but with a cap of 51 per cent, to make up for the shortfall.