Cairn defends $1.2bn 'loan' to parent Vedanta

Vol 19, PW 23 (28 Jul 16) People & Policy

Vedanta Resources boss Anil Agarwal is often accused of using subsidiary Cairn India like an ATM to draw cash to repay Vedanta's ballooning debts at the expense of Cairn's minority shareholders.

But at its 10th annual shareholders meeting in Mumbai on July 21 three independent Cairn directors vigorously defended its decision to renew a $1.25bn loan to a subsidiary of parent Vedanta for two years from May 2016, first granted in 2014. "Minority shareholders got a raw deal," complained shareholder Vinayak Bapat.

"A much better interest rate could have been secured by lending the money to say HDFC Bank. I didn't like how our loan was rolled over (extended) for a Vedanta subsidiary." To this Cairn India director Aman Mehta replied that comparing interest rates on Indian rupee and US dollar loans is "like comparing apples and oranges." He said Cairn India traditionally holds half its cash deposits in Indian rupees and half in dollars.

"We're getting a far higher interest rate on this loan than on other dollar assets," stressed Mehta. Also in the spotlight were directors Edward Story and Omkar Goswami who reviewed the two-year renewal.

 "Omkar and I spent a long time evaluating the rollover (extension) in terms of the interest rate, security, fairness and representing all shareholders," said Story. "Omkar and I are independent and unconnected with Vedanta.

It is our firm conclusion the rollover was in the interest of all shareholders."