Panaji Jun 15, 2015 (Thomson StreetEvents) -- Edited Transcript of Vedanta Ltd M&A conference call or presentation Sunday, June 14, 2015 at 12:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Tom Albanese Vedanta Ltd. - CEO * Mayank Ashar Cairn India Ltd. - CEO * D. D. Jalan Vedanta Ltd. - CFO * Mike Yeager Cairn India Ltd. - Chairman, Operations Review Board * Sudhir Mathur Cairn India Ltd. - CFO ================================================================================ Conference Call Participants ================================================================================ * Rakesh Morgan Stanley - Analyst * Manish Kumar HSBC - Analyst * Rakesh Arora Macquarie - Analyst * Naveen Goldman Sachs - Analyst * Nithesh Axis Capital - Analyst * Rohit ICICI Securities - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (audio in progress ) team present with us today, we have Mr. Tom Albanese, CEO of Vedanta Limited; Mr. Mayank Ashar, CEO of Cairn India; Mr. D. D. Jalan, CFO of Vedanta Limited; and Mr. Sudhir Mathur, CFO of Cairn India. The team will make a brief presentation, which is available on our website for download as well; and then, we'll open it up for Q&A. I would like to draw your attention to the disclaimer on pages 1 and 2 of the presentation. So, with that, over to Tom. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [2] -------------------------------------------------------------------------------- Okay. Thank you, Ashwin; and fist of all, I'd like to just express my appreciation for those of you coming on a Sunday to see us. We do think this is a very, very important transaction for both the Cairn and the Vedanta shareholders, and very much an important part of the simplification objective, vision and story for Vedanta; and again, for you to coming on a Sunday, this does reinforce the fact that you see this as being important. So again, I think there will be some people that are on the webcast too. So those of you that are watching from your hopefully homes in London or somewhere else in the world, welcome to you too. We are very excited and delighted to present today's announcement. And this is the merger of Cairn India and Vedanta Limited, which we do believe will create significant value for both sets of shareholders as well as for Vedanta Resources Plc. So let me start by summarizing the key highlights of the transaction. Transaction has been earnestly approved by the non-conflictive, independent Board members of Vedanta Limited, Cairn India and Vedanta PLC. Cairn India Limited public shareholders will receive for each equity share they hold, they'll receive one share of (technical difficulty) redeemable preferred share in Vedanta Limited to the face value of INR10; and D.D. will provide a little more on these RPSs later in the presentation. We believe the transaction terms are very compelling and very attractive for the Cairn's shareholders, and these terms imply a valuation of 7.3% to the previous Friday's closing price. Post the transaction, 79.8% of Vedanta Limited will be held by existing Vedanta Limited shareholders and 20.2% will be owned by Cairn Indian minority shareholders. Vedanta Resources will remain the largest shareholder in Vedanta Limited, with 50.1% of the shares post the merger. This transaction will be affected by a Scheme of Arrangement, and will be subject to regulatory and shareholder approvals, which we will outline later in the presentation. We've acted in line with corporate best practice and applied the highest governance standards, both as per Indian regulations, the Indian Corporation Law and also UK regulations in relation to this transaction; and we would expect this transaction to close in the first quarter of calendar year 2016. Let's look big picture. I'd like to now outline the strategic rationale for this merger. With this transaction, we will reinforce our position as large, diversified India (technical difficulty). And finally, to sum up, we believe this transaction will generate long-term, sustainable value for all our shareholders and I recognize the importance of this transaction to Cairn's shareholders and hence [may] have Mayank come up and go through the transaction from a Cairn perspective. Mayank, over to you. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [3] -------------------------------------------------------------------------------- Thanks, Tom; and good evening, everyone. I'm pleased to share the Cairn story. The Cairn story in India is a very rich one. It's a great brand and as you know, it's India's second largest producer of oil. We discovered the largest onshore oilfield in the last 20 years. So from Cairn perspective, there are multiple attractions to this merger. The terms of the transaction are extremely attractive for Cairn India shareholders. The implied premium offered reflects the higher quality of our assets and the significant future growth potential. We become part of a larger Natural Resources Group with high-quality assets and significant diversification. It leads to greater resilience to commodity prices and economic cycles, and derisks the earnings. The value of a diversified model is illustrated by the chart on the top-right-hand corner. Over the last ten years, diversified resource peers have significantly outperformed the pure play oil and gas companies. The more stable and resilient cash flows of Vedanta Limited will enable us to invest through the cycle and not be dependent on the outlook for one commodity, while making strategic decisions. It will also enable the enlarged company with a strong, sustainable dividends, which is attractive to our shareholders. We will be able to deliver better value to our shareholders as part of a bigger, more diversified company. Cairn India shareholders will also get access to Vedanta Limited's first-year metals and mining assets, which are longer life as compared to some of the Cairn assets and are well invested with low cost. Additionally, there is significant latent capacity at Vedanta Limited, which is ramping up and thereby unlocking value, which we will share in. The zinc assets are truly world-class, in terms of scale, cost and reserve life. This enlarged platform will also give rise to significant economies of scale, including administration, technical excellence, quality of people, interactions with the government, and CSR efforts in the community. Additionally, the shares in the new Vedanta Limited will be more liquid than Cairn India given the larger market cap and the larger free float. A higher index weighting for Vedanta Limited will also benefit its liquidity. We will also gain access to the various capital markets, including NYSE and the international debt market, which further increases our financial flexibility. This merger provides Cairn India minority shareholders with high exposure to the announced cost improvements of $1.3 billion across the group, the majority of which originate from the metal and mining business, which we would not otherwise have received. To summarize, the Cairn management team is very excited about this merger. Rather than it being an impediment, we firmly believe it will strongly support the execution of the unique growth pipeline, which we have developed over the last few years, which I will discuss in the next slide. Cairn's growth strategy will not change post the merger. There's a song or an album by Led Zeppelin called The Song Remains the Same. So at least when you think about the Cairn brand, we are very much on track, but perhaps with a renewed vigor. We will continue to operate our assets efficiently and execute our strong pipeline of projects with the same rigor and with the support of the Vedanta Group. We have an excellent suite of assets, which generate very high returns. The Mangala, Bhagyam, and Aishwariya fields of Rajasthan as well as the offshore assets of Cambay and Ravva are all world-class assets from a cost, reserves and profitability perspective. We will continue to focus on growing our portfolio and have made good progress in the current fiscal year on ongoing projects of gas, Barmer Hill and Bhagyam EOR. Our focus over the long-term is unchanged and that involves maximizing value from a further suite of projects, including Aishwariya EOR, satellite fields and subsequent phases of Barmer Hill development. We continue to execute our strategy. We need access to capital that which we believe will not in any way be impacted by the merger. We are firmly of the view that Vedanta Limited will allocate the capital required to fuel our growth aspirations and that our progress will continue unabated. Finally, Vedanta Limited is committed to promoting the brand value that Cairn India has built over the years. This brand is synonymous with excellence in geology, advanced technology, talented people and financial discipline; and India has been a key contributor to not only India's oil and gas growth story, but also tremendous social capital through community engagement and sustainable practices. We will be committed to ensure that the growth story of Cairn India will remain unaffected. With that, I'll hand it back to Tom. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [4] -------------------------------------------------------------------------------- Thanks, Mayank. Vedanta Limited's earnings are diversified through oil and gas, metals and power; and this diversification has derisked earnings through the cycle. The chart in the upper-right-hand corner shows the EBIT margin volatility has been much lower in (technical difficulty) to the fact that having a diversified portfolio increases cash flow stability as compared to single commodity exposure. We've also had a well-balanced exposure to consumption-related commodities, [be it] aluminum, zinc and copper; and of course, latter-stage commodities represented by power and oil, gas, which have a stable and secured growth trend and are more mature. The bottom-right-hand chart, like to make two points. First, by diversifying across commodities, which have different economic cycles, we do gain again the stability of earnings. Second, you'll notice that the oil prices have dropped toward the back end of the year, which had a bearing on Cairn's share prices. The reality is the oil price decline, as those of you following the sector know, many of you do, that had a material derating of the other commodities over the last few years, which had impacted Vedanta Limited's share price as some of the views expressed that this transaction may be opportunistic, but really not that true. This transaction will enable Cairn's Indian shareholders to fully participate in the substantial upside potential that exists within the Vedanta Limited portfolio, while of course retaining exposure to its oil business. A significant portion of the CapEx in aluminum and power are behind us now. We've also make good progress on our zinc projects. These projects will deliver the majority of the growth over the whole business in the near term, the upside of which will now be shared with Cairn Indian minority shareholders, which is a fairly unique and value-enhancing proposition for them. Vedanta Limited will also support Cairn India's growth plans and then share the upside in these projects. As a group, we'll focus on delivering long-term value for all the shareholders by continuing to allocate capital to the most compelling growth opportunities across the group. So with that, I'll now hand the mike over to Mr. D. D. Jalan, our CFO, who will walk you through the more specific information about the transaction. D.D.? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [5] -------------------------------------------------------------------------------- Thanks, Tom; and good evening to you, ladies and gentlemen. The minority shareholders of Cairn India will receive, for each share held by them, one equity share in Vedanta Limited, one redeemable preference share in Vedanta Limited with a face value of INR10 each. The redeemable preference shares would have the following terms. Dividend of 7.5% per annum payable annually at the end of each financial year, tenure of 18 months from issuance upon closing of the transaction. It will be listed on the National Stock Exchange. The preference shares will be redeemed at face value of INR10 per share for cash at end of the tenure. Vedanta Limited will also provide for a third-party facility, enabling a cash exit for redeemable preference shareholders within 30 days from the closing of the transaction. The preference shareholder will therefore have the option to either hold this instrument or monetize it based on their preference. It is expected that there will be no tax implication from this transaction for Vedanta Limited, Cairn India Limited and their shareholders under Indian law. Just to be clear, shares will only be issued to the minority shareholders of Cairn India and not to Vedanta Limited. The graphic on the right-hand side represents the impact of the merger on the group structure. Cairn India becomes Vedanta Limited's fully owned oil and gas vertical, along with our other metals and mining and power verticals. Vedanta Resources will continue to have a premium listing on the London Stock Exchange. Vedanta Limited will continue to trade on the BSE, NSE, as well as NYSE through ADR shares. Vedanta Resources' ownership of Vedanta Limited will be 50.1%, based on the exchange ratio; and it maintains control of the merged entity. Majority of our operations are divisions or wholly-owned subsidiaries, with exception to Hindustan Zinc where we own 65%, and BALCO where we own 51%. HZL remains only listed subsidiary of Vedanta Limited post this transaction. Vedanta Limited shares issued to Cairn's minority holders will be more liquid given the higher market capitalization, a free float, and greater index weighting of the merged entity. As for our strategy, we will continue to look at further simplification of the group structure. Rest assured that any further transaction would seek to maximize the potential for long-term value creation to all shareholders, in line with the group's stated strategy. The transaction has been unanimously recommended by the non-conflicted independent Directors of Vedanta Resources Plc, Vedanta Limited, and Cairn India Boards, and their respective audit committees, as pointed out by Tom also. Furthermore, an independent subcommittee of non-conflicted Members of the Boards of Cairn India and Vedanta Limited has been established to oversee the transaction. Pricewaterhouse & Company and Walker Chandiok & Company have provided the Boards of Vedanta Limited and Cairn India their joint recommendation on the exchange ratio. The exchange ratio determined by the independent valuers is derived from a combination of valuation methodologies, including market prices, book value and DCF valuation, which is driven by consensus commodity prices, which is a forward-looking valuation of the business. This approach is consistent with market practice. The Boards have been advised by and have received fairness opinion from independent banks. The Vedanta Limited Board from Lazard and Cairn India Board from DSP Merrill Lynch and JM Financials, J.P. Morgan Cazenove and Morgan Stanley are joint financial advisors to Vedanta Resources Plc. All our procedures are in line with legal requirements as well as the best practice in corporate governance in India as well as in UK. It is our desire to achieve full transparency and fairness to all parties in the course of this transaction. Here are the list of approvals that we need to close for the transaction, both in India and the UK. In India, in addition to the Stock Exchange and High Court approvals, we will need shareholders' approval at both Cairn India and Vedanta Limited. As per the listing agreements, we need a majority of the independent public shareholders to approve the transaction, which means that Vedanta Limited and Vedanta Resources will not be able to vote. As per the High Court scheme approval process, we will need approval from 75% of Vedanta Limited and Cairn India shareholders but in this case, Vedanta Resources and Vedanta Limited will be able to vote. We expect these shareholder meetings to occur in Q4 of calendar year 2015. For a detailed transaction timeline, please refer to the slide in the appendix. We will also need approval from the Ministry of Petroleum and Natural Gas, the Foreign Investment Promotion Board as a part of the transaction. In the UK, from a Vedanta Resources Plc's perspective, the transaction will be a Class 1 transaction, as per the listing rules, which will require a simple majority of shareholders to approve the transaction. To clarify, this transaction will not be considered a reverse takeover, as per the definition of the listing rules. The transaction is expected to close in Q1 calendar year 2016. I'll now hand back to Tom for his closing remarks. Thank you. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [6] -------------------------------------------------------------------------------- Thank you, D. D. To summarize, we believe there are significant merits in this transaction to both sets of shareholders. Based upon the recommended exchange ratio, it's a very attractive and compelling offer for the Cairn shareholders. Cairn India shareholders gain access to Vedanta Limited's Tier 1 mining and metal business, which are well-invested, long-life, first-quartile and delivering strong growth. Becoming a part of a larger natural resources group with high-quality assets and significant diversification will derisk earnings and stabilize cash flow, more than as a single commodity exposure company. The all-share merger presents Cairn India shareholders with a largely funded growth pipeline and also exposure of future potential upside at Vedanta Limited from the already announced cost savings. And lastly, shares of the new Vedanta Limited will be more liquid given the larger market cap and larger free float. Now, from a Vedanta Limited perspective, this transaction is one step forward in our drive to achieve further simplification of our Group structure. Our position as an Indian natural resource champion is further reinforced and the alignment of debt and cash flow improves the Group's capital structure, credit profile and a result cost of capital. It improves the financial flexibility for the Group to make optimal capital allocation decisions and drive shareholder value creation. We really believe this transaction will have a long-term value creation potential and all shareholders will benefit from this. Quite simply, it's a win-win situation and solution for all shareholders. So maybe as I close, I'll just go back to the vision of Anil Agarwal, Founder and Chairman; and what he's been really focusing on for the past ten years, the creation of a global diversified natural resources champion here in India. Like to leave you with a few thoughts about that long-term strategy and the vision for this group. This is something you've heard quite a number of times and I've also talked about it. I'd like to reinforce some key highlights and key points. We are the only diversified Indian natural resource company of global scale. Given our expertise and experience, we are uniquely positioned to develop India's world-class endowment of natural resources. We are critical to the supply of raw materials to sustain India's strong economic growth in the future. We've demonstrated our commitment to maintain social license to operate. We have a world-class portfolio of Tier-1, long-life, low-cost assets and are well invested for growth. We generate stable cash flows throughout the cycle and support long-term shareholder returns. So with this transaction, we believe it is truly a case for potential re-rating and emphasize we are committed to invest in growth and support strong dividends. So thank you very much, especially on a Sunday afternoon. And with that, I think the four of us will come up and we'll take any questions you may have. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thanks, Tom. We'll take questions from the room first. I would request you to introduce yourself when you ask questions, for the benefit of those on the phone line. And we'll take questions from the conference call and webcast thereafter. [One in the back, yes. Thank you, there]. -------------------------------------------------------------------------------- Rakesh, Morgan Stanley - Analyst [2] -------------------------------------------------------------------------------- Yes. This is [Rakesh] from Morgan Stanley. Two questions if I may. The first one is, what does the management think or what will be the path forward in the scenario, the merger get rejected by Cairn minority shareholders? And second one is, what are the management expectations from the post-merge entity perspective on the CapEx guidance in the oil and gas division? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [3] -------------------------------------------------------------------------------- Can you just repeat first question, please? -------------------------------------------------------------------------------- Rakesh, Morgan Stanley - Analyst [4] -------------------------------------------------------------------------------- What would be the path forward or what does the management think in the scenario, the merger gets rejected by the Cairn minority shareholder? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [5] -------------------------------------------------------------------------------- I think we presented a compelling case and I think I'd like to focus on the fact that we presented a compelling case; I do look forward to engaging with all of the minority shareholders and present the benefits of this transaction, so that really should be the [mandate for what we're doing. We're] really quite clear, for quite awhile, about the benefits of simplification, and people come to us actually saying, simplify, simplify; and again, I think what we would see from the Cairn shareholders is a recognition that that is something that is being received well in the market, but also we want to know that this process has been done well and it has been well governed. So I think what we have looked at -- so before we even considered what the valuation was, we say let's make sure we have the proper governance in place. That proper governance in place will ensure a fair value, I believe a compelling value for them to make that decision. So the next question was really on capital and maybe Mike, if you could talk about how you see capital post this transaction, from the oil and gas business. -------------------------------------------------------------------------------- Mike Yeager, Cairn India Ltd. - Chairman, Operations Review Board [6] -------------------------------------------------------------------------------- Sure. I'll just give a little bit of context. Last year, we spent more capital in this than any other year in our history of Cairn and it was under a backdrop of a $100 oil. In that scenario, it makes sense to go virtually as fast as you can, because all projects provide returns. When the oil prices started to decline in November-December, we cut back on exploration and capital, consistent with all the energy companies all over the world, but even through that, we continue to generate positive cash flow after capital. So the capital profile that we're spending now, it is still quite robust. 70% of the capital this year of $500 million is still sizable, is designed for growth; and what we're really trying to do is make sure that we invest, still very assertively, aggressively, but we also want return at this oil prices. So rather than doing just three defined projects, what we are doing is really pushing that technology envelope, in particular Barmer Hill, we are doing some of the leading technology with horizontal drilling and fracing of any other company in Asia. And as far as the EUR is concerned, to maximize production for big deals, we are doing some of the largest work of any company in the world, So what this demonstrates is we can't change the oil prices. They are somewhere in that $50, $60 range for the moment, but within that context, within that backdrop, we are working as aggressively as we can. We have received some positive work data now from the Barmer Hill project in terms of capital required, in terms of OpEx, in terms of productivity and with fine-tuning that work and I expect over the next 60 days or so, we will be coming up with an FTP, working with a joint venture partner, we'll see if we can accelerate that as well. So as I mentioned, the song remains the same. We are very, very keen on investing in a maximal way, but we're also keen on getting good returns even at this point in the low oil prices. Yes, as we expect, the oil prices will recover in time, we will then can bring in some projects that you put on pause, which will rapidly turn them on as well. Thank you. -------------------------------------------------------------------------------- Rakesh, Morgan Stanley - Analyst [7] -------------------------------------------------------------------------------- Thank you so much, sir. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Excellent. Just two rows ahead, please. -------------------------------------------------------------------------------- Naveen, Goldman Sachs - Analyst [9] -------------------------------------------------------------------------------- Hi, this is [Naveen] from Goldman, two questions from my end. Cairn India now has a tax liability of INR20,500 crore. Mr. Jalan mentioned that one of the fairness opinions valuations that you arrived at worth for DCF. So can you share, how have you factored the tax liability in the DCF? That's point number one. And from a Vedanta minority shareholder perspective, how do you convince them to own an asset which has a INR20,000 crore tax liability? So that's my first question. The second question is if you can share whether Cairn Energy PLC, which is, I'm assuming the largest minority shareholder in Cairn India, as that on board, because I'm sure they'll not be too happy owning -- not owning a oil and -- E&P company and a diversified mining company? -------------------------------------------------------------------------------- Mike Yeager, Cairn India Ltd. - Chairman, Operations Review Board [10] -------------------------------------------------------------------------------- Maybe I'll start with that last point, maybe I'd like to hear and talk about the tax point from a Cairn perspective but maybe also D.D. from a Vedanta Limited perspective too. As you know, there are restrictions and engagement with minority shareholders before there is a transaction [side upon by] boards are announced. So I think that now that we have made at a Board decision, we've had an announcement, we do look forward to meeting with the Cairn PLC shareholders and have a proper dialog with them. But again, as I said earlier, I do believe that there is a good governance in process in terms of arriving at what is seen as a fair and I think compelling exchange ratio and value for Cairn PLC. And I think it is a good proposition for them to create an asset for them that is actually of more value than otherwise would be safe. So I do think we're presenting them with a strong case, still is an oil company, but it's an oil company within a diversified resources group and you go to look at it, what does it mean for shareholder return? And again, as a reminder, one of the slides you saw that the total shareholder return for diversified is significantly greater, 2x greater than what we've seen over the past ten years for the pure play and that's got to make a difference. -------------------------------------------------------------------------------- Naveen, Goldman Sachs - Analyst [11] -------------------------------------------------------------------------------- Sure. -------------------------------------------------------------------------------- Sudhir Mathur, Cairn India Ltd. - CFO [12] -------------------------------------------------------------------------------- Tax liability, I mean, at a Cairn India level, we've been defending it in the court and we are quite confident of our stand that we have taken. Vedanta plc has also initiated a bilateral [investment]. So as a group, we've been very confident on all sides that we have a very strong case. And given the strength of the case and as understood by our auditors as well, it's reflected in a certain position in our balance sheet as of March 31. And [we all set]. As far as the DCF is concerned, it takes into account the merits of the legal case, it takes into account and classifies it by probable, certain, etcetera, assigns probabilities, then it gets adjusted with this. So it is very much a part of the DCF calculation, sir. -------------------------------------------------------------------------------- Naveen, Goldman Sachs - Analyst [13] -------------------------------------------------------------------------------- Can you share what is the tax liability that you've assumed in the DCF calculation, sir? -------------------------------------------------------------------------------- Sudhir Mathur, Cairn India Ltd. - CFO [14] -------------------------------------------------------------------------------- I think the scheme would make it public as you read the scheme would contain a lot of this information. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [15] -------------------------------------------------------------------------------- Just to supplement what Sudhir was talking about, I think the valuers have got a very comprehensive methodology of arriving at the valuation; and as I talked about, they have given consideration to 60 days of [VVAP], number one; number 2, the DCF valuation; and number 3, the NAV. So while arriving at the DCF, they also look at all the contingent liabilities and then they do the BPR testing and based on the BPR testing, they assigned a value that what is the probability factor they should be considering in the valuation so that Cairn India's total liability is somewhere around INR20,000 crores, they have tested this INR20,000 crores on the BPR and based on that, adequately, they have factored into while arriving at the valuation. -------------------------------------------------------------------------------- Naveen, Goldman Sachs - Analyst [16] -------------------------------------------------------------------------------- So maybe I will take it offline. Thank you. -------------------------------------------------------------------------------- Unidentified Company Representative [17] -------------------------------------------------------------------------------- Thank you. One behind you, there you go. -------------------------------------------------------------------------------- Naveen, Goldman Sachs - Analyst [18] -------------------------------------------------------------------------------- Hi, thanks a lot. -------------------------------------------------------------------------------- Unidentified Company Representative [19] -------------------------------------------------------------------------------- I want to get the next slide -- okay. -------------------------------------------------------------------------------- Unidentified Participant [20] -------------------------------------------------------------------------------- Yes. Hi, thanks a lot. My question is related to the regulatory approval from Indian government. In the past, we have had a bad experience related to interacting with the Oil Ministry. So this time around, do you expect any [coercive] term being imposed on to Vedanta and Cairn, while approving the merger? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [21] -------------------------------------------------------------------------------- I think Mayank actually talked to that but again, quite important to remember that [there is a] change in the oil and gas strategy. Long-term better access to capital flows, clearly and as a Cairn brand, the Cairn is very much known as being a driver of increased oil and gas production in India. And I think for us, the key message to government, we want to continue on that pace of finding more resources and delivering more oil and gas production on a going-forward basis. Yes. -------------------------------------------------------------------------------- Unidentified Company Representative [22] -------------------------------------------------------------------------------- We are highly (inaudible) with the government in terms of growing production and being profitable and bear in mind that government is a partner of ours in Rajasthan where if you look at the amounts that earned by ONGC as well as the profit petroleum that goes, the government is a very, very large part. So it's truly a congruent and aligned relationship. What I would say is, we had a meeting with the Petroleum Minister. It was scheduled ahead of time and it's the normal review, and what the benefits that is look commenting on the reports in the Media. It says, look, we really want you to make sure you're part of a solution to India's growing energy needs, please invest well and grow the production and what we said is absolutely, we're committed to technology, investment, production, but we're also concerned about returns, because it's important we balance all of those. So I don't anticipate to answer your question that there will be any issue at all with the MoPNG approving this, because fundamentally, they are very much alive. -------------------------------------------------------------------------------- Unidentified Participant [23] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Unidentified Company Representative [24] -------------------------------------------------------------------------------- Thank you. Maybe on this side. Yes. Can we get you a mike? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [25] -------------------------------------------------------------------------------- Answering your question on change in terms unlike last time when there was a change in control, this time, we already own. Then will change in control. So to that extent, I think this is not there. -------------------------------------------------------------------------------- Unidentified Participant [26] -------------------------------------------------------------------------------- So the press release mentions that Vedanta Limited would further consider consolidation of some of its wholly-owned foreign subs? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [27] -------------------------------------------------------------------------------- This is one of those technical things that I better turn over to the internal plumbing of the Company and D.D., over to you. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [28] -------------------------------------------------------------------------------- Thanks, Tom. So basically like you are seeing that we are committed to simplify the structure of the operating companies in India. Similarly, we are looking into the opportunity, how we can unplug the structure of various SPVs in different jurisdictions. So, we are looking into that also and perhaps as part of this process, we will clean some of those structures. -------------------------------------------------------------------------------- Unidentified Participant [29] -------------------------------------------------------------------------------- Does it anyway indicate about Konkola Copper mine brought here? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [30] -------------------------------------------------------------------------------- No, not at all, that is not the wholly-owned subsidiary of Vedanta Limited; and as of now, we are talking about simplification of the wholly-owned subsidiaries residing overseas, that is what is the subject matter of discussion. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [31] -------------------------------------------------------------------------------- And you know what, I told D.D. we're going to get that question. -------------------------------------------------------------------------------- Unidentified Participant [32] -------------------------------------------------------------------------------- And just when you say book value will consider the Vedanta's except goodwill or other? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [33] -------------------------------------------------------------------------------- Book values, book value includes all the goodwill and all the parts and then what are the liabilities. So based on that, net book value. -------------------------------------------------------------------------------- Unidentified Participant [34] -------------------------------------------------------------------------------- It's just on the reported basis. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [35] -------------------------------------------------------------------------------- Absolutely right. -------------------------------------------------------------------------------- Unidentified Participant [36] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Manish Kumar, HSBC - Analyst [37] -------------------------------------------------------------------------------- Good evening, my name is Kumar Manish, I'm from HSBC. I have two questions. First is, it seems there are synergies that you highlighted in merger, and I would imagine that the these synergies there are obviously when you acquired in India. Do you believe that buying, or either funding in the assets of Cairn India or the better strategy is buying the company which is unquantifiable liability at that time? And the second question that I have is, now that overhang of merger is out of the way, can we get a little more clarity on the production from Rajasthan or other assets of Cairn India going forward? Thanks. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [38] -------------------------------------------------------------------------------- Yes. Maybe I'll -- I think there's something with the original acquisition, I don't know if there's anything you want to say about that, but give me a microphone, please. -------------------------------------------------------------------------------- Manish Kumar, HSBC - Analyst [39] -------------------------------------------------------------------------------- Was buying Cairn a better idea or was farming in the assets of Cairn India a better idea, if it was anyway to be merged later? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [40] -------------------------------------------------------------------------------- First decision for us for the group, [a success] to the company, which produces 25% of the oil of the country and one of the best assets in the oil sector. We look at the business case, we don't look at individual transactions sort of things, it's a business case. Believe this was a good decision. -------------------------------------------------------------------------------- Sudhir Mathur, Cairn India Ltd. - CFO [41] -------------------------------------------------------------------------------- I think your question is that why in the first case we bought a company, not the asset, is that your case? -------------------------------------------------------------------------------- Manish Kumar, HSBC - Analyst [42] -------------------------------------------------------------------------------- Yes, pretty much. -------------------------------------------------------------------------------- Sudhir Mathur, Cairn India Ltd. - CFO [43] -------------------------------------------------------------------------------- I think, look, when the Company is growing like we have grown in an inorganic way, so whatever comes first, whatever is the best at that point of time, adopt that strategy and then you try to see that what best can be done. It is a continuous improvement, which you have to always keep on thinking. So it's that process, I think that point of time, that was the best strategy to acquire the Cairn India and keep it as a listed company and now after thinking it over more, we find that it has little shareholder value if you try to merge both the companies. It's part of the continuous improvement process. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [44] -------------------------------------------------------------------------------- Yes, I think it's also important to recognize that when transactions are considered a possible. They're generally not menu choices. They're generally going to be a buyer or a seller in certain conditions and you have to create a transaction around that condition between buyer and seller. Now, I would like to say maybe something on synergies and then maybe sit here could comment on your last question. But on synergies, the big synergies that we've talked about are those that we've been focusing on over the past year about bringing the management team together more cohesively (inaudible) businesses and look for areas where we can learn from each other (inaudible) won't buying on those types of things. And that was effectively built into the announced $1.3 billion of synergies that are available with or without this transaction. There are potentially synergies associated specifically with this transaction, but they're not as material as that particular number. We will have some IR that we can consolidate; corporate secretary, we consolidate, those aren't going to be big-ticket numbers like the $1.3 billion. However, what's important is that Mayank and Sudhir will be freeing up a lot of their own bandwidth, their own personal calendar to focus entirely on their business, they won't have to do the separate IR, they won't have the separate Board agendas, they will be basically operating entirely on what do they need to do to maximize the value for that particular business. So I think that's not a quantifiable synergy, but it's very -- I think there is a very tangible benefit that comes with that down the road. Of the $1.3 billion, I would say is that, if you do the calculations, you look at how the synergies of the $1.3 billion, originally were configured between Cairn and the rest of the business is what this transaction does, it gives those Cairn minority shareholders a larger piece of that $1.3 billion pie than otherwise would be the case. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [45] -------------------------------------------------------------------------------- I just want to say in the previous transactions when the group took control over the oil and gas business, the party which was intending to sell was Cairn PLC and not Cairn India. So there is no way we could have bought the working interest. Yes, all the assets were under it, so it is a single transaction rather than multiple transactions. -------------------------------------------------------------------------------- Unidentified Company Representative [46] -------------------------------------------------------------------------------- Maybe, Mayank, there was a question on production, I think. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [47] -------------------------------------------------------------------------------- Yes, you were looking for guidance on production and let me kind of give a short-term guidance and have a long-term view. The short-term guidance is flat production and even though that is not exciting, I want you to know that's hard to do, because most of our production in Rajasthan are from the big fields and the big fields were increasing production when we're putting on more wealth and they are declining and what we're doing with enhanced oil recovery between some of the largest EOR projects in the world has that decline. Of what we're trying to do is build the pipeline at this level of oil prices, with new technology applied to Barmer Hill and tight oil to be able to unlock it. We are going to announce, as I said, probably Phase 1 in the next two to three months; and beyond that, we hope, subsequent phases of growth can be brought in. Short term, it is flat and they've run very hard to remain flat because there is a basis of enhanced oil recovery projects that will be commissioned. But I am very confident, if you think beyond the next 12 months, and think medium term and so on, we will be getting two benefits. We will be, as I said, getting the tight oil technology cost equation solved and beyond that, as the oil prices improve, we have a suite of projects that will be -- with the pause button on that we can very easily put to play. -------------------------------------------------------------------------------- Unidentified Company Representative [48] -------------------------------------------------------------------------------- I just want to maybe add one point to that, there is thinking about that play earlier this year, where we are holstering and that chasm of declining oil prices not really knowing, where we can settle out and Mike was presenting with the management team, the economics of Barmer Hill and basically while they look great at $85, they weren't so compelling at something in the $50, $55 range. Just because the standalone economics of it. And we didn't say don't do it. We didn't say go away, what we said is re-engineer. Find a way for better technical solutions, find a way to extend your horizontal (inaudible), increase the number of fracs per horizontal length, figure a way we can do fracing 24 hours a day instead of just during the daylight hours, bring in better contractors, lower cost rigs. So that's what they have been doing, so they've not being standing still in this market, but they've been actually taking advantage of this weak market condition, looking at what they can do improve the economics even at low oil prices. That's what you can do with or without this transaction. Now, we have one question on this side. Now, I'm going to go over here on this. -------------------------------------------------------------------------------- Unidentified Participant [49] -------------------------------------------------------------------------------- Two questions, first, with regard to the debt profile. So how does the merger change the entire debt profile, or what kind of reduction do we see in terms of the overall costs, and do we see some prepayment of existing. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [50] -------------------------------------------------------------------------------- D.D? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [51] -------------------------------------------------------------------------------- If you just try to look at Vedanta Limited, we have got a net debt of INR31,000 crore and this is 1.4 times of our EBITDA at Vedanta Limited. It is quite comfortable situation of the debt on the assets which is so value accretive, number one. Number two, you were talking about, as of now, we have got last year our average cost of interest was 7.5%; and when we talk about interest cost, it has got two components. One is interest on US dollar borrowing and the second is interest on the INR borrowing, whereas you know that the INR interest rate is coming down and the US dollar interest rate is likely to go up. So our objective is to see that how do we ensure that our blended cost of interest doesn't move beyond what it was last year and with the refinancing plan what we are putting in place, the overall interest cost comes down. So, that's the objective what we are having. Third part of your question was repayments. I think if you just try to look at, we have bought about $2.4 billion of refinancing due in Vedanta Limited as well as Vedanta Plc for this year. Out of that at Vedanta Plc, $400 million has already been refinanced, that $2 billion of loan which is due in this year at Vedanta Limited, that is mostly a roll-over case because most of the loans are short-term loans for the long-term purposes and now in the low interest rates scenario, we plan to refinance for a longer-term period. So the total refinancing is automatic and automatic means it is in a normal course, it will be done and you don't see that there is any issue, and as Vedanta Plc $2billion of loan coming for refinancing in the next year, that we have already started working on and we are at very advanced stage of refinancing, the team is working on and with the objective of containing our interest cost, what I talked to you a little while ago, as well as on the elongation of the maturity profile, we think that we'll be able to close this refinancing by end of this calendar year. -------------------------------------------------------------------------------- Unidentified Participant [52] -------------------------------------------------------------------------------- Like, there are no prepayments [pursued so if I have to make]? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [53] -------------------------------------------------------------------------------- As of now, we are not planning any prepayment of loans, but yes, if there is any opportunity, if there is any cost arbitrage, we will definitely consider it. -------------------------------------------------------------------------------- Unidentified Participant [54] -------------------------------------------------------------------------------- Sir, second, just deviating from the current topic, if you can just highlight about the allocation of Raykal mine, I believe the state has recommended, the bauxite mines? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [55] -------------------------------------------------------------------------------- This is the bauxite (inaudible) I don't think there is any real progress over the past couple of months on that. I think that we want to see that go forward, if I understand right, that, we will first go to a new greenfield refinery if L&T would want to build it, and I you suspect that their desire to do that, so we would see Raykal being a refinery a ready customer for that lease. Sorry, a question over here, you want to [take over]? -------------------------------------------------------------------------------- Rakesh Arora, Macquarie - Analyst [56] -------------------------------------------------------------------------------- So, this is Rakesh Arora from Macquarie. Given the perception that this deal is very opportunistic given that oil prices are low. I want to ask two or three basic facts about the merger ratios. One is what is the long-term oil prices, which has been assumed in this DCF calculation. Number 2 is that are we building in this $1.3 billion of synergy benefits, which are supposed to come in already into the BCF? And number three is, are we building in any benefit of possible acquiring captive bauxite mines or coal mines from here on? -------------------------------------------------------------------------------- Mike Yeager, Cairn India Ltd. - Chairman, Operations Review Board [57] -------------------------------------------------------------------------------- Can I just start by my own point about the opportunistic point; then, maybe Sudhir and Mayank talk about that? Right now, we've seen oil drop -- Brent now drop into the 40s, now up in the mid-60s. If you look at the body of opinion, there are some people that think it's ready for a correction downwards, but some people think it's fairly stable here; very few think it's going to rise from this level. I don't know whether over the next year, that sort of position of wide range of disequilibrium is going to change that much. We have a big question out there in terms of what will OPEC do, or what will OPEC do? There is a big question on the table as to is the shale oil phenomenon in North America shut off, oil in the 50s, or if you see enhanced productivity coming from that? I met with one of the top oil and gas CEOs last week at Beijing and he was actually very bearish in the near to mid-term at oil prices. So I'm not sure if this were now or three months ago or three months now or year from now, that particular price dynamic would be the difference. So we're not doing it at a price of $100 but we are not as afraid to $100 per barrel, we're in a different price environment and most people would probably argue that's the pace. -- anything more-- around the calculation. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [58] -------------------------------------------------------------------------------- I would say that the scheme carries a significant part of the valuation report and (inaudible) better than that, but it would not be significantly off the analyst consensus over the [months]. Very close to that. -------------------------------------------------------------------------------- Rakesh Arora, Macquarie - Analyst [59] -------------------------------------------------------------------------------- Basically, the current price is around $65 -- -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [60] -------------------------------------------------------------------------------- The long-term consensus is more like $80, $85. So would be in that ballpark. We've just done an impairment testing as well. Maybe D.D if you can talk about but also you've heard some questions about, one of the assumptions about captive coal and captive bauxite. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [61] -------------------------------------------------------------------------------- So I think very good question, Rakesh. First of all, I think as said that, that DCF valuation is done based on consulting, what is the long-term prices and our -- says that the price in the during current year is a $60 that is increasing to $80 in the third, fourth years and then after that, there is a solution of 2.5%. That is how the pricing model has been built. The second point was regarding the synergy benefits, as Tom said that this is a synergy benefit we are pursuing. Out of $1.3 billion, 20% of that synergy is from Cairn business and 80% of the synergy is from metals and mining business. Most of the synergies are not part of the DCF valuations, either outside the DCF valuation because these are evolving and we are sure that it will get accrued over next three to four years time. So this is an upside to the shareholders. The third point was regarding the captive mine of bauxite. So this is the DCF model based on next 20, 30 years of life of the plant and the mine. So we have definitely assumed that after a few years of time, there will be solution to the bauxite issue and then the bauxite will be available and we will have a refinery capacity of 5 million ton. -------------------------------------------------------------------------------- Rakesh Arora, Macquarie - Analyst [62] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Unidentified Company Representative [63] -------------------------------------------------------------------------------- On the right hand side here. -------------------------------------------------------------------------------- Unidentified Participant [64] -------------------------------------------------------------------------------- Yes, a couple of questions. In terms of there was a mention of strong dividend payout. So once the merger is done, given that there will be lower leakage now going forward, can we expect the payout ratio to explicitly increase from where we are? Second question is on the PLC ownership level, what has fallen to 50.1% and you also were the head of PLC management. So is that the bare minimum PLC holding that we can expect or is it something on the lower side? Now, how should we [look at base] PLC's holding in Vedanta India? -------------------------------------------------------------------------------- Mike Yeager, Cairn India Ltd. - Chairman, Operations Review Board [65] -------------------------------------------------------------------------------- Maybe, I want to make two comments on those, and then maybe D.D.'s (inaudible). First of all, on the dividends, just a reminder of the commitment for a [fresh] dividend at the Vedanta PLC level. That's been a commitment that's been there since the IPO, now going on 11 years of that and we've reinforced that with the earnings call just a month ago on that. So again, we would expect that the dividend stream from Vedanta Limited will be sufficient to provide us to continue that aggressive dividend at Vedanta PLC, so that does suggest very strongly a robust dividend growth policy. The second area is on the ownership of Vedanta PLC and Vedanta Limited. And in order to have a premier listing in the UK market, for UKLA, we have to be at or above 50%. So we see that as a key point that we intend to stay above because as we said, our Chairman's reinforced, he does want to see a continued premier listing of Vedanta Resources Plc in the [UK market]. D.D. sorry had some follow up on. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [66] -------------------------------------------------------------------------------- Yes. I'll just supplement what Tom said that, basically, at Vedanta Limited and Vedanta Resources, we are going to have a very strong and robust capital allocation policy. And how the fund is going to get utilized, there are three important uses of the fund. Number one is that growth, so that is non-compromisable, we need to see that the fund gets deployed for growth. And the second is the return to the shareholders. Tom talked about that we'll have a strong dividend policy. And the third is how to use the optimum cash, how to use the cash, which is not generating any value for the shareholders, so that is the third piece. It's an amalgam of all the three that we will try to optimize and then see that how do we use the balance between these three. Priority would be growth [certainly on weightage] or all three are equally important as of now. I think this is in a circle, (multiple speakers) all these three items are appearing, so we need to have a balance between these three. So this is not one-two-three. -------------------------------------------------------------------------------- Unidentified Participant [67] -------------------------------------------------------------------------------- And sir, last question is there was a goodwill impairment in the month of April after 4Q results and there would be certain calculations done behind that. And now, obviously, there is a valuation exercise, so does the goodwill impairment and this assumptions would be the same or do we need to do another goodwill impairment or I mean how should we look at it? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [68] -------------------------------------------------------------------------------- So basically, I think as I said that the DCF model, so the DCF model is very similar to the model which was used for impairment. -------------------------------------------------------------------------------- Unidentified Company Representative [69] -------------------------------------------------------------------------------- In the back, yes. -------------------------------------------------------------------------------- Unidentified Participant [70] -------------------------------------------------------------------------------- Yes. Good evening, sir. I have three questions. One is in your presentation, you said that the regulatory approval, which would be required is for the Cairn assets is just the Petroleum Ministry, is that the only regulatory approval? Will you not need an ONGC approval also since it's a partner in the Rajasthan block first? Second, will this transaction also lead to a new PSC or the old PSC continues for Cairn India? And third question on the Cairn India liabilities, in the worst-case scenario, if the Vedanta Limited has to pay that liabilities, is there a legal way which we can recover that liabilities from Cairn PLC? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [71] -------------------------------------------------------------------------------- Yes. We do require approvals from all our partners, but they're procedural of change in name more than change in control, as I think Mr. [Jain] pointed out earlier as well. In the last transaction, a change in control is a very material issue in any contract. So there is no change in control, it's just a change in ownership, that's one. Then, you mentioned about -- -------------------------------------------------------------------------------- Unidentified Participant [72] -------------------------------------------------------------------------------- And on the liability front? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [73] -------------------------------------------------------------------------------- The tax liability, I mean we continue to -- you know, as we mentioned in the case, this is -- we are fighting like -- Cairn PLC, but yes, we do have records with Cairn PLC, which was up signed up during the time of the IPO, you know, Board of --. So I think it's very well covered from an inability point of view. -------------------------------------------------------------------------------- Unidentified Participant [74] -------------------------------------------------------------------------------- Other [approvals]? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [75] -------------------------------------------------------------------------------- Other approvals, yes, no, yes, I mean there -- (multiple speakers) lastly, change in names, ONGC and other JV partners in all assets. So we would have to go through that process, but it's just a change in name. -------------------------------------------------------------------------------- Unidentified Participant [76] -------------------------------------------------------------------------------- And the new PLC will be needed or --? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [77] -------------------------------------------------------------------------------- (multiple speakers) of name. It's got nothing helps to it. -------------------------------------------------------------------------------- Unidentified Participant [78] -------------------------------------------------------------------------------- And on the liability front? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [79] -------------------------------------------------------------------------------- Tax liability, I mean we continue to as we mentioned, in the case, the case is we are fighting the case, so is Cairn PLC. But yes, we do have a recourse with Cairn PLC which we would find out during the time of the IPO, the Vodafone issue had caught up. So I think it's very well covered from an indemnity point of view. -------------------------------------------------------------------------------- Unidentified Participant [80] -------------------------------------------------------------------------------- And sir, my last question, what will be the pro forma stand-alone and consolidated net worth? We have shared our FY15 pro forma numbers, but if you can give us some network number? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [81] -------------------------------------------------------------------------------- Take that one, D.D. Think he's going to refer you to the slide in the back of the appendix. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [82] -------------------------------------------------------------------------------- Of course, this slide doesn't talk about what is the net worth, I think in the net worth, it will be the total of equity and reserves and then there'll be some marginal adjustment on account of some of the goodwill which will get knocked off because of the budget. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [83] -------------------------------------------------------------------------------- So just to clarify this, maybe afterwards we'll go through the detail then. Tom, do you want to come at that? -------------------------------------------------------------------------------- Unidentified Participant [84] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Unidentified Company Representative [85] -------------------------------------------------------------------------------- Okay. Next. -------------------------------------------------------------------------------- Nithesh, Axis Capital - Analyst [86] -------------------------------------------------------------------------------- Hi, sir. My name is [Nithesh]. I am from Axis Capital. You mentioned that the merger will be tax neutral for Vedanta. I was wondering that all the debt taken for the Cairn acquisition is right now [must be sitting now in] SPV where we must be paying the interest, where the cash flow is like down. So when both these two merge together, there is to be some tax savings, if you can clarify this point it will be helpful. I have one second question, which is just one small clarification, you mentioned that there will be majority of minority approval, so will this be like 51% or 75% of minorities? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [87] -------------------------------------------------------------------------------- I think that maybe I'll start with the second question, D.D maybe will tackle the first question but there are two both I think as we had the presentation, one was 50 plus percent of the [NRE] and the second was 75% of all of the shareholders effectively show up for the shareholder meeting, that effectively includes of Vedanta Limited shares [report]. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [88] -------------------------------------------------------------------------------- And coming to your question number one, basically, I think there will be a lot of synergies which will keep evolving over a period of time, whereas some of the synergies are not visible as of now. And in this case, since both the companies are in [match]. So there no immediate tax synergy, which we are able to see. -------------------------------------------------------------------------------- Nithesh, Axis Capital - Analyst [89] -------------------------------------------------------------------------------- Sir, this one -- sorry, I am just reading down on this point, but as per the new Companies Act, the 51% majority of minorities required but as per the SEBI -- under the SEBI, under listing agreement, it is 75% majority. So -- -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [90] -------------------------------------------------------------------------------- Basically I think if you just try to look at as per the listing agreement, it's majority of the minority which has to vote and as per the new Companies Act, it's 75% of the shareholders including -- -------------------------------------------------------------------------------- Nithesh, Axis Capital - Analyst [91] -------------------------------------------------------------------------------- Thanks a lot. -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [92] -------------------------------------------------------------------------------- Yes. Right here. [Akshar]. This is great doing this on a weekend, everyone has got different colored shirt, so we can direct this microphone much easier. -------------------------------------------------------------------------------- Rohit, ICICI Securities - Analyst [93] -------------------------------------------------------------------------------- Hi, sir. This is [Rohit] from ICICI Securities. Sir, the first question is on the approval process. Now, you mentioned you retained the Cairn brand name is released, so that I assume you will be retaining that name for the Rajasthan SPV, so that again that the approval for ONGC doesn't require, (inaudible) mentioned the MoPNG approval. Secondly is same thing on the approval process, does this have an impact on the PNC extension that we're trying to negotiate with the government and could there be a scenario similar to how we saw when Vedanta acquired from PLC and there were some negotiation and leeways on the terms? And thirdly, if you can throw some more light on the preferential shares, how do we become operational? I assume it's post the approval but you mentioned that within 30 days after that, they can be redundant. So can you just throw some more light on that? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [94] -------------------------------------------------------------------------------- Mike, first; Sudhir, second; and D.D., third, you guys get all the fun questions. So we talked about that in that slide, the Cairn brand is very important, it's got a rich history and that brand signifies value on multiple dimensions. In Rajasthan, in Barmer, as an example, it is a very strong brand that has significant value because of -- the brand has value inside for the employees. We celebrated 20 years and fundamentally, it is a technology company and there is no intention to change the brand name. Also, the management will remain unchanged. So if you think about the best of Cairn as it applies to production, technology, cost , innovation, all of that, will continue but also within the context of Vedanta, I mentioned this earlier. What it does for Cairn is derisk that from a single commodity and as part of the Indian national resource champion, the largest diversified natural resources company in India and the seventh largest in the world. So there are all kinds of broader benefits that Tom talked about which are yield and as we look for those broader benefits, we will be mindful that we don't let go off everything that has been useful and has worked for us and that we very confident we can do both. -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [95] -------------------------------------------------------------------------------- Yes, no, we've got nothing to do with the PLC, this is really the retention of only the brand, ,the IP right in it on which the values are associated. So, the contractual obligations lie on Cairn as a legal entity, so that will needless to say disappear. Yes. About 3.5 years back, we had initiated a process. So if you look at Rajasthan asset, it was held in two separate subsidiaries, one out of Australia, one out of UK; and Cairn India was merely a holding company and then, we merged the Australian one up through its chain which allowed Cairn India to access the cash flows, the working interest belongs to Cairn India and that allowed us to distribute dividend to all the shareholders. So, that was very, very critical and is the same process, we didn't go through any change. So in this case, it's just a distribution of that. -------------------------------------------------------------------------------- Unidentified Participant [96] -------------------------------------------------------------------------------- On the PLC extension, that approval process is going on. So -- -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [97] -------------------------------------------------------------------------------- No, absolutely, I think we have mentioned, we are very confident of that. We've answered the related parties and we are quite confident that in not too distant a future we should have that. These are pretty a straight forward preferences caring a coupon rate of 7.5%, may be after 18 months from the issuance,and we are also providing the exit option to the shareholders and since that to the third-party and that exit option will hit somewhere around 30 days time from effectiveness of the scheme to work out within those 30-days period, this exit option, this scheme will be on. So, any of the preference shareholders, they can go -- they have got the choice to hold the instrument for 18 months period or if they want to monetize it, they can monetize it after 30-days period, they can go to the third-party and they can ask for the cash and the third-party will give them the cash. -------------------------------------------------------------------------------- Unidentified Participant [98] -------------------------------------------------------------------------------- What are the terms of the (inaudible) get the INR10 back or will it be lower than INR10? -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [99] -------------------------------------------------------------------------------- So, what we have done if you read the scheme, in the scheme they will say that it will be at par. So eventually they will get INR10. -------------------------------------------------------------------------------- Unidentified Participant [100] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Unidentified Company Representative [101] -------------------------------------------------------------------------------- We have some questions from the webcast. So a lot of those have been answered. I'll discover what has not been answered. One question from Deutsche Bank, [Pavithra]. One is detailed approvals and timelines. And second is, is the merger contingent on resolution of the tax issue? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [102] -------------------------------------------------------------------------------- Item two, I'd say no, because we see that as being independent, whether it gets resolved quickly or takes time. You guys know as well as I do on that particular case. So we see that this is independent of that. So first is on the merger approval processes. Maybe more you want to say with that, D.D.? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [103] -------------------------------------------------------------------------------- There is a detailed timeline in the appendix. So -- -------------------------------------------------------------------------------- Mayank Ashar, Cairn India Ltd. - CEO [104] -------------------------------------------------------------------------------- Yes, it's there in the appendix, I think nothing more to add we have already covered the -- -------------------------------------------------------------------------------- Unidentified Company Representative [105] -------------------------------------------------------------------------------- That's fair. Then, we have a question from Neelkanth Mishra of Credit Suisse. What's the rationale for the preference share rather than changing the exchange ratio? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [106] -------------------------------------------------------------------------------- I think that it's important to recognize my answer to the earlier question that we can't go below 50% in terms of PLC's ownership in Limited and still have our premium listing in the UK market. So what we're trying try to do is against why that compelling opportunity for the Cairn India shareholder as I consider what their options are but also recognize from a Vedanta PLC perspective, expecting that premier listing is important. -------------------------------------------------------------------------------- Unidentified Participant [107] -------------------------------------------------------------------------------- Thanks. Then, we have [Rithesh] from Investec asking any plans to revisit the Cairn CapEx? Secondly, with the merger, can we expect higher dividends? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [108] -------------------------------------------------------------------------------- It depends on what this guy does in terms of Barmer Hill. -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [109] -------------------------------------------------------------------------------- No, I mean the short-term is no. Our biggest focus is to get the pipeline full with more projects. So there's certainly no plant reductions. -------------------------------------------------------------------------------- Unidentified Participant [110] -------------------------------------------------------------------------------- Anything on dividends? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [111] -------------------------------------------------------------------------------- I think I said, forget the dividend at the PLC level and that drives again higher dividends at the limited level. -------------------------------------------------------------------------------- Unidentified Company Representative [112] -------------------------------------------------------------------------------- Then, we have a question from [Pritesh] at IIFL. How many years of extension of lease was considered for the transaction, I guess in the valuation of DCF? -------------------------------------------------------------------------------- D. D. Jalan, Vedanta Ltd. - CFO [113] -------------------------------------------------------------------------------- Yes, we covered it into 20, 30, for sure. -------------------------------------------------------------------------------- Unidentified Company Representative [114] -------------------------------------------------------------------------------- Any other questions? -------------------------------------------------------------------------------- Tom Albanese, Vedanta Ltd. - CEO [115] -------------------------------------------------------------------------------- I guess I want to thank all of you again, for this being a Sunday and for taking the time, very good questions. Maybe just close on again the big picture. The big picture is that, we have first-tier assets, the first quartile or second quartile assets, spanning a range of commodities. Some like oil has dropped in price, some like zinc are going up in price. But we see everyone coming to us saying, come up with a way of simplifying this and we'll think about investing more in your Company. So we do see in that rerating opportunity. In the mining, the metals, the oil gas sector, size does matter. So a stronger balance sheet, a larger portfolio of revenue-generating assets improves the ability of the business to seek out future opportunity. I am here in India, because I see a great demand story in India for our -- the metals and the energy products and potentially if we could figure out the geology, figure out the exploration, get the technology here and help the government with policy reforms, so they can attract foreign direct investment, can attract mining companies and can attract oil companies in. We've got a premier ground floor opportunity, right now uncontested in terms of developing India's future resources for the Make in India agenda, and I think that the Cairn's shareholders can get true benefit of that by participating through the Vedanta Limited shares, so again thank you very much.
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