ONGC to support in doubling Cairn's capacity: Anil Agarwal

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ONGC to support in doubling Cairn's capacity: Anil Agarwal

Anil Agarwal, Chairman of Vedanta Group is breathing a sigh of relief after16 months labour. Vedanta today finally acquired a controlling stake in Cairn India, 16 months after announcing this proposed transaction.

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Anil Agarwal, Chairman of Vedanta Group is breathing a sigh of relief after16 months labour. Vedanta today finally acquired a controlling stake in Cairn India , 16 months after announcing this proposed transaction.

In an interview to CNBC-TV18, Agarwal said that the group is going gung ho on Cairn and has all infrastructure to double its production. He, however, points out the group has to complete certain government formalities before ramp-up. On a very confident note, Agarwal says, " ONGC is going to fully support us in doubling capacity."

Cairn energy, which had in July sold a 10% stake in Cairn India to Vedanta for about USD 1.4 billion, got another USD 4.1 billion from the sale of the remaining 30%.

Vedanta group now holds nearly 60% in Cairn India and Cairn Energy has retained 22%. The Vedanta group funded 50% of this USD 8.67 bn deal via debt and remaining 50% from its own resources.

Here is an edited transcript of his interview with CNBC-TV18's Shereen Bhan. Also watch the accompanying video.

Q: Its been over a year that you have been labouring to get this deal done. You finally got this done. How relieved are you feeling today?

A: I am feeling great. I was always confident that this is going to go through. This is a question of energy security of our country. We only produce 14% of our oil. Even China produces 50%. I am looking forward to double Cairn's capacity and making it a very important for the oil and gas area to make more discoveries.

Q: You talked about doubling the capacity at Cairn India and this has been a long-standing issue. It was held back on account of differences with your partner ONGC, all sorts of other clearance issue and regulatory approvals. Now that everything seems to really have been put behind you, how soon do you believe you are going to be able to hike production at Cairn?

A: Very soon. We have the entire infrastructure. We have certain formalities to complete. Of course we have to take the permission of the government and which we are working on it. ONGC is going to fully support and we will start as soon as all the clearances.

Q: So, what is the initial estimate? By when do you actually believe you are going to be physically hike the production and by how much?

A: We believe that we can go up to 240 thousand barrel probably in 2012-2013.

Q: Now going to be a net debt company and atleast you will be net debt company for the next two to three years. So far that hasn't been the case. Is there any plan to raise equity at the Vedanta level?

A: Not at all, we are gearing below 40% which is very comfortable. We have enough dividends down the line in the company to throw the dividend to service all our debt. Out of the total, we have put 50% of our own money to acquire Cairn and the rest is funded through debt.  W are very comfortable about it and have no plan to raise equity.

Q: You have no plans to raise equity, but you also talked about dividend. Cairn India has not had a history of paying any dividend. Is that going to change now with you being the new owner. Are we actually going to see a dividend policy by Cairn?

A: Absolutely, you said it. There will be a dividend policy, which the Cairn India management will put through the board because there was no production.. They have very good cash flow and surplus and they will be proposing for the dividend in coming year.