Cairn-Vedanta merger could be done by year end: Anil Agarwal

Speaking to CNBC-TV18, Anil Agarwal, Chairman of Vedanta Resources said that shareholders will meet in a month's time for the merger proceedings.

The merger plans were stalled after the income-tax department froze Cairn Energy’s 9.5 percent stake in Cairn India. In 2011, Cairn Energy sold 58.5 percent of Cairn India to Vedanta, for USD 8.67 billion. He said the revised deal is 'fantastic'. "Everybody should be happy, especially the Cairn shareholders." He believes by end of this year, the merger will be a done deal."The whole world is appreciating the way we are operating our business to cut costs and make a diverse product." He says that copper and zinc are firming up.

He added that when the merger takes place there will be benefits on both sides. Below is the verbatim transcript of Anil Agarwal’s interview to Nisha Poddar and Kritika Saxsena on CNBC-TV18.Nisha: First, why the sweetener to this particular merger? Of course this has been in the making for a long time, now Vedanta is paying more for this Cairn-Vedanta merger. A: It is very important for India to create a very value creating company, risk diverse company and that is what is happening in the world and we wanted to have oil and gas, copper, zinc, iron ore, aluminium to be one company and that is what the merger proposed. We have been watching for one year and we want everybody to be happy and we felt and all our advisors felt that we should revise our terms graciously and that is what we have done. We have revised the terms and this will help everybody, everybody will be positive and we have taken everybody in confidence and this is what we have done today to revise the terms and announce. Nisha: This merger is in the larger benefit of the shareholders is what you are saying. Could you enumerate what will be the benefits of this behemoth that you have created of metal and mining business with the oil and gas company? A: It is on the ground level. The consumption of metal and oil is on the ground level. When we have one company which has tremendous strength to each other and to the balance sheet, it will have many fold advantage and that is how we are looking. A very strong management, we are almost lowest quartile of the cost of all our business. We have reduced our cost while merging this whole thing. It will merge as a beautiful, a single large company which will help everybody, to India, to market it worked for, stakeholders, shareholder is the most important for us and we have taken the full consideration of the shareholders to make sure they are very happy including LIC, including our Cairn Plc shareholder or anybody else to make sure that everybody will have some advantage. So, we thought we should give little premium and to make sure that everybody is happy. Kritika: What is the timeline you are looking at? You pointed out all the various shareholders that you have already spoken to, you said you have spoken to LIC and Cairn Plc, roughly by when do you expect the merge to be completed? A: We have always informed every of our stakeholder, shareholder what we are doing and how we are doing. This is our governance point of view, we want everybody to be with us but I believe board will convene at date for shareholder which will be I think in the months time. Once that happens, the process of other approval will take place and it will move on.Nisha: Government will have a huge role to play in this one. There is a tax issue which is in the waiting also. Cairn Plc’s stake is there. What is the discussion that you have had with the government; you have offered them Cairn-Vedanta merged shares so how has been the reaction?A: We have nothing to do with the Cairn Plc. Cairn Plc has a separate subject of the tax which they are looking at with the government. It is the Cairn Plc, the shareholders whether the shares are with them or is in the ESCROW with the tax authority but we have to talk to them, to make them understand what we are doing and that is what we are doing. Government in this case has to do with the Cairn Plc, not with us. Kritika: Just to reiterate on the earlier point that you were making, you have spoken to Cairn Plc as well as LIC. What have they said? A: We are doing general to the shareholder, telling them what are proposing, how we are doing. Whatever governance point of view, whatever we need to do we are conveying them.Kritika: These sweeteners are after talking to all these shareholders, the once you mentioned, LIC, Cairn Plc, all shareholders?A: They are not supposed to tell us whether they will accept it or not. We have convened in the best of our interest and I believe what we have done is fantastic and everybody should be happy about it especially the Cairn oil shareholders for getting a share which is more diverse, better premium and that is what we believe.Nisha: The cycle is not looking very good in the commodity side, you have been in this sector for so long, what are the signs that you are seeing because shareholders would like to see the operational benefits also coming in. What are the signs that you are seeing, how soon will the entire metal and mining space will turnaround. Hindustan Zinc is doing very well but the others like copper, iron ore, aluminium, they all need to turnaround. What are the signs that you are picking up at this point, how much time will you give for that? A: We have reduced the overhaul cost of about 20-25 percent. The whole world is appreciating the way we are operating our business, to cut the cost, to make the beautiful products, we are making a diverse product, this is emerging from all over the world. In the region where there is less production, there is hardly any production on these areas, plus the market is looking up, if you see all the metals, copper is coming up, zinc is coming up, aluminium is looking good, aluminium is the best metal for India to produce. We have the best of bauxite, we have the best of consumption and I believe that this is what business we are in, every business is a premium business and the way we are run it, most beautifully. So, this time where the prices were not doing well in last one or two years, it has allowed us to make us more disciplined to be better than others. Kritika: By the end of the fiscal can we say that Cairn and Vedanta will be a merged entity? A: Yes that is what we intend. The whole idea is to create a natural resource diverse company and that is what we are looking and this is one best thing that can happen for India, for shareholders, for everybody. I am looking forward for this thing to happen.Nisha: How will you reduce the debt now on Vedanta, can you give us some plant at least because Cairn India will come with cash?A: What is the problem with debt? There is no problem with debt, we are servicing the debt well, such a large company you need that kind of debt. We are churning the cash and while churning the cash all the payments are being made on time, every bank is happy, so where is the question of debt?Nisha: The inter-corporate loan that you have taken from Cairn India that was rolled over. Now you will not have to pay huge interest on that, it is libor plus 450 basis points.A: When the merger takes place both sides will benefit, management will reduce the cost, it will be one management. It will be helpful because it is a natural resource and it has the same approach. So, it will be helpful to everybody.Nisha: Is there any loan repayment that you are doing to Vedanta PLC?A: Whatever is the loan and whatever is the due date it will be paid and everything is absolutely in order.