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Last Updated : Jun 15, 2015 09:58 PM IST | Source: Moneycontrol.com

Good, bad or ugly? How to trade Cairn-Vedanta post merger

CLSA has upgraded Cairn India to buy with a target price of Rs 250 per share and says that rejection of merger may drive 40-50 percent upmove in Cairn.


Moneycontrol Bureau 


Shares of Cairn India jumped 3.5 percent intraday Monday on its merger plans. Though analysts see grey areas in the deal that will merge oil subsidiary company and Vedanta (formerly Sesa Sterlite), they are still bullish on both the stocks.


CLSA has upgraded Cairn India to buy with a target price of Rs 250 per share and says that rejection of merger may drive 40-50 percent upmove in Cairn. It says Cairn's stock is building in USD 50 Brent Crude and completion of merger may limit downsides in merged entity's stock.

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UBS also has a buy rating on Cairn India with a target price of Rs 210 per share, though it thinks the merger is negative for Cairn. The brokerage is unhappy with the merger ratio as it is below expectations and feels ratio is insufficient to offset Cairn's cash which gets diluted upon merger.


Barclays has an overweight rating on Cairn India with a target price of Rs 275. Stating that deal may be disappointing for Cairn’s minorities, the brokerage says that merged Vedanta and ex-Hindustan Zinc will have a stretched balance sheet.


Meanwhile, Axis Capital maintains buy on Vedanta with a target price of Rs 237, saying that the merger provides it immense financial flexibility due to access to Cairn’s books. It also adds Cairn shareholders will gain from diversified earnings stream.


Credit Suisse maintains outperform rating on Vedanta with a target price of Rs 253.


The deal, in which minority shareholders of Cairn India will receive one equity share in Vedanta for each share held, along with one 7.5 percent remeemable preference share with Rs 10 face value, is expected to be completed in the first quarter of calendar year 2016, the group's press release said.


At 11:02 hrs Cairn India was at Rs 184.20, up Rs 3.45, or 1.91 percent while Vedanta was at Rs 182.45, down Rs 1.55, or 0.84 percent on the BSE.


Posted by Nasrin Sultana



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First Published on Jun 15, 2015 11:45 am
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