Vedanta goes down the beaten path - Livemint

Vedanta Resources Plc’s proposal to buy a stake in Cairn India Ltd has caught investors unawares. Vedanta and Sterlite Industries Ltd’s share prices fell while Cairn’s gained.

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The key concerns appear to be on the logic for diversifying from mining and metals into oil and gas, and funding for the proposed transaction. Cairn India’s market capitalization is around Rs67,000 crore, and a 26-51% stake (51% is what news reports are mentioning) will cost it around Rs17,000-34,000 crore. Why oil and gas? Vedanta’s appetite for acquisitions is no secret. Its strategy, as mentioned in a recent offer document, is to create a world-class metals and mining company, using four approaches: asset optimization and cost reduction, capacity expansion, consolidating its holdings and seeking acquisitions. It will seek opportunities where it can leverage its “transactional, project execution and operational skills and experience”. It will seek complementary businesses too, such as coal mining and oil and gas, which though not really complementary, appear to fit in here.

Vedanta goes down the beaten path - Livemint