Cairn India is one of the sufferer of recent global Oil
meltdown. The revenue, profitability, cash flow all went for toss. The majority
stakeholder Vedanta offered Cairn India for merger through share swap. Cairn India
is cash rich company whereas Vedanta is reeling under huge debt pile. Post the
commodity market meltdown, Vedanta revenue and profitability also went for
toss. Vedanta also owns majority stake in Hindustan Zinc with huge cash pile
and trying very hard to convince government to sell their equity so that they
can use their cash to reduce overall cost which will help them to
profitability.
At last Cairn India shareholders
like LIC India which owns around 9% of the Cairn India voted for merger once
Vedanta sweetened the offer as one Vedanta share plus four preferential share
and very soon Cairn India Shareholder will be the Shareholder of Vedanta.
In long run once commodity market
improves then Vedanta is going to do very well but in short term they will be
relying on Cairn India Cash flow plus the dividend from Hindustan Zinc as
additional resources of cash to service their debt or debt interest.
One may consider buying small
quantity during market selloff and must hold on to share for few years to get
real value out of it
Please contact your financial
advisor before investing
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