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Friday, Oct 13, 2006

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Cairn IPO may raise $2 b

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Parent company to divest 30.5 per cent equity stake

High stakes
Cairn Energy's current market valuation is $6 b
90 pc of parent's assets located in India
Cairn India produces 7 pc of domestic crude


Mumbai , Oct. 12

Cairn India Ltd today filed with SEBI for its proposed IPO, which, according to analysts, stands a chance of being among the largest offers on the Indian bourses.

The oil exploration company proposes to offer 538.47 million new equity shares of Rs 10 each for cash at a premium to be decided through a 100 per cent book building process. An over-allotment option may also be granted by the company.

Following the floatation, parent company Cairn Energy Plc's equity stake in Cairn India will be reduced to 69.5 per cent, the divestment through the IPO being 30.5 per cent.

The possibility that the IPO may be among the biggest in India is based on the current market valuation of $6 billion of London Stock Exchange-listed Cairn Energy Plc, 90 per cent of whose assets are in India, and which are to be transferred to Cairn India, said analysts.

(Cairn Energy Ltd will acquire the subsidiaries that hold all of the ownership and operated interests in Cairn Energy Plc's Indian crude oil and natural gas development and production assets, and the majority of its Indian exploration assets, at the end of the reorganisation process, according to a statement.)

Divestment of 30.5 per cent by Cairn Energy means a valuation of the offer at roughly $1.6 billion. This is estimated by analysts as the minimum amount that the offer can fetch.

With the premium that will be yielded later by the book building process, the offer could raise as much as $2 billion (Rs 9,500 crore) or even more, they said.

The offer is likely to open in December, providing for the usual nine weeks that it takes from the date of filing with the SEBI.

At least 60 per cent of the issue will be allotted to qualified institutional buyers, not less than 10 per cent to non-institutional investors, and not less than 30 per cent to retail bidders, all on a proportionate basis.

Cairn India currently accounts for seven per cent of domestic production of crude.

The company is aiming to operate approximately 20 per cent of India's oil production by 2010, said Mr Rahul Dhir, CEO of Cairn India.

For its last fiscal half-year, Cairn Energy reported a cash flow of $153 million and profit before tax of $6 million, said a company official.

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