Vedanta Group Acquisition of Controlling Stake in Cairn India

Submitted By:ANTARKISH YADAV (10) JANMEJAY GUPTA (32) SHYAM DOGRA (55)

Agenda

Vedanta Group Cairn India Deal Structure Synergies Pre Acquisition Impact Post Acquisition Impact Legal & Political Impact Current Status

Vedanta Groupa Glance

Vedanta is an UK based, LSE listed metals and mining company. Vedanta business is principally located in India, one of the fastest growing large economies in the world. Vedanta have additional assets and operations in Zambia and Australia. Vedanta are primarily engaged in copper, zinc, aluminum and iron ore businesses, and are also developing a commercial power generation business. Vedanta have experienced significant growth in recent years through various expansion projects for copper, zinc and aluminum business.

Vedanta Group Companies

Vedanta Group Vision

MISSION :
Our mission is to be a world-class metals and mining group and generate superior financial returns. STRATEGY : Our strategic goal is to create a world-class metals and mining company and to generate strong financial returns. Our strategy is based on the following four key pillars:
Continuing focus on asset optimisation and reducing the cost of production. Increasing our capacities through greenfield and brownfield projects. Consolidating our corporate structure and increasing our direct ownership of our underlying businesses to derive additional synergies as an integrated group. Seeking further growth and acquisition opportunities where we can leverage our transactional, project execution and operational skills and experience.

Cairn India.A Glance

Cairns India is subsidiary of Cairn Energy plc ,is a global oil and gas exploration company headquartered in Edinburgh, United Kingdom. It has operated interests in Albania, Bangladesh, Greenland, India, Nepal and Tunisia. Produces around 33,000 barrels of oil equivalent per day. Its largest activities are in India, where it has made more than 20 discoveries in Rajasthan, including a major oil discovery in Mangala. As at 30 June 2010 it had total proven commercial reserves of 247.4 million barrels of oil equivalent.

Cairn India Highlights

Large resource base with significant growth potential. Key producing asset substantially de-risked. 125,000 bopd production in H2 2010, plan to reach at least 240,000 bopd. Low cost producing assets Low cost F&D platform ($5/bbl), low opex ($5/bbl). Deep skill sets in oil & gas. High quality management team. Unique position in Rajasthan. Excellent HSE track record .

Cairn India: Scale and Growth

Cairn Indias Asset Base

Deal Structure
Cairn to sell a maximum of 51 per cent of Cairn India to Vedanta. Consideration of up to US $8,480m (INR 396,561m), based on US $8.66 (INR 405) per Cairn India share*. A premium of approximately 32 per cent to the Cairn India average closing price for 90 days prior to 14 August 2010 Put and call options, exercisable after July 2012 and July 2013, to ensure a majority interest in Cairn India can be sold (exercisable at US $8.66 (INR 405)) Intention to return a substantial proportion of the proceeds from the transaction to Cairn shareholders.

Deal Structure
Retained cash will provide Cairn with financial flexibility to pursue an active exploration programme in its leading acreage position in Greenland and future growth opportunities. Continued exposure to Rajasthan through the retained shareholding in Cairn India. Completion expected before end of 2010. For each Cairn India share subject to the Proposed Transaction, Vedanta will pay Cairn US $8.66 (INR 405) in cash on completion, comprising: US $7.59 (INR 355) (pursuant to the sale and purchase agreement) US $1.07 (INR 50) (pursuant to the non-compete arrangements)

Key Transaction Terms

Vedanta acquiring 51% to 60% of Cairn India for a total consideration of $8.5bn to $9.6bn. Vedanta to acquire a 31% to 40% interest. Sesa Goa to acquire a 20% interest. Implied equity value of Cairn India of $16.6bn. Premium of 21.8% to the undisturbed share price of INR332.602 Subject to shareholder and regulatory approvals Immediately EPS accretive for shareholders. Funded through debt and cash resources Expected to close by Q1 2011

Transaction Details
Vedanta Group to acquire between 51% - 60% of Cairn India via the following steps. Vedanta Resources Plc to acquire 51% from Cairn Energy Sesa Goa to tender for 20% via an open offer Vedanta's purchase to be reduced by the shares acquired under the tender offer to a minimum of 40%. If Sesa Goas open offer is not fully taken up, it will purchase shares from Vedanta Plc to reach 20% Put and call options written to enable either Vedanta or Cairn Energy to ensure a minimum of 50% of Cairn India is acquired from Cairn Energy.

Transaction Financing
Transaction consideration of US$8.5bn to US$9.6bn Payable on completion (expected by Q1 2011) Funding Vedanta Resources: bank debt facilities of up to US$6.5bn, 2 year tenure. Sesa Goa: c. US$3bn, primarily from cash resources

Synergies : Unique Opportunity to Create Value

Creating an Indian natural resources champion: comprehensive footprint across Indias resources sector World class asset and management team. Leverages Vedantas core skills. Common operating philosophy: focus on delivery and costs Enhances and diversifies Vedantas strong growth profile Financial flexibility retained and no impact on existing expansion programmes Immediately EPS accretive for shareholders.

Synergies

The Cairn Board believes that the Proposed Transaction delivers positive benefits in line with Cairns strategic goals.

The IPO of Cairn India in 2007 provided a return of cash to shareholders and created sufficient financial flexibility to allow the fast-track development of Cairns world-class discoveries in Rajasthan.

The completion of the first phase of the Rajasthan development represents a significant milestone for the Cairn Group, with the project now producing approximately 125,000 barrels per day.

The Cairn Board therefore believes that now is an appropriate time to realise further value from its shareholding in Cairn India, whilst at the same time maintaining exposure to the ongoing business through a significant retained shareholding.

Pre-Acquisition Impact
Stock prices of Vedanta Resources fell below normal (London Stock Exchange), which fell 20 percent last week on speculation of the deal, were 2.9 percent higher at 1447 GMT on 15 Sep10.

Stock prices of Vedanta

Pre-Acquisition Impact
Shares in Cairn India ended up 1.7 percent at 338.65 rupees in the main Mumbai market which was almost flat. had risen as much as 2.4 percent earlier in the day, after falling sharply on Monday when the deal was announced. Shares in Cairn Energy were down 1.7 percent in London.

Stock prices of Cairns

Post Acquisition Impact

Cairns strategy is to establish commercial reserves from strategic positions in high-potential exploration plays in order to create and deliver shareholder value. Cairn has focused on gaining early entry into frontier basin plays such as in India and Greenland. Following completion of the Proposed Transaction, the Cairn Group's principal focus will be to advance its exploration programme in its frontier basin positions in Greenland and continue to pursue its proven strategy of building shareholder value from growth opportunities.

Legal & Political Impact

Cairn has given certain non-compete undertakings covering the territories of: Bhutan Sri Lanka Pakistan India pursuant to which Cairn has agreed that, for a period of three years,

Current Status and Post Impact of the deal on 17 SEP 10

Regulatory approval for London-based Vedanta Resources' deal to buy a controlling stake in Cairn India, a unit of the UK's Cairn Energy, will take at least a month, the Oil Secretary said on 16th Sept 10. Cairns have sought the approval of shareholders for the deal & expects to complete by early October. The conclusion of the deal is "conditional to completion of open offer in India". Vedanta has already published an advertisement making an open offer to the minority shareholders of Cairn India as part of the takeover exercise, which is slated to open on 11 October.

Current Status and Post Impact of the deal on 17 SEP 10 :

Tussle with ONGC :

ONGC state-run company has decided to exercise its "pre-emptive right"

in relation to Cairn's participatory interest and has written to the stock exchanges stating that Cairn Energy needs its nod for the Vedanta deal.
SEBI is likely to direct the group to disclose the pre-emptive rights of

ONGC to Cairn Indias assets.

Cairns may also have to disclose the letters it has received from the environment ministry and even give an undertaking that it will comply with all the regulatory requirements of the environment and forests ministry.

Glossary
2P - Proven plus Probable reserves. 2C - Contingent resources. 2D/3D - Two Dimensional/Three Dimensional. boe - Barrel(s) of Oil Equivalent. boepd - Barrels of Oil Equivalent per Day. bopd - Barrels of Oil per Day. E&P - Exploration & Production. EOR - Enhanced Oil Recovery. F&D - Finding & Development. FDP - Field Development Plan. mmboe - Million Barrels of Oil Equivalent. mmt - Million Metric Tonne. PSC - Production Sharing Contract tpa - Tonnes per Annum HSE- Health Safety & Environment

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