Cairn India Holdings Limited (CIHL), the overseas subsidiary of Vedanta Ltd will exit its investments in Anglo American Plc, Vedanta said today.
In December 2018, Cairn India Holdings purchased an economic interest through a structured investment in equity shares of Anglo-American Plc, from Volcan Investments for a total consideration of ₹3,812 crore. “As of March 31, 2019, the transaction was positively marked to market by ₹1,041 crore,” Vedanta had said in its latest annual report.
This structure was to mature in parts in April 2020 and October 2020 but Cairn is exiting the same ahead of the originally envisaged schedule.
“With this, Volcan will exercise the early exchange option available to it on 26 July 2019 and consequent to this the full exchange of its two issues of mandatory exchangeable bonds secured by shares in Anglo American plc, will settle on 12 August 2019. The share price of Anglo American has close to doubled, since Volcan invested, delivering attractive gains to all investors,” Vedanta said.
Vedanta said that the investment by CIHL, which was entered into as part of its cash management activities, has delivered a net gain of over $100 million in the eight-month period it was held. Cash proceeds from the settlement of the transaction will be paid to CIHL on 13 August 2019.
Srinivasan Venkatakrishnan, CEO of Vedanta Ltd, said: “We are pleased this structured investment has achieved a superior return for CIHL, as we expected when it was entered into. Our strategy continues to be to focus on our existing businesses, where we believe that there are significant opportunities to unlock their full potential. The unwinding reflects our disciplined approach to treasury management and capital allocation together with our commitment at all times to act in the interests of all shareholders.”
Following the redemption of the structured instrument, completed with due Board approvals, CIHL will have no further economic exposure to Anglo American plc shares, added Vedanta.
India Ratings in May had flagged the issue of voting rights and the option to buy the underlying shares with Volcan in the deal that implied a risk of further “leveraging at the parent entities or a likely corporate event”.
Vedanta Ltd had said that it followed all prescribed procedures in undertaking the funding of parent Volcan’s acquisition of Anglo American Plc through a structured deal by its wholly-owned subsidiary Cairn India Holdings Ltd.