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Vedanta: Cairns India’s investment in Anglo American adheres to governance standards

PW Bureau

Investors were unconvinced of the investment’s merits as Vedanta’s shares fell by 20 percent on Friday to a 52-week low Mumbai: Vedanta Ltd asserted that its foreign unit Cairn India Holdings Limited’s (CIHL) investment in Anglo American Plc was made on an arm’s length basis and adhered to governance requirements. It added that the decision had been valued by an independent valuer and was given the green light by both Vedanta and Cairn India boards. The natural resources major added that this was “voluntarily and transparently” made known in the December quarter results. “The investment was made on an arm’s length basis in December 2018, after meeting all governance requirements. The economic interest was valued by an independent valuer and approved by the boards of CIHL and Vedanta Ltd,” Vedanta said in a statement on February 4.

Investors skeptical of investment

Investors were unconvinced of the investment’s merits as Vedanta’s shares fell by 20 percent on Friday to a 52-week low. CIHL’s purchase of a stake in Anglo American Plc from Volcan Investments amounted to Rs 1,431 crore. “Cairn India Holdings Limited (CIHL), an overseas subsidiary of the company, was offered the opportunity by Volcan to invest some of its surplus cash resources in a structured investment representing the economic interest in upside potential of ~24.71 million shares (~1.8 percent of outstanding shares) of AA Plc,” the company said in the statement. Volcan Investments, a family trust of Anil Agarwal, holds nearly 19 percent in Anglo American. “The structure provides significantly higher returns compared to other overseas cash management investments that would typically return around 2 percent. After careful consideration of the risk-adjusted returns of this opportunity relative to other available investments, it elected to invest a portion (which is less than five percent of Group’s cash and cash equivalent of around US$5.0bn) of its available cash resources, as part of its cash management activity. The ownership of the underlying shares and the associated voting interest remains with Volcan,” it said.