CAIRN eyes IPO of Indian Unit as reserves grow

CAIRN Energy-Europe's largest independent oil company called time on its life as the oil firm unveiled plans to float more than 90 per cent of the business on the Mumbai Stock Exchange through an initial public offer and return the proceeds to shareholders - a move that will return it to its roots as a small-cap oil and gas explorer.

"We intend to examine a partial initial public offering of our Indian exploration and production business on the Bombay Stock Exchange," said Cairn Energy CEO Bill Gammel. The company estimates in-place reserves in excess of 3.5 billion barrels in the Rajasthan block- the biggest oil find in India in the last two decades.

There has been much speculation that Edinburgh-based oil and gas explorer Cairn Energy -which won a place in the FTSE 100 following bumper oil and gas finds in the Indian state of Rajasthan -would eventually sell the Golden Goose of India. But fewer people had thought it would instead look to float off its core Indian operation, primarily the flagship Rajasthan fields, on the Mumbai stock exchange, and then return almost all the proceeds of the float to investors, a total that could reach over £ 2 billion.

The announcement came after India's state-controlled Oil & Natural Gas Corporation (ONGC) said it may buy Cairn's assets in the Indian state of Rajasthan earlier this month. Analysts say an IPO is a way of extracting more value from the unit than a trade sale would achieve as Sources said Cairn was asking for .8 billion while ONGC was willing to pay only -2.2 billion.

The firm will retain a stake in the newly listed Indian firm of anything between 20 and 75 per cent, depending on market conditions alongside a board room presence. The new firm is likely to be named Cairn Resources, and at least one Cairn director will sit on its board - potentially Gammell. The Edinburgh group itself will go back to an exploration play, hoping to repeat the Rajasthan success elsewhere.

Besides, some Edinburgh-based jobs are likely to go as the firm moves more autonomy into India, so some of the functions will move to India. However, the Scottish firm plans to keep job losses to minimum. The firm employs 120 people in Edinburgh and 700 in India. Cairn reported full-year pre-tax profits of -£ 101m, up from a -£ 30.4m loss, on revenue up 52pc to -£ 262.6m. Cairn currently has 0 million cash on its books and an un-drawn credit facility 0 million.