Cairn, ONGC up after Vedanta deal nod

Shares of Cairn India surged by nearly3 per cent in morning trade on the Bombay Stock Exchange after the governmentgave its approval for the sale of a stake to UK-based mining firm Vedanta , 10months after the deal was first announced.

The Cabinet Committee on Economic Affairs (CCEA) headed byPrime Minister Manmohan Singh yesterday gave its approval to Cairn Energy forselling its Indian unit to Vedanta Resources, but with riders.

The company opened on a weaker note on the BSE but thenregained the lost ground and touched a high of Rs 319.10. The scrip was latertrading at Rs 315.65, up 1.58 per cent, at 10.40 hours.

"The uptrend in the stock is because the deal hangoverwhich was there for the last 10 months is finally over and the uncertainty andregularity hurdles are now all clear," Ashika Stock Brokers Research HeadParas Bothra said, adding that the cost-based royalty issue has also beenfactored in.

Meanwhile, Vedanta gained 3.1 per cent to 2,094 pence in London on Thursday.

Marketmen said yesterday's decision was also positive forONGC and it was visible in the stock movement today as shares of ONGC weretrading at 278.90, up 1.81 per cent on the BSE, after witnessing a high of Rs290.55 in morning trade.

The approval comes with the precondition that Cairn or itssuccessor has to treat the royalty paid by ONGC on the entire crude output fromthe Rajasthan oilfield as recoverable from oil sales.

Cairn Indiawill have to withdraw the arbitration it has initiated disputing its liabilityto pay a Rs 2,500 per tonne oil cess on its 70 per cent share in the fields.Besides, the approval will be subject to ONGC and would also need securityclearance.