Cairn Energy Plc, on Tuesday, suspended the $300-million share buyback programme as it is unable to sell its 10 per cent stake in Cairn India due to the ongoing dispute with the Income Tax department.
The company had declared a $300-million programme in October last to buy back shares for cancellation. “The board has decided to suspend the previously announced share buy-back programme as of March 21 until the position regarding the Cairn India shareholding is resolved,’’ it said in a statement here.
Cairn Energy had in 2011 sold majority stake in its Indian arm to the Vedanta Group for $8.67 billion. It still continues to hold 10.3 per cent stake in Cairn India, which is worth about $1 billion at today’s share price.
The Income Tax department has told the company that it made capital gains of Rs.24,500 crore when it transferred all its Indian assets to Cairn India in 2006, and got it listed on the stock exchanges.
The statement said the company is not able to sell the residual shareholding in Cairn India while interactions are ongoing with the Income Tax department. “Cairn has re-confirmed with its advisers that throughout its history of operating in India, the company has been fully compliant with the tax legislation in force in each year,’’' the company had stated earlier. The I-T department has so far not raised a tax demand on Cairn Energy, but has ordered Cairn India not to allow the transfer of U.K. firm’s residual stake.
Cairn India plans to buy 17.09 crore shares, or 8.9 per cent of the equity, from the open market at not more than Rs.335 a share, aggregating up to Rs.5,725 crore.