Vedanta Resources shares gain on merger confirmation

Shares in Vedanta Resources rose 2.5% on Monday as investors welcomed the company’s confirmation over the weekend that it is merging Vedanta Ltd and Cairn India.

UBS said the merger is positive as it will allow greater flexibility on the use of cash throughout the group.

RBC Capital Markets said the proposed merger is a modest positive in terms of balance sheet flexibility and group simplification and should provide the parent company with better access to Cairn India’s $2.9bn in cash.

“The greater accessibility to Cairn India’s cash should allow the company to better manage its debt maturities in the coming two fiscal years totalling $5.7bn, with $2.4bn held at the Vedanta Plc level and the remaining $3.4bn held by Vedanta’s subsidiaries,” said RBC.

“Despite our modest positive take on the proposed merger, we see the extended timeline and approval process as a slight negative on the transaction,” it said.