The Indian government has sold a US$216mln chunk of Cairn Energy PLC’s (LON:CNE) stake in Indian miner Vedanta as part of the ongoing row over retrospective tax dues.
Vedanta completed its buyout of Cairn’s Indian division last year, which left the London-listed oil and gas explorer with a 5% stake in the enlarged group plus an interest in preference shares. That investment was valued at US$1.1bn at the end of last year.
But tax authorities seized the shares having issued Cairn with a US$1.3bn bill in 2014, claiming it had failed to pay tax on capital gains made during the reorganisation of its Indian business back in 2006.
READ: Cairn boss excited by busy year ahead
On top of the share sale, the Indian government has seized dividends due to Cairn from that shareholding, while it has also offset a tax rebate of US$234mln due to the company from overpayment of taxes on a different matter.
Cairn said it is continuing to fight the claims and will take its case to the International Court of Justice next month, where it will demand US$1.3bn from Indian authorities.
“Cairn continues to have a high level of confidence in the merits of its claims in the arbitration. Cairn is seeking full restitution for losses totalling approximately US$1.3bn resulting from India's expropriation of its investments in India in 2014, and India's unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures,” read Monday’s statement.
While it waits on the outcome from the trial, the explorer said it would write down the value of its investment in Vedanta to account for the share sale. It also warned investors that the government could look to sell more of its stake in the coming weeks and months.
Cairn shares fell 1% to 230.2p in early deals on Monday.