Cairn Energy will initiate a buyback of its shares at a later date using the $1.06-billion tax refund it will receive from the Indian government for scrapping a retrospective tax law.
Announcing its buyback plan, the British oil and gas major said it will start an initial share repurchase programme of its ordinary shares up to £20 million.
“This programme is being initiated prior to the anticipated larger buyback programme to commence following receipt of the Indian tax refund," Cairn said in a statement.
Cairn and Morgan Stanley have entered into non-discretionary arrangements for the purchase of ordinary shares, which will follow certain pre-set parameters and be executed according to relevant regulations, the statement said.
“Cairn will announce any market repurchase of ordinary shares no later than 7.30 am on the business day following the calendar day on which the repurchase occurred,” it said.
The UK-based company recently entered a deal with India to settle its long-running retrospective tax dispute. India agreed to refund $1.06 billion if Cairn dropped all litigations against the country.
Cairn planned to give $500 million as special dividend to its shareholders when the refund came through and use $200 million for a share buyback programme. The company would use the balance amount to bolster its net cash position.
“Progress in resolving our Indian tax issue and active portfolio management leave Cairn well-positioned to deliver growth from a sustainable business, focused on generating further value and returns for shareholders,” Simon Thomson, Chief Executive of Cairn Energy PLC, had said in September.
India introduced the retrospective tax provisions in its income tax laws in 2012-13. The law was used by the government to tax Cairn in 2014 for reorganising its assets in 2006-07. The tax department attached the shares of the company’s Indian arm as part of the proceedings and sold them to recover tax dues.
Cairn challenged the tax demand in an arbitration tribunal, which ruled in favour of the UK-based firm. India appealed the verdict, following which Cairn filed lawsuits in several countries seeking to seize Indian assets. Under pressure, the Indian government repealed the retrospective tax provisions, which were the cause for dispute with Cairn and other companies.
(Edited by : Shoma Bhattacharjee)