Mumbai, April 19: Petronas — Malaysia’s national oil corporation — today sold its entire 14.9 per cent stake in Cairn India for $2.11 billion, ending its three-year association with the oil exploration venture.

Sesa Goa, the affiliate of Anil Agarwal-owned Vedanta Resources Plc, bought an 11 per cent stake, or 20 crore shares, through a block deal on the market at an average price of Rs 331 per share.

The remaining 3.9 per cent stake was picked up by institutional investors — the top two being Merrill Lynch Capital (3.94 crore shares) and Broad Peak Peak Mauritius (1.2 crore shares) — at the same price.

Bank of America Merrill Lynch assisted Petronas in the sale transaction.

Last August, Vedanta Resources had struck a deal with Edinburgh-based Cairn Energy Plc to acquire a controlling interest in Cairn India, which struck oil in the Mangala field in Rajasthan in January 2004.

The Vedanta-Cairn Plc stake buyout deal has still to be cleared by the Indian government. Earlier this month, the two sides extended the deadline for winning all regulatory approvals till the middle of May.

Petronas had first bought into Cairn India in March 2008. Under a private placement deal, it had picked up 113 million shares at a price of $636.8 million. This was followed by another private placement of stock in June the same year.

In October 2009, Petronas bought another 2.3 per cent, or 43.6 million shares, for $240 million, raising its holding to 283.43 million shares.

On Tuesday, Petronas sold the entire lot of 283.43 million shares through three block deals.

In early April, Sesa Goa won approval from the Securities and Exchange Board of India to come out with an open offer to buy up to 20 per cent of the outstanding Cairn India stock from its minority shareholders at a price of Rs 355 a share.

The Sesa open offer was launched on April 11 and will close on April 30.

It wasn’t immediately clear why Petronas sold the stock at a 6.8 per cent discount to the open offer price.

The Cairn India stock rose 2.29 per cent to Rs 344.25 on the Bombay Stock Exchange. The Petronas-Sesa Goa deal was priced at a discount of 3.8 per cent to Cairn India’s closing price on the market.

Cushion for Vedanta

The purchase of the Petronas stake will cushion Vedanta Resources against any disappointment that might arise from a tepid response to Sesa’s open offer.

The purchase of the 11 per cent stake from Petronas will bring Vedanta closer to the 51 to 60 per cent it had hoped to acquire in Cairn India by buying out anywhere between 40 to 51 per cent stake under the deal struck last August.

Vedanta is paying Cairn Plc the equivalent of Rs 405 per Cairn India share that includes a fee for a non-compete agreement in South Asia.

Analysts said the move would help Vedanta win a controlling stake in the company even if the open offer was lacklustre.

The transaction — that has so far been held up on differences over royalty payments with Cairn’s state-run partner ONGC — will only go through when the cabinet committee on economic affairs meets to clear the deal.

On April 6, the CCEA had referred the Cairn India deal to a group of ministers headed by finance minister Pranab Mukherjee. No date has been set for the GoM meeting.

Petronas confirmed the sale but refused to say why it had walked away from Cairn India.

Unconfirmed sources said uncertainty hung over Cairn India as Vedanta’s buyout of the company had been delayed, sparking a severe flight of talent in mid- and senior-level jobs. Petronas is also reported to be unhappy with the pace of growth at Cairn India.

Cairn India has been producing 1,25,000 barrels of crude oil per day in its Rajasthan block. Output can be increased by another 25,000 barrels per day at no extra cost. However, the oil ministry has not signed off on this additional production.

Vedanta has said in the past that the company has the ability and potential to increase current production by almost double.

Petronas is looking to invest more in its home markets to boost Malaysia’s oil and gas reserves, some reports said. It also has a participating interest in Cairn Plc’s exploration fields in Greenland.