The ratings of Vedanta remain unchanged after the company's announcement on June 14 to merge its 60% subsidiary, Cairn India (Cairn India) with itself. As part of its analytical approach, CRISIL has always combined the business and financial risk profiles of Cairn India with Vedanta. Therefore, the proposed merger is in line with CRISIL's analytical approach, underpinned by the expectation that Vedanta and Cairn India will have cash fungibility.

CRISIL believes that Cairn India's oil and gas business is one of the key elements of the Vedanta group's overall strategy to be a globally diversified natural resources major. Till now, Vedanta's access to liquidity in Cairn India (cash and marketable securities of Rs.170 billion as on Mar. 31, 2015) was limited to the dividends distributed, coupled with the loans and advances extended by the latter in 2014-15 (USD 1.25 billion). The proposed merger is a step in the simplification of the group structure. Post the merger, improvement in Vedanta's net debt/EBIDTA will continue to be a key rating monitorable.

The transaction is subject to Vedanta, Cairn India and Vedanta Resources Plc (rated BB-/Negative by S&P) shareholder approvals, as well as approvals from the court, stock exchanges and other regulatory bodies. The transaction is likely to be concluded by end of 2015-16 (refers to financial year, April 1 to March 31).

Shares of Vedanta gained Rs 0.3, or 0.17%, to trade at Rs 173.30. The total volume of shares traded was 147,326 at the BSE (12.49 p.m., Thursday).