Cairn to assess impairments relating to India in August
May 15 2014 , London
India's tax authorities contacted Cairn Energy in January to discuss income tax assessments dating back about seven years, making it the latest foreign firm to be involved in the tax crackdown the country has launched to cut its budget deficit.
Other foreign multinational companies to be targeted include Anglo-Dutch oil major Shell, South Korea's LG Electronics and France's Capgemini.
In March, Cairn Energy called a halt to a $300 million share buyback programme until a review of its Indian income tax was resolved. It said the outcome would shape the company's way forward beyond 2014.
"The Indian income tax department has cited legislation introduced in 2012, with retrospective effect, as the reason for these current enquiries," Cairn said on Thursday.
"While these are being dealt with, Cairn has been denied access to the value of its shareholding in Cairn India Ltd (CIL), either through disposal or future dividend income, which will be assessed for impairment at the next reporting date."
It said that while interactions were ongoing with theIndian tax authorities, Cairn was unable to sell 10 percent of residual shareholding in Cairn India valued at around $1.1 billion as of the end of 2013.
Cairn said it would pursue the tax discussion with the new Indian government to be formed after the election in May.
The company also said that as of the end of March its net cash balance stood at $1.2 billion.
Cairn said French bank BNP Paribas would underwrite a 7-year, $575 million loan to fund development of the Catcher and Kraken fields in the North Sea.