Mumbai (Platts)--4Apr2011/523 am EDT/923 GMT

India's capital market regulator, the Securities and Exchange Board of India, has approved Vedanta Resources open offer to acquire an up to 20% stake in Cairn India from its shareholders, a source familiar with the deal said Friday.

This takes Vedanta's takeover of Cairn a step further because both companies are sticking to an April 15 deadline to complete the deal. Vedanta would be able to start the open offer in 15 days from SEBI clearance.

However, the deal has to obtain clearance from the Indian Cabinet because the oil ministry decided to refer it to a larger ministerial group, saying the deal was too large and complex for it to approve.

UK-listed metals and mining group Vedanta Resources made an open offer through its Indian iron ore subsidiary Sesa Goa to the shareholders of Cairn India as mandated by existing takeover regulations through a public announcement dated August 16, 2010.

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A source at SEBI, without confirming that the letter has been sent to Sesa Goa's merchant bankers, said the change in the processing status of the Cairn-Vedanta takeover deal would show up on their website when it is updated on Monday.

Cairn Energy on August 16 said it would sell up to 51% in Cairn India to Vedanta Resources for $8.5 billion based on a price of Rupees 405/share ($8.66/share).

Vedanta first agreed to buy a 40% stake in Cairn Energy and later up to 60% depending upon the response from the open offer by other shareholders.

While it agreed to pay Rupees 405/share to Cairn Energy, the price offered to other shareholders was Rupees 355/share.

There are also unresolved issues with state-run Oil and Natural Gas Corp. ONGC has said Cairn Energy needs ONGC's permission to go ahead with the deal and also says it had pre-emptive rights, which it chose not to exercise. ONGC also wants the royalty payment issues resolved as it pays 100% royalty while having only a 30% stake in the Rajasthan block where Cairn India has a 70% stake.

The field is currently producing 125,000 b/d of crude oil, with a potential to produce up to 240,000 b/d.

Cairn India is 62.37% held by UK-based Cairn Energy and 14.94% by Malaysia's Petronas, with the remaining equity in the hands of retail and institutional investors.

--M.C.Vaijayanthi, newsdesk@platts.com