Capricorn begins $700m shareholder payout process

Edinburgh-based Capricorn Energy — formerly called Cairn Energy — is publishing a shareholder circular relating to the proposed return of $500 million of the $1.06 billion proceeds received in the resolution of the company’s tax dispute with the Government of India, following approval of the circular by the Financial Conduct Authority.

“Capricorn plans to return up to US$700 million of the India Tax refund proceeds to shareholders,” said the Edinburgh firm.

“Having consulted with its shareholders and in order to provide flexibility to them, Capricorn is proposing to return up to US$500m via a Tender Offer …

“The remaining sum of up to US$200m is to be returned by way of an ongoing share repurchase programme in order to provide a continuing value-accretive return of capital to shareholders …

“Following the closure of the Tender Offer, a clearing strike price will be selected which allows for the most efficient distribution of the US$500m.

“To the extent that the company does not receive sufficient take-up of the Tender Offer to allow it to fully deploy the US$500m, it plans to consider the return of the remainder to shareholders in the form of a special dividend.”

Capricorn Energy confirmed on February 24 it finally received its expected tax refund of $1.06 billion from the government of India.

The news brought to an end the long-running tax fight between Capricorn and the government of India.

On Monday, Capricorn added: “As announced on 24 February 2022, Capricorn has received a tax refund from the Government of India of approximately INR 79bn (US$1.06bn), in connection with the India Taxation (Amendment) Act 2021 …

“The refund constitutes the resolution of a historic dispute between Capricorn and the Government of India, dating back to a January 2014 retrospective taxation claim and subsequent asset seizure in relation to the 2007 initial public offering of Cairn India Limited.

“On 3 November 2021, following a successful dispute by Capricorn under the UK-India Bilateral Investment Treaty and the passing of the 2021 Act by the Indian Parliament, Capricorn announced that it had entered into undertakings with the Government of India, which would result in the nullification of the tax assessment originally levied against it and the refund of the capital which was collected from it in respect of that assessment.

“The company is of the view that with the receipt of the Indian Tax Refund, it is well positioned to continue delivery of its differentiated business model of returning value to shareholders whilst building sustainable cashflow generation and growth.”