Can Cairn India and Vedanta Merger happen?

Given the current scenario in which metals and mining companies globally are facing brutal sell-off it seems highly unlikely for the Cairn and Vedanta merger to go through. Mining giant Glencore collapsed 30% in a single day on 28th Sep 2015. Vale, another Brazil based iron ore giant, is down more than 80% from it’s 2011 high. Back home we have Hindalco and Vedanta Ltd and both has corrected 65% and 75% respectively from their 2014 high. Cairn India is also a commodity company but the dynamics of crude oil is very different from metals which are recyclable. Beside that China consume 40-50% of most of the global metals produces while crude oil demand is fairly distributed.

5 Reasons why LIC could say no to the Cairn Vedanta merger

1. LIC till 31st March had little over 1.5% stake in Vedanta Ltd while over 9% stake in Cairn India. If there is more value in Vedanta Ltd than Cairn India then why LIC stake in Vedanta is just over one and half percent. Also the logic of tax overhang on Cairn India for low valuation is meaningless as if the court ruling is in favor of CBDT, it is Vedanta which will have to shell out the tax and penalty amount which will be huge setback considering it's already stretched balance sheet. 

2. LIC had over 11% stake in Hindalco till 31st March 2015 and has recently increased it's stake in the company by 2% to 13%. As we all know Hindalco and Vedanta are somewhat similar company with majority of revenue coming from Aluminium and copper refining. Its must be observed that LIC is preferring Hindalco vs Vedanta for obvious reason. If the merger go through LIC would eventually have very high exposure to metals sector as it's stake in Vedanta Ltd will be go over 6%.

3. LIC currently receives around 150 crores of dividend out of it's investment in cairn India while post merger it's dividend income from swapped shares will reduce to around 70 crores per annum with relatively increased risk as Vedanta has very high amount of debt and Cairn India is a cash rich company.