The exploration company will buy back shares from January 23 and extinguish them. The purchase may include a part of the 10.3 percent stake held by former promoter Cairn Energy Plc.

Cairn India, which is sitting on a cash pile of about USD 3 billion, received shareholder approval to buy 17.09 crore shares, or 8.9 percent of the equity, from the open market at not more than Rs 335 apiece, a public notice said.

The buyback will be open until July 22, the notice said. After completion, Agarwal's Vedanta Group ownership in Cairn India will rise to 64.53 percent from 58.76 percent. Separately, London-listed Vedanta Resources Plc said it received 99.89 percentage of votes in favour of potential participation of Cairn Energy in the proposed buyback at a shareholder meeting held on Monday.

UK's Cairn Energy sold a majority stake in Cairn India to the Vedanta Group at Rs 355 a share, a level not seen in the past year. "Cairn Energy is a known seller for a long time and the share buyback may present it with an opportunity to exit from Cairn India," an analyst said.

The maximum buyback price represents an over 4 per cent premium compared to the average of the weekly high and low of the closing share price of the company on the stock exchanges during the two weeks preceding the board approval on November 26, according to the notice.

Cairn India shares rose 1.2 percent to Rs 327.95 in morning trade on the BSE. A buyback is a process where a company repurchases outstanding shares to reduce their number in the market. Companies buy back shares to increase their value by reducing supply or to eliminate potential threats by shareholders who may be seeking a controlling stake.

While a buyback is considered an efficient way to return capital to shareholders, it also indicates the company does not have significant capital expenditure plans and may not be looking at any major acquisitions.

The Vedanta Group holds 112.27 crore of Cairn India's total of 191.05 crore outstanding shares. Cairn UK Holdings Ltd has 19.61 crore shares and Life Insurance Corp has 16.77 crore (8.78 percent) shares.

ICICI Prudential holds 1.08 percent while foreign institutional investors have a 15.14 percent holding. Financial institutions and banks have 8.7 percent.

(Agencies)

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