BofA ML retains buy on Cairn post CEO exit

MUMBAI: BofA Merrill Lynch has retained its buy rating on Cairn India after the company announced its managing director and chief executive officer Rahul Dhir has quit.

But, the broking firm said the exit of Dhir has raised concerns on whether full potential of the Rajasthan reserves would be realized. BofA Merrill Lynch said another concern is whether the CEO exit is precursor to CIL becoming part of Vedanta group restructuring.

"During his tenure the two main Rajasthan discoveries were developed and profit rose to US$1.7bn in FY12. The Rajasthan story also became bigger and better as further significant potential reserve upside was identified," said BofA Merrill Lynch analysts, Vidyadhar Ginde and Akash Gupta in a note to clients.

On Friday, Cairn shares rose 1.5% to close at Rs 324.15. The broking firm has set a price target of Rs431 for the stock.

"CIL’s FY13 EPS is likely to rise sharply and its valuation is attractive, we believe," the analysts said.