Cairn's Indian chief picks up £12m shares deal

Cairn Energy has awarded the chief executive of its Indian unit, which is being spun off, a share options package worth almost £12m.

The company also revealed that listing a minority stake in its Indian assets on the Bombay Stock Exchange would raise some $1.8bn (£1bn), based on the value of the London-listed Cairn plc. Of this, some $600m will go to Cairn India, while the remainder will come back to Cairn plc. Analysts believe that around $1bn will be returned to shareholders of the London-listed entity.

The company will publish a price range for Cairn India this month, which may well show a higher value being put on the business than the £2.7bn implied from the Cairn plc share price. Trading in the shares should begin in December.

Rahul Dhir, 40, an Indian former investment banker who will be chief executive of Cairn India, will receive shares worth £11.7m, most of which are not subject to meeting performance measures. The maximum that he will have to pay for the shares is £2.7m, handing him a profit of at least £9m. In a circular to shareholders, the company admitted that the shares package was "unusual". It is thought that Cairn was keen to recruit an Indian national.

Cairn wrote: "In Mr Dhir's case, the award is required to attract a highly sought-after executive from investment banking into an Indian chief executive officer's position in the oil and gas sector ... He was an outstanding candidate for the post with all the necessary sector experience so, whilst the above arrangements are unusual, the board considers them appropriate."

Mr Dhir trained as an engineer and worked as an oil and gas reservoir engineer early in his career. He went into investment banking in 1994, working for SBC Warburg, Morgan Stanley and, immediately before joining Cairn in May this year, Merrill Lynch, where he was co-head of energy and power investment banking.

Lawrence Smyth, 61, an oil industry veteran, will be Cairn India's chief operating officer. He will get shares worth £2.6m.