Malaysia's Petronas is probably an indirect beneficiary of the Securities & Exchange Board of India's condition that Vedanta scrap a provision to buy more of Cairn India from the UK parent, if the Anil Agarwal-controlled company did not get 51% in the explorer.

Petronas sold a 14.9% stake in Cairn India for $2.1 billion. The Vedanta group bought 10.4 percentage point of Cairn India from Petronas after the regulator put a spoke in the structure of its deal with Cairn UK that had assured at least a 51% stake in the company.

The sale by Petronas did not benefit the treasury, since the government could not tax the profits made by the Malaysian state-owned company from its investments. This is why: the Income Tax Act says there's no need to pay long-term capital gains tax on shares that attract securities transaction tax. And a block deal on stock exchanges facilitates that.

"The capital gains tax is exempted and you get the cash flow within 3-4 days, based on the transaction cycle," said KH Viswanathan, executive director of RSM Astute Consulting Group. "In an open offer, you are uncertain where the entire shares can be tendered and also it attracts long-term capital gain tax of as much as 20%."

Vedanta's deal to buy a controlling stake in Cairn India for $9.6 billion had a provision with put and call options exercisable after July 31, 2012 for six months and the other after July 31, 2013, in both cases, at an effective price of $8.66 for each Cairn India share. If there is no take-up under the open offer, the put and call options would not have covered any Cairn India shares. Sebi objected to provisions that would have helped Vedanta buy more shares, saying such derivative transactions were not permissible.

Awaiting government approval, Vedanta opened an offer to buy 20% of minority holders in Cairn India to fulfil regulatory obligations. If all the minority holders had tendered their shares, then only a proportion of Petronas' would have been accepted and it would have had to pay tax on gains. That would have forced Petronas to sell off in the market, probably leading to a fall in prices.