Vedanta Resources Plc completed its long-delayed $8.7 billion (5.5 billion pounds) purchase of a majority stake in Cairn Energy Plc's Indian unit, more than a year after the deal was first announced, in a move that turns India-focused Vedanta into a diversified resources group.

London-listed Vedanta now holds 58.5 percent of Cairn India , it said on Thursday, of which 20 percent is held through its Sesa Goa unit.

Cairn Energy, which will retain a 22 percent stake in Cairn India, confirmed it would return around $3.5 billion to shareholders.

Cairn Energy agreed in August last year to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India's energy sector, was delayed for months due to a disagreement over royalty payments.

Today marks a key milestone for Vedanta as it puts to bed a deal drawn out for well over a year that has contributed to underperformance on fears of deal terms uncertainty and balance sheet stress, analysts at Liberum said in a note.

Oil has been a solid performer over the course of 2011 ... we see the Cairn India inclusion as the key factor in repairing Vedanta's balance sheet and boosting bottom-line performance.

(Reporting by Clara Ferreira-Marques; Editing by David Holmes)