GSPC, which had written off nearly Rs 15,000 cr spent on its gas production project in Krishna-Godavari basin, still has a mountain of debt, and has been looking at various options to reduce it
Gujarat government owned Gujarat State Petroleum Corporation (GSPC), which has debt of more than Rs16,500 crore, will slash it by more than Rs3,200 crore - nearly 20% - by selling its stake in city gas distribution company Gujarat Gas to its subsidiary Gujarat State Petronet Limited (GSPL).
GSPC, which had written off nearly Rs15,000 crore spent on its gas production project in Krishna-Godavari basin, still has a mountain of debt, and has been looking at various options to reduce it. It has hired SBI Caps to devise a detailed realignment plan to improve its financial and operating performance.
"GSPC will sell its entire 28.40% stake in Gujarat Gas to GSPL. The transaction is aimed at cutting GSPC's debt, and also at restructuring the group's gas business. We feel that GSPL and Gujarat Gas can have strong business synergies," state's chief secretary JN Singh, told DNA.
Singh is also chairman & managing director of GSPC, and managing director of GSPL.
GSPL did not announce the price at which it would acquire GSPC's shares in Gujarat Gas, but at Monday's closing price of Rs829, sale of 3.91 crore shares would fetch a little over Rs3,200 crore.
After spending more than Rs23,000 crore in the KG project, GSPC sold its 80% stake to ONGC for about $1.19 billion (Rs7,738 crore), booking an impairment of over Rs15,000 crore. Even after selling its stake in Gujarat Gas, GSPC is not out of the woods. The once blue-chip firm would still have a whopping debt of Rs13,000 crore on its books, and would need to sell more of family silver to bring down the debt to sustainable levels.
Coming back to the latest transaction, GSPL would see its stake in Gujarat Gas going up to 54.20% from the existing 25.76%, making it the sole promoter of the country's largest City Gas Distribution (CGD) company.
In regulatory filings on Monday, GSPL said that the transaction is a related party transaction between two government companies, and would not require any governmental or regulatory approvals.
"The proposed transaction would bring better business synergies between businesses of GSPL and Gujarat Gas. It would help in achieving economies of scale and enable faster roll out of city gas distribution networks," GSPL said in a BSE filing.
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