Deal to take over British Gas stakes in Gujarat Gas Co Ltd could be
finalised any time, and analysts have given thumbs up to this proposition.
Analysts have given thumbs up to the proposed acquisition of BG Group stake in Gujarat Gas Company Limited by the state-owned Gujarat State Petroleum Corporation (GSPC), which is all set to become the first big bang acquisition by a public sector undertaking.
“It makes sense for any company to buy an asset like Gujarat Gas, but particularly for GSPC, it’s a strategic buy. If the deal does go through, GSPC would have almost a monopoly in key consumption centres in Gujarat,” said Harshvardhan Dole, vice president, IIFL. He, however, said that a lot also depends on the valuation and modalities of the deal.
Experts describe Gujarat Gas as a “great and quality asset” and point out the potential synergies between Gujarat Gas and GSPC Gas, a subsidiary of GSPC, which may be merged with Gujarat Gas.
“A lot of synergies are possible between GSPC Gas and Gujarat Gas. Both are in the same business, but do not compete with one another. They could supplement one another very well,” said an oil & gas expert.
A GSPC-led consortium, which also comprises ONGC and BPCL, is close to clinching BG’s 65.12% stake in Gujarat Gas in a deal estimated at Rs3,000-3,300 crore. Government officials say that talks are in final stages, and the deal is likely to be finalised in a week.
Experts also point to the fact that Gujarat Gas has a well established business in one of the finest markets in the state (Surat).
“South Gujarat, where Gujarat Gas operates, is like the gas hub. It is not only a mature market, but is also home to the only two existing Liquefied Natural Gas (LNG) terminals (Dahej and Hazira) in the country,” sand another expert. A senior government official said that having positive cash flows and zero-debt, Gujarat Gas would add a lot of value to GSPC’s balance-sheet.
An official said that Gujarat Gas is a highly respected company on account of good governance and high standards.
“The manpower too is of very high quality. In fact, many of the CGDs in the state are headed by people formerly associated with Gujarat Gas,” said an official.
GSPC Gas is the largest city gas distribution (CGD) company in the country with daily gas sales of 4.3 million standard cubic metre (scm), while Gujarat Gas is the largest player in the private sector with gas sale volumes of 3.3 million scm per day.
It was in November 2011 when BG took everyone by surprise with the announcement to sell its stake in Gujarat Gas. The company was expecting to get around Rs4,500 crore for its stake. However, market uncertainty and lack of interest from other players resulted in the GSPC-led consortium emerging as the only bidder for the BG stake. The consortium expects to seal the deal at around Rs3,000 – 3,300 crore.
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