Gujarat Gas, owned by state-owned GSPC, has announced amalgamation of it and GSPC's three arms into a new company-- GSPC Distribution Networks Ltd (GDNL).
The new entity would be Asia's largest gas distributor company, with a combined volume of around 8 mmscmd and presence in 16 districts of Gujarat.
After a board meeting on Tuesday, the company announced that board of directors considered and approved the amalgamation of Gujarat Gas Co Ltd, Gujarat Gas Financial Services (GFSL), Gujarat Gas Trading Co (GTCL), GSPC Gas Co and GSPC Distribution Networks (GDNL).
It is believed that the new entity of Gujarat Gas, GDNL may get listed on stock exchanges in next six to eight months.
However, the market did not welcome the move. The stock price of Gujarat Gas crashed by 8.60% or Rs 35 per share to Rs 374.50 per share on BSE after the company announced the merger plans on Tuesday. Experts said the new entity will have higher debt which will affect the profitability.
Gujarat Gas investors have neither to lose or gain through amalgamation, said vice-president of Wealth First Portfolio Managers, Bhadresh Shah. "The announcement has a lot of hidden information such as debt of other companies. There are high possibilities of the company turning from zero debt to huge debt. Hence, the stock price crashed. We suggest long-term investors to stay with Gujarat Gas," said Shah.
Sanjay Shah, managing director of Prudent Corporate Advisory Services Ltd, said, "Investors don't lose anything from the amalgamation," he said.
At present, Gujarat Gas holds 69.88% and 100% of the total issued, subscribed and paid-up share capital of GFSL and GTCL respectively. Since the company, GFSL and GTCL are the transferor companies, the shares held by Gujarat Gas in GFSL and GTCL shall get extinguished. Accordingly, no new shares of GDNL shall be issued in lieu of such shares getting extinguished, Gujarat Gas informed the stock exchanges.
All assets and liabilities of Gujarat Gas, GFSL, GTCL and GSPC Gas would be transferred to GDNL.
GDNL will issue and allot shares in swap ratio to Gujarat Gas, GFSL, and GSPC Gas.
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