The Hindu Business Line : FIPB allows BG to hold 50% in Mahanagar Gas for one more year

THE Foreign Investment Promotion Board (FIPB) has given its nod for British Gas to hold a 50 per cent equity in Mahanagar Gas Ltd (MGL) up to December 2006, thereby giving a one-year extension to the gas major for continuing with its present stake in the company.

Currently, MGL is a 50:50 joint venture between BG and GAIL (India) Ltd. MGL will now have to come out with a public issue before the end of this calendar year.

Under the earlier agreed norms, BG and GAIL had to reduce their stakes in MGL to 35 per cent each, with MGL floating a public issue. The company had requested FIPB to grant a year's extension for continuing with its existing equity stake of 50 per cent in MGL. Even as the Petroleum Ministry did not support the extension of one year for continuing the foreign equity holding, the FIPB has granted the approval for the same.

It has, however, placed a condition that no further extension would be permitted and that the company would be required to bring an IPO to meet the entry condition in the FIPB approval.

One of the arguments put forth by the Petroleum Ministry was that the purpose of seeking an extension for one year was to get more time for share valuation to appreciate and when the IPO is floated after one year, BG and GAIL would be the major beneficiaries.

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