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The Berkshire-headquartered BG Group Plc (formerly British Gas) is working overtime to divest its little over 65 per cent stake in India's largest and oldest private sector city gas distribution company, Gujarat Gas Co Ltd (GGCL).
Market sources suggest that the global gas major has already received a number of ‘requests' and may shortlist the potential suitors by mid-January.
Going by the existing share value, the deal should cost nearly $600 million (over Rs 3,000 crore in current exchange rate). BG has reportedly appointed Citigroup as an advisor to the proposed deal.
The UK-based company acquired interest in GGCL from Gujarat Industrial Investment Corporation (GIIC) and Mafatlal Group in 1997 at a consideration of Rs 170 crore.
Comments were not available from BG India on the issue.
In a surprise announcement on November 8, GGCL reported to the stock market that the company was informed by its majority shareholder that it had started “a process that may result in divesting its shareholding” in the CGD company. The decision was reportedly taken in tune with BG's renewed focus on exploration and production, worldwide.
Low volume growth
Catering to nearly four lakh industrial, retail and domestic consumers in Gujarat, GGCL posted a net profit of Rs 259 crore on a revenue of over Rs 1,800 crore in 2010 calendar year.
Having witnessed a robust growth in the 1990's and early part of the last decade, GGCL is now suffering from lack of volume growth due to reduced availability of natural gas and increasing dependence on costly LNG (liquefied natural gas) to maintain the supplies at 3.5 million standard cubic metres a day (mscmd).
Latest estimates suggest that GGCL source nearly 1.75-1.8 mscmd gas – 55 per cent of total requirement – from domestic sources ((including 1.4 mscmd from Panna-Mukta-Tapti JV of ONGC RIL and BG and, 0.35-0.4 mscmd from Nico-Cairn joint venture in Cambay). The rest of the demand is met through LNG.
Going forward the share of domestic gas is expected to be even lower.
Shares of GGCL were marginally down at BSE on Wednesday at 337.95.
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