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Uncertain market conditions have hit Gujarat State Petroleum Corporation's (GSPC) plan to raise finances – through private placement of its equity shares and, unlocking value in city gas subsidiary GSPC Gas – to part-finance its $1.7-billion (over Rs 7,500 crore) KG asset development plan. The company has outlined a capital expenditure of Rs 3,500 crore towards the project, in 2011-12.
While GSPC officials were not available for comments; capital market sources told Business Line that the prevailing market conditions forced the company to keep the private-placement on hold since May this year. “Considering the market conditions, there is a gross mismatch between the expectations of the company and the investors over valuation of assets,” said an analyst in a leading fund management company.
The Gujarat Government owned energy major is creating onshore and offshore production facilities at KG-8 discovery in KG-OSN-2001/3 block in the Bay-of Bengal close to Andhra Pradesh coast. The project is slated to produce 5.7-8.6 million standard cubic metres of natural gas a day (mmscmd) in five years. Gas is slated to start flowing from mid-2013.
GSPC Gas IPO on hold
According to sources, also impacted are the company's plans to raise finances through part-dilution of holdings in GSPC Gas, in this fiscal. The company had previously approached the merchant bankers to explore to explore the opportunity of the GSPC Gas IPO in 2011.
Owned by GSPC and its listed subsidiary Gujarat State Petronet Ltd (GSPC); GSPC Gas currently supplies 3.76 mmscmd gas in Gujarat and posted a little over Rs 130 crore profit on a revenue of Rs 2,000 crore in 2010-11.
The sources, however, added that the delay in private-placement and GSPC Gas IPO should not impact the KG development plan in the immediate term as the GSPC had already arranged close to Rs 2,500 crore worth of debt. In addition, the Gujarat Government infused Rs 500 equity capital in the company.
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