BG to divest Gujarat Gas stake

BG Group Plc plans to sell stake in Gujarat Gas Company Ltd (GGCL). Though the British exploration major has not yet decided on how much it wants to sell in the company, a person close to the development said the parent may completely exit the venture if it gets a good valuation.

BG Group holds 65.12 per cent stake in GGCL through BG Asia Pacific Holdings. In a statement issued to the Bombay Stock Exchange on Tuesday, GGCL said the company had been informed by its majority stakeholder it had started a process that may result in divesting its shareholding in GCCL. The person, who did not wish to be named, added BG was looking at selling stake because it was getting good return on its investment. Industry estimates indicate at the current valuation of GGCL, the divestment could fetch BG Group about Rs 3,500 crore (approximately $712 million). “It is part of BG Group’s strategy to realign its global portfolio and invest money elsewhere,” he said, though he ruled out BG diluting stake in Mahanagar Gas Ltd, Mumbai’s city gas venture.

BG’s biggest investment in India is in the upstream gas and oil producing fields of Panna, Mukta and Tapti, where it holds 30 per cent equity along with Reliance Industries Ltd and the Oil and Natural Gas Corporation. The group is looking at investing more on the upstream side in India.

Company executives did not give any details and ruled out being in direct discussions at present. However, industry experts said among the likely suitors could be Gujarat State Petroleum Corporation or its subsidiary Gujarat State Petronet Ltd, GAIL India and the Adanis, though Business Standard could not independently verify the names.

GGCL, which has the country's largest city gas distribution network with sales volumes, supplies nearly 3.5 metric million standard cubic metres per day (mmscmd) of gas to about 350,000 customers including industrial, commercial, domestic and CNG consumers. The company has a 3,900-km gas distribution network, with 42 CNG stations catering to auto customers. “The company has business in the lucrative south Gujarat area. It also has gas linkages, which makes it a good investment for companies that want to get into the city gas business. But, there is no more upside available for the company since it has already captured the high-value market in the area,” said a senior executive in one of the gas companies.

GGCL was originally promoted by the Gujarat government and the Mafatlal Group. BG Group acquired a majority stake in GGCL in 1997.