Gujarat Gas may open datarooms for potential suitors next week

Gujarat Gas Co may open datarooms and make presentations to eight prospective suitors in the fray for parent BG Group's 65.12% stake in the company next week, including Adani Group and a consortium of ONGC, GSPC and Bharat Petroleum.

Eight non-binding bids were received by BG at the close of the deadline on January 10. These included Adani Group, Torrent Power, Germany's E.On and a consortium of Oil and Natural Gas Corp (ONGC), Bharat Petroleum and Gujarat State Petroleum Corp (GSPC), besides two large global private-equity players.

Industry sources said the dataroom is being opened for suitors and individual presentations have been lined up for next week.

State-owned gas utility GAIL India and Indian Oil Corp (IOC), which had initially evinced interest in buying BG's 65.12% stake in Gujarat Gas, found the Rs 4,000 crore asking price too expensive.

The other major concern for the bidders is the availability of domestically produced natural gas. Gujarat Gas gets almost half of its supplies from the Panna-Mukta and Tapti gas fields, where production is on the decline.

Gujarat Gas, the nation's largest private sector gas distribution firm, currently sells about 3.5 million cubic metres per day of natural gas.

It sells gas to about 320,000 residential, commercial and industrial customers through an about 3,900-km-long pipeline network in Gujarat. It also sells CNG to over 161,168 vehicles through 42 retail outlets.

Sources said GAIL dropped out of the bidding because it felt the Rs 4,000 crore price being quoted for the stake sale was 16 times the expected Rs 250 crore net profit of Gujarat Gas and eight times an asset replacement ballpark estimate of between Rs 400 and 500 crore.

BG Group has hired Citigroup Inc to advise it on the potential sale of its stake in Gujarat Gas.

Besides GGCL, BG also holds a 49.75% stake in Mahanagar Gas, which sells CNG and piped gas in Mumbai.

Sources said BG has not yet put the MGL stake on offer, but may decide to do so after GGCL.

BG has already exited from all but one exploration asset in the country. It is left with just one exploration block in the Krishna-Godavari basin and has a 30% participating interest in the Panna-Mukta and Tapti oil and gas fields with ONGC (40%) and Reliance Industries (30%).