The UK oil major cites Coca-Cola case to drop IPO clause. | |
| British Gas India (BGI), the Indian arm of the UK's BG Asia Pacific Holdings Pte Ltd, wants to go the Coca-Cola way. It does not want Mahanagar Gas Ltd, in which it holds 49.75 per cent, to hit the capital market with its initial public offering (IPO). |
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| BGI has approached the petroleum and natural gas ministry seeking deletion of the IPO clause for the Mumbai gas distributor. |
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| BGI and the state-owned GAIL India Ltd are joint promoters of Mahanagar Gas (MGL) holding 99.5 per cent between them. The Maharashtra government holds 0.50 per cent in the company. |
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| As per the initial agreement signed in 1992, both the promoters were to dilute their stake to 35 per cent each. The Maharashtra government was to be given 10 per cent and another 20 per cent was to be offloaded in the market through an IPO. |
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| BGI, which has been seeking extension for the deadline for MGL's IPO for several years, was given a final extension last year when the ministry asked MGL to come out with its IPO by December 31 this year. |
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| In a presentation to the ministry on September 29, BGI went a step further and sought a deletion of the IPO requirement saying, "in view of the liberalised regulatory framework, the current commercial intention is not to go for an IPO". |
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| It also pointed out the fact that the government had, in the past, decided in favour of dilution/deletion of divestment condition for a number of foreign investors, including Coca-Cola, Total, Caltex, Penzoil, Sodexho, etc. |
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| "The government needs to ensure a level playing field for all foreign investments and it would be unfair to subject MGL to an onerous restriction, while not placing the same constraint on another player," it said. |
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| However, according to sources, GAIL, the other promoter in MGL, wanted the company to hit the market with an IPO at the earliest. |
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| The company, which posted Rs 130 crore profit on an equity base of Rs 90 crore, would unlock huge value for GAIL, they said. |
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| An internal valuation done by GAIL estimates MGL to command a price of Rs 270 a share. BGI, on its part, argued that the India public shareholders are already part of MGL indirectly through GAIL, where the non-promoter shareholding is 42.65 per cent. |
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| Similarly, no foreign equity cap was prescribed for city gas distribution projects. Stating that BGI was an early-bird investor, the company said, BGI had invested in MGL project just when the economic reforms were ushered in by the government. |
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| "An early-bird investor ought not to be put into a situation, which is worse than that for current entrants and for the fence-sitters in the early stages of the reforms process," it argued. |
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