GSPL falls 6% after board approves stake buy in Gujarat Gas

The stock dipped 6% to Rs 178 on the BSE after the company said that its board approved the acquisition of 28.4% stake of GGL from GSPCL by way of an inter-se transfer.

Gujarat State Petronet (GSPL) dipped 6% to Rs 178 on the BSE in early morning trade after the company said that its board approved the acquisition of 28.4% stake of Gujarat Gas (GGL) from Gujarat State Petroleum Corporation (GSPCL) by way of an inter-se transfer. GSPL is a subsidiary company of GSPCL.

GGL was trading 1% higher at Rs 836 after hitting high of Rs 844 on the BSE in intra-day trade so far. At 09:53 am; the S&P BSE Sensex was trading 0.16% higher at 32,977 points.

“The board of directors, at their meeting held on March 19, 2018 considered and approved the acquisition of upto 39.1 million equity shares or 28.4% stake of GGL from GSPCL, by way of an inter-se transfer,” GSPL said in a regulatory filing.

“The city gas distribution (CGD) is one of the largest category of industry segments catered to by GSPL, which is further poised to grow by leaps and bounds in view of increased thrust of Government and the Regulatory authorities to expand the CGD networks across the country,” the company said in a statement.

GGL's business being complementary to GSPL, the proposed transaction would facilitate better synchronization of its gas transmission network with GGL's network. And Gujarat being the 1/3rd of gas consumption market in India, the acquisition of stake would bring better business synergies between the business of GSPL and GGL as City Gas Distribution Network provides last mile connectivity to the end users of the gas. This would help to achieve economies of scale of businesses, enable faster roll-out of CGD networks on the strength of stronger balance sheet to maximize value for the shareholders, it added.