France's GDF to exit Petronet by selling entire 10 pc stake

France's GDF International plans to sell its entire 10 per cent stake, worth over Rs 2,900 crore, in Petronet LNG Ltd.
GDF, a unit of French energy giant Engie SA, has written to Petronet -- India's biggest importer of liquefied natural gas -- expressing its desire to exit the company.
It has offered the stake to Petronet's principal promoters -- GAIL India Ltd, Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL).
"We have been informed by GDF International, which is holding 10 per cent equity share capital in the company, that they proposed to divest their entire shareholding in the company," Petronet said in a regulatory filing.

Petronet said GDF International has also sent a communication to each of the promoters offering "a first right of purchase/refusal in relation to the proposed sale of 10 per cent equity shares in the company in the same proportion in which the promoters are holding equity shares in the company."
The four promoter firms hold 12.5 per cent stake each in Petronet. Going by this proportion, they are each entitled to buy 2.5 per cent of GDF's stake.

But it unlikely that anyone of them will exercise that option given that Petronet has been structured as a private company.
At present, the four companies hold 49.99 per cent stake of Petronet. If any of the promoters were to buy GDF's stake, the combined shareholding of state-owned firms will rise above 50 per cent and will lead to conversion of Petronet into a public sector company.

Though Petronet is registered as a private company, Government of India's Secretary in the Ministry of Petroleum and Natural Gas is its Chairman.
By its private nature, the company is currently out of purview of CAG audit as well as any Parliamentary scrutiny.
The Ministry's desire to keep the company private had led to none of the four promoters exercising their right of first buy when in August 2011 Asian Development Bank (ADB) offered to sell its entire 5.2 per cent stake in Petronet.
All the four promoters firms IOC, ONGC, GAIL and BPCL were originally interested in buying ADB's 5.2 per cent stake but the company management was opposed to it as it would have led to PSU holding crossing 50 per cent.

The board of all the four promoter companies approved exercising the first right of refusal over ADB stake but the Ministry vetoed the proposal at a meeting on March 26, 2012.
Eventually, ADB in September 2014 sold 3.9 crore shares via a block deal to CitiGroup and HDFC Mutual Fund for Rs 714.5 crore.
EDF holds 7.5 crore shares in Petronet, which at today's trading price of Rs 391.70, is valued at Rs 2,937 crore.