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Single bid for Gujarat Gas from PSU consortium

Kalpana Pathak & Arijit Barman  |  Mumbai 

As the deadline for Gujarat gas closed yesterday only two bidders put in their binding offers for the controlling stake. Joining the PSU consortium of four -- Gujarat state petroleum corporation, ONGC, BPCL and Oil India -- is Spanish gas marketing and distribution major Gas Natural SDG (better known as Gas Natural Fenosa).

The Barcelona headquartered utilities major has wide presence in Europe,north Africa and in the emerging markets of Latin America and posted a profit of of 1.2 billion euros in 2010. It's revenues in the same year stood at a whopping 19.6 billion euros. If successful it will be thier debut in India

The other bidders like a dani group, torrent power, private equity player acts, germany's E.On, French    major GDF all opted out.

The deadline to submit the bids for BGs 65.12 per cent stake in Gujarat gas closed on Thursday.

As on March 15: An extension of the deadline for potential suitors to give binding bids for BG subsidiary Gujarat Gas has not worked out. In fact, most players seem to have opted out.

Three independent sources closely involved with the bidding process said only one bid for the PSU consortium came in till late this evening.

British Gas (BG), which is in the process of divesting its 65.12 per cent controlling stake in Gujarat Gas, had earlier extended the bid deadline to March 15 from the earlier February 29 cut-off. The idea was to give more time to to discuss the matter with their boards and decide on the bidding process.

The sources said so far, Gujarat State Petroleum Corporation, Oil India, Bharat Petroleum Corporation, Oil and Natural Gas Corporation have together bid as a part of one consortium. “We four have bid as a consortium,” said a senior official from Oil India. “If this acquisition comes through, it will help us mark our foray in downstream gas business.”

Private bidders like Adani Group and Torrent Power, who were earlier expected to put in aggressive bids, have stayed away. Moreover, multinationals like GDF and Gas Natural SDG (better known as Gas Natural Fenosa), who were looking at Gujarat Gas for their India city gas distribution debut, are yet to submit their bids.

Private Equity fund Actis, earlier seen as likely bidders, is also said to have opted out. This could not be independently verified.

A BG spokesperson in India the company had no comments to make. Reason: “The deal is being done at a global level,” he told Business Standard. Adani, too declined to comment. However, these sources also clarified there was still room for negotiation and clarity would emerge in “a few days’ time”.

“It is not like a government auction process with a rigid window and timeline,” said a person involved in the ongoing negotiations. “So, some of the private sector suitors may still be in the race, even though they may not have put in their bids yet. They will negotiate even harder to get a better deal.” The source said it was a “common strategy” in such situations. “The MNCs are still keen. They are looking at long-term strategic value of the asset,” he added.

Added another official representing a potential buyer: “We are still in the game -- bids or no bids. So, don’t rule us out just yet.”

BG had last year decided to exit the city gas distribution business, and had mandated Citigroup to advise them in the disinvestment. It was planning to raise upwards of Rs 3,150 crore ($600 million) through the selloff. GGCL is India’s largest private sector natural gas distribution company in terms of sales volume.

BG is rationalising its global portfolio, and requires $9 billion for its exploration and production businesses in Brazil and Australia. The company expects to raise Rs 4,000 cr ($800 million) through this divestment.

“It was quite obvious for bidders to pull out,” said a Mumbai-based analyst. This, he said, was considering the price BG was asking for a premium from the bidders at over Rs 00 per share. “While 50 per cent of GGCL’s gas supply is on short term, the company which acquires 65.12 per cent stake will have to come up with an open offer. This again, will have to be at a premium,” he pointed out.

“Pricing is the only factor that could have made companies uncomfortable to go ahead with the bid.”

Till February, seven bidding groups had been shortlisted.

Shares in GGCL closed on Thursday 0.59 per cent lower at Rs 428.25 on the Bombay Stock Exchange.

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First Published: Fri, March 16 2012. 11:30 IST