The 25 per cent divestment of government stake in the Gas Authority of India Ltd (GAIL) recommended by the Disinvestment Commission would mean offloading around 20 crore shares in the market.
GAIL originally had 84.5 crore shares of Rs 10 each. Of these, 3.6 per cent have already been divested. This implies that GAIL is left with around 80 crore shares.
If GAIL divests 25 per cent of these shares, it would mean offloading around 20 crore shares. If the current market value of around Rs 100 a share is taken into consideration, it would involve mopping up of around Rs 2,000 crore from the domestic and international capital markets.
Officials feel that the market conditions are not conducive to this scale of divestment and fear that GAIL may not get the right price for its equity.
GAIL is in the process of completing a major diversification programme to produce petrochemicals. It has also set up processing facilities at Vijaipur and Vaghodia to produce liquefied petroleum gas, propane and pentane. It has a 13 per cent share in the overall liquefied petroleum gas (LPG) production in the country. From 1998-99, its capacity will increase to around 1.3 million tonnes from the current 0.48 million tonnes due to the ongoing expansions.
According to the principles evolved by the commission for the extent of divestment, GAIL falls under the core sector. On this basis, it has recommended that the government can disinvest up to 49 per cent.
The commission feels the companys strong finances and its near monopoly position in business would help attract both institutional as well as small investors. Keeping in mind the capital structure and the availability of investible resources in the domestic capital market, it is recommended that divestment up to 25 per cent of the total equity capital is recommended and should be distributed between the domestic and international markets, depending on the market conditions, the commission said in its report.
It said the price and exact timing may also be decided by the standing empowered group, depending on market conditions.
