BG Group sold its 65.23% stake in Gujarat Gas Company for Rs 2460 crore to GSPC at a steep discount, reports CNBC-TV18. At 09:16 hrs Gujarat Gas Company was quoting at Rs 303.50, down Rs 33.20, or 9.86%.
Shares of Gujarat Gas were down around Rs 32 or over 9% to Rs 305, after British Gas sold its 65 percent stake in the company at a discount to the market price. A consortium led by Gujarat State Petroleum has picked up British Gas's (BG) stake for Rs 2464 crore, which works out to Rs 295 per share.
Gujarat Gas shares had rallied from Rs 290 to Rs 351 in the last couple of weeks on speculation that the buyer for BG's stake would pay a premium to market price. Heavy trading is seen in the stock this morning, with around 18 lakh shares already having changed hands on both exchanges combined. Brokers attributed the slide in the stock also to unwinding of speculative positions built up in anticipation of a handsome stake sale price.
Brokerage house Spark Capital has downgraded its rating on Gujarat Gas to 'sell', with a fair value price of Rs 282.
"The acquirer will now have to make an open offer for “the acquirer will have to do an open offer of 26% at a price of around Rs 305/share which would entail investment of another Rs. 10,500 crore bringing the acquirer’s holding to 91%. Eventually, GSPC has to either opt for delisting or reduce its stake to 75%. Since the open offer price is below current market price, stock would correct," Spark analysts Mayur Patel and Vishnu Kumar said in their note to clients.
Meanwhile, the deal which has been announced in the run up to assembly elections in the state can be considered politically significant as it can be showcased as a symbol of Gujarat pride as the company originally belonged to the state government.
For BG, the exit is part of its global realignment of its portfolio. It requires $9 billion for exploration and production in Brazil and Australia. It recently sold stakes in offshore blocks in the Mahanadi and KG Basins.
This acquisition is believed to make GSPC the country’s largest distributor of natural gas with total volumes of close to 8 million cubic metres a day. The transaction will also help BG get closer to its earlier announced $5 billion non-core assets divestiture programme.
helps BG get closer to its announced $5-billion non-core assets divestiture programme while GSPC enters into new gas distribution markets in Gujarat increasing its size and scale
The acquisition makes GSPC the country's largest distributor of natural gas with total volume of close to 8 million cubic metres a day. However, the company may face challenges in getting regulatory approval in absence of public sector-owned companies on board.
GSPC had initially bid for the stake along with state-run ONGCBSE 0.62 % and BPCL, but finally acquired the stake alone. According to a top official in Gujarat's energy department, GSPC may face challenges in getting regulatory approvals in absence of central PSUs on board.
Guj Gas stock price
On July 28, 2014, Gujarat Gas Company closed at Rs 448.20, down Rs 3.7, or 0.82 percent. The 52-week high of the share was Rs 578.90 and the 52-week low was Rs 159.00.
The company's trailing 12-month (TTM) EPS was at Rs 28.13 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 15.93. The latest book value of the company is Rs 106.18 per share. At current value, the price-to-book value of the company is 4.22.
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