Oct 03, 2011, 06.49 PM IST | Source: PTI

GAIL keen to buy ADB stake in Petronet LNG for Rs 614cr

The Asian Development Bank plans to sell its 5.2% stake in Petronet LNG, which the state-owned gas utility GAIL India is keen to acquire and may have to pay over Rs 600 crore for it.

GAIL keen to buy ADB stake in Petronet LNG for Rs 614cr

The Asian Development Bank plans to sell its 5.2% stake in Petronet LNG , which the state-owned gas utility GAIL India is keen to acquire and may have to pay over Rs 600 crore for it.

ADB has offered to sell its 39 million shares or 5.2% stake in Petronet, which is valued at over Rs 614 crore at today's trading price of Rs 157.85 per share on the BSE, sources privy to the development said.

GAIL, Oil and Natural Gas Corp, Indian Oil and Bharat Petroleum hold a 12.5% stake each, to restrict the public sector holding in the company at 50%. GdF holds 10%. Under the Share Holders' Agreement (SHA), the five have the first right of refusal over ADB stake.

GAIL has proposed to the Oil Secretary G C Chaturvedi, who is the Chairman of Petronet, that it can buy the entire 5.2% stake of ADB. In case other companies are also interested, the ADB stake can be split equally among GAIL, IOC, ONGC and BPCL with each buying 1.3% stake.

ADB stake being bought by state firms would turn Petronet into a public sector company with shareholding of state firms rising above current 50%, sources said, adding that GAIL is agreeable to this as it will bring more accountability in running of Petronet.

When contacted, an ADB spokesperson from Manila said: "ADB has held a 5.2% stake in Petronet LNG since 2004. ADB always looks to exit its equity investments once it believes that the development mission has been accomplished."

ADB had in fact first proposed to exit Petronet in 2008 but the then company CEO Prosad Dasgupta was in favour of a third party like Chevron or the steel baron Lakshmi Mittal's group buying the stake instead of the four promoters.

Sources said Dasgupta had on February 29 in that year written to the then GAIL Chairman U D Choubey to say that sale of "even one share" held by ADB to the four promoters or Gaz de France (GdF) would trigger the takeover code, turn the joint venture into a state-run firm and may result in delisting from the bourses.

ADB and German Development Bank KfW had in 2008 approved a loan of USD 169 million to Petronet for its expansion projects at Dahej and new terminal at Kochi, but the multilateral lending agency's internal norms prohibit it from having both debt and equity exposure in a company.

"In 2004, ADB had sanctioned USD 75 million loan to Petronet. But once it took 5.2% stake for less than USD 8 million, ADB could not disburse the balance due to its internal regulations," a source said.

ADB norms also stipulate it to divest its equity holding in a company three years from the date of the company going public. Petronet's IPO came in 2004 and ADB was supposed to exit Petronet in 2007, but was persuaded to stay on.

Last year, ADB had for the second time offered to quit Petronet and the current move is its third attempt, sources said.

"Since the four promoters and GdF could be seen as entities acting in concert by virtue of the SHA, the purchase of ADB's 5.2% by any one of them will immediately trigger the takeover code meaning collectively an open offer has to be made for at least 20% shares held by the public," Dasgupta had written in February 2008.

"This would result in the collective holding of the promoters and GdF increasing to 85%. Since a company cannot remain listed if the public holding goes below 25%, the takeover code would require the promoters and GdF to
again collectively make an offer for the remaining 15%, leading to delisting of the company," he wrote.

Petronet LNG stock price

On March 31, 2015, at 12:31 hrs Petronet LNG was quoting at Rs 174.30, down Rs 1.2, or 0.68 percent. The 52-week high of the share was Rs 221.90 and the 52-week low was Rs 135.00.

The company's trailing 12-month (TTM) EPS was at Rs 10.01 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 17.41. The latest book value of the company is Rs 66.48 per share. At current value, the price-to-book value of the company is 2.62.

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