Adani Gas may skip the IPO-route, plans direct listing

Adani Gas is looking to not go the IPO route and call for a direct listing of shares.

According to a Mint report that spoke to two people aware of the development, Adani Enterprises approved the scheme of arrangement between Adani Gas and Adani Gas Holdings.

The shareholders of Adani Enterprises would get one share of Adani Gas for each one held, according to the company in its investor presentation in January.

The deal is expected to be completed in the second quarter of the fiscal 2019.

One of the persons said that the aggressive expansion of the company will find a good source of monetization through the city gas distribution.

A direct listing means that the shares that are offered are less expensive an IPO because no underwriters are involved. Besides, there is no issue of new shares.

The company currently has a network of pipelines across seven cities, with the Indian Oil Corporation. It looks to cover 240 cities by 2022. It currently has its gas distribution networks in cities such as Khurja in Uttar Pradesh, Ahmedabad and Vadodara in Gujarat, and Faridabad in Haryana.

It has also won contracts in Ernakulam, Panipat, Allahabad, Daman, Chandigarh and Dharwad in alliance with state-owned Indian Oil Corporation Limited.

Adani Gas supplies compressed natural gas (CNG) for transport and piped natural gas (PNG) to households and industries.

Its 2016-2017 annual report stated “The company will focus on growing its residential penetration by extending beyond 3 lakh customers.”

A Morgan Stanley report also spoke favourably of the gas industry and the subsequent oil to gas substitution.

“First, with oil in the high US$60s, gas is in a sweet spot to accelerate oil to gas substitution. Second, supply constraints are easing while domestic production is reviving, and new pipeline networks should further unlock latent demand as new demand centers get connected. Third, with the gas regulator (PNGRB) now fully staffed, long- pending decisions on streamlining of pipeline tariffs as well as bidding for rollout of new city gas networks, should accelerate in 2018, providing long-term earnings visibility beyond this decade,” it said in its report.