Adani, GAIL may bid for BG's stake in Gujarat Gas

Adani group, a consortium of state-run companies led by GAIL India, and Gujarat State Petroleum Corp are likely to bid for BG Group's stake in Gujarat Gas, three sources said, in a deal valued at about USD 900 million.

The interested companies will submit non-binding bids for the 65% stake in the gas distribution company on Tuesday, the sources with direct knowledge of the matter said. They declined to be named as the information is not public yet.

Two of the sources said Indian energy major Reliance Industrieshad been keen on acquiring the stake, but a company spokesman denied any interest in the deal.

Two European companies are also expected to submit bids, the sources told Reuters. They did not name the companies.

BG India, a unit of the British oil and gas company, announced in November it was interested in selling its 65% stake in Gujarat Gas, a western India-focused gas distribution company.

BG India, which acquired the stake in 1997, is looking to sell the stake as part of restructuring its asset portfolio. Globally, BG Group focuses on exploration & production activities and liquefied natural gas.

"We have started a process aimed at evaluating the potential sale of our interest in GGCL (Gujarat Gas). We will inform the market when we have something to announce," a BG India spokesman said in an e-mailed statement.

Most bids for the Gujarat Gas stake are likely to come around USD 600 million, the sources said, valuing the transaction, including the subsequent mandatory open offer, at close to USD 900 million.

A GAIL spokesman was not immediately available for comment, while an Adani group spokeswoman and officials at GSPC could not be reached.

Gujarat Gas, set up in 1980, currently supplies piped gas to 317,000 domestic and industrial customers and compressed natural gas to 144,000 users, mostly across Surat, Bharuch and Valsad in the western state of Gujarat.

The company also operates a 3,700 kilometre-long gas pipeline network. It reported a net profit of 805 million rupees in July-September, on sales of 6.4 billion rupees.

India's current gas demand of 166 million cubic metres a day (mmscmd) is projected to rise to 443 mmscmd by 2017, due to the growing number of power plants, industries and vehicles in Asia's third-largest economy.

Slowing gas output from the Krishna Godavari gas fields, off India's east cost, has forced increasing imports of expensive LNG to feed demand in the fast growing economy.

On Monday, shares in Gujarat Gas, which has a market value of USD 919 million, ended 0.3% lower at Rs 382 in the main Mumbai market that fell 0.2%.