Gujarat Gas, GSPC Gas entities' amalgamation gets board approval

Analysts, however, estimate possible sales growth of 50% in next three years by new entity amidst renewed economy

The Board of Directors of Gujarat Gas Company Limited has approved amalgamation of the company along with Gujarat Gas Financial Services Limited (GFSL), Gujarat Gas Trading Company Limited (GTCL), and GSPC Gas Company Limited (GSPC Gas) into GSPC Distribution Networks Limited (GDNL). An announcement on Bombay Stock Exchange (BSE) was made regarding the same.

As per the BSE announcement, Gujarat Gas, GFSL, GTCL, and GSPC Gas would be amalgamated with GDNL and all assets and liabilities of Gujarat Gas, GFSL, GTCL and GSPC Gas would be transferred to GDNL. Further GDNL will issue and allot shares in swap ratio to Gujarat Gas, GFSL, and GSPC Gas.

According to industry sources, the new amalgamated entity GDNL may be listed in next 6-8 months under a new name. A combined network of the amalgamated entities under GDNL now stands at 16 districts out of 33 districts in Gujarat. The combined volume is now slightly below 8 mmscmd, 1.5 mmscmd of which serves CNG (transport) and PNG (domestic) while rest serves industries.

"The new entity may be listed few months down the line post certain regulatory approvals from Sebi and PNGRB. For now, Gujarat Gas and GSPC Gas cease to exist even as the new entity may get a new name in near future," said industry sources.

Analysts, however, estimate a possible sales growth of 50% in next three years by the new entity amidst renewed economy.

"The new entity can leverage on advantages of the erstwhile amalgamated entities. For instance, Gujarat Gas focused was adept at earning profit margins and best practices while GSPC Gas was best in procuring gas. There is also a ready pipeline network from south to north Gujarat that can facilitate quicker growth. The new entity should look to consolidate its operations in Gujarat. However, they won't be in a hurry to expand outside Gujarat," said Harshvardhan Dole of IIFL.

However, the announcement of amalgamation did not have any positive impact on the stock price of Gujarat Gas Company Limited which closed at Rs 374.50, down by Rs 35.25 or -8.60% on Tuesday, April 22. "Investors may have been jittery given the fact that the announcement didn't tell anything about the implied valuation of each of the entities," Dole added.