Gujarat Gas share prices tumble after heavy selling by investors

In past one year, shares fall by over 35%, closes at Rs 215, lowest since November 2009

Gas distribution major, Gujarat Gas Company Ltd (GGCL), has witnessed heavy selling on the bourses, pushing the company's shares to the lowest levels since 2009. Gujarat government-run Gujarat State Petroleum Corporation (GSPC) recently completed acquisition of 65.12 per cent stake of BG Group for Rs 295 per share.

At the time of announcement of stake sale by BG Group in October 2011, GGCL shares traded in the range of Rs 423-425 per share.

However, over the past one year, GGCL shares have fallen by over 35 per cent against the benchmark index, Sensex's gain of close to 12 per cent during the same period. On the Bombay Stock Exchange (BSE), GGCL shares closed at Rs 215 on Friday, lowest since November 2009.

Analysts hold multiple factors responsible for the sell-off in the company shares. "The downfall in GGCL could be due to sector specific factors such as non-clarity about the future of the gas distribution industry and also overall weakness in the sector," said an analyst with Angel Broking.

It may be noted that shares of other gas distribution companies including Indraprastha Gas Ltd (IGL) and GAIL have performed better as compared to GGCL. While share prices of GAIL fell by over 7 per cent, that of IGL surged by 14 per cent.

"We believe that it is possibly because of GGCL, which was once owned by a multinational promoter like BG Group has become a state PSU now. This could have triggered the sell off by fund houses and also retail investors. Also, Central government has deferred gas price hike, which would also have added to the selling pressure," said Kishor Ostwal, CMD, CNI Research.

Interestingly, other state-PSUs including Gujarat State Petronet Ltd (GSPL), Gujarat Mineral Development Corporation (GMDC), Gujarat State Fertilizers and Chemicals (GSFC) and Gujarat Narmada Valley Fertilizers Company (GNFC) witnessed fall over the past one year. The share prices of GNFC, GSPL, GMDC and GSFC fell by 3 per cent, 19 per cent, 24 per cent and 86 per cent respectively.

On the other hand, Gujarat Industries Power Company Ltd (GIPCL) and Gujarat Alkalies and Chemicals Ltd (GACL) posted gains of 23 per cent and 55 per cent respectively during the same period.

"There is heavy pressure on PSU stocks, both central and state PSUs. Investors should stay away from these counters till August, by when offer for sale will also be over," Ostwal added.

However, analysts also maintained that investors should not worry about the Gujarat government-run companies.

"Slightly there is a concern after GGCL becoming a state PSU but investors should not worry about the Gujarat government companies as they are comparatively more investor friendly than central PSUs," said G Chokkalingam, chief investment officer, Centrum Wealth Management Ltd.

In October 2012, GSPC had announced to acquire 65.12 per cent in Gujarat Gas Company Ltd (GGCL) for Rs 2,464 crore BG Group.

BG's shareholding was acquired by Gujarat Distribution Networks Ltd (GDNL), in which the GSPC Group holds 100 per cent stake.

Soon after the announcement of stake acquisition, GDNL had made an open offer for the remaining stake.

Post offer, the shareholding of GDNL stands at 73.70 per cent and the public shareholding in Gujarat Gas has reduced from 34.88 per cent to 26.30 per cent post the open offer.