Gujarat Gas is one of three primary players in LNG distribution in India, accounting for barely $4 bln in market cap among the three. The other two are Petronet LNG and Delhi based Indraprastha Gas Ltd.

BG Plc owns the 65% promoter stake in the company, with Indian institutions holding the rest. The company's latest quarter sales amount to INR 6545.0 mln or $109 mln, likely to reach $420 mln for the year (USD 1 = INR 60) At exact rates for ye 12 per forecasts that will go to $120 mln and $500mln

Its profits of $16 mln for a quarter or $50 mln for last year are still growing at more than 40% 

GAIL and ONGC from the state players and Adani Enterprises iwith holdings in Oil and Gas in nearby Rajasthan, including a pipeline are presently interested in the ourchase of the company's $1 blln stake. Its Market Cap of $1 bln thus seems underpriced and the 30% premium demanded by BG plc's advisory team could well be a bottom if there is indeed a bidding war for the stake with Cairn.

(BS)Sources said the public sector firms are keen on forming a consortium to jointly bid for the stake in Gujarat Gas that sells gas to about 325,000 residential, commercial and industrial customers through a pipeline network of about 3,850 km in Gujarat.

GAIL, which is the largest city gas player in the country, is taking the lead and there is a possibility that at least two other firms including ONGC may join it in bidding for Gujarat Gas.

Sources said GAIL however is finding the valuation being proposed for the 65.12% stake as too high. If feels Rs 4,000 crore that is being quoted for the stake was 16 times the expected Rs 250 crore net profit of Gujarat Gas and eight times an asset replacement ballpark estimate of between Rs 400 and 500 crore.

At 4X sales, the valuation of $2.0 bln could be well defended by profit growth and for a controlling stae even a bigger valuation premium defended by the profit growth annually generated by the business consistently

Last year's Rs 250 Cr ( $ 50 mln ) profit be well outscored by the 40% rate to $70 mln or INR 3500 mln comfortably for FY13 and the valuation for the stake could well end up near $1.5 bln

 

 

Posted via email from The India Investment Post