Indraprastha Gas ponders Kanpur CGD stake buy

Vol 15, PW 21 (03 May 12) People & Policy

Indraprastha Gas (IGL) is leading the race to buy up to 50% of fellow GAIL and Bharat Petroleum joint venture Central UP Gas (CUGL), but hasn’t yet made up its mind if it wants to proceed.

“IGL had better hurry up and decide if it wants to go ahead,” stresses a source from the Kanpur headquartered gas retailer. “We want to conclude this sale by the end of the month (May).

” On offer is a combined 50% stake in CUGL held by Manila-based Asian Development Bank (20%), Mumbai-based Infrastructure Leasing & Financial Services (15%) and Infrastructure Development Finance Company (15%). Last September the three banks jointly hired Ernst & Young to advise them on inviting and evaluating bids from interested buyers.

Mumbai-based law firm Wadia Gandhy & Co was also hired to carry out legal due diligence on the deal. Ernst & Young completed its financial and investment feasibility study in December and invited bids the same month.

In January this year, 10 companies submitted ‘non-binding’ bids, including CGD operators IGL and Jay Madhok Energy. Financial institutions ICICI Prudential, Axis Bank, as well as Mumbai-based LPG cylinder manufacturer Everest Kanto also bid.

Axis, adds a source, quoted the best price of Rs47/share against CUGL’s Rs10/share ‘face value’. Yet Delhi-based IGL has an advantage: its promoters GAIL and BPCL also promote CUGL and enjoy ‘right of first refusal’ for any stake sale.

But GAIL and BPCL don’t want to directly buy out the stake held by ADB, ILF&S and IDFC as under law any company where the government owns more than 50% can no longer qualify as ‘privately-held.’ Instead they want to conclude the deal through IGL, a BSE-listed company that’s legally not state-owned.

When contacted, IGL managing director M. Ravindran confirmed IGL’s interest, but said no firm decision had yet been made.