Gujarat Gas will pay up to $45m for Adani Energy

Vol 8, PW 24 (09 Mar 05) People & Policy

Gujarat Gas is in the final stages of negotiations that will see it acquire a 51% controlling stake in Gujarat Adani Energy.

When the deal goes through, Gujarat Gas will automatically win gas distribution rights in the prize cities of Ahmedabad and Vadodra, something it has long wanted. PETROWATCH learns serious talks began two months ago when Gujarat Gas managing director BS Shantharaju convinced Adani Group chairman Gautam Adani that it was not worthwhile to be in the gas distribution business because his company, unlike Gujarat Gas, a subsidiary of UK major British Gas, has no expertise in the subject.

Gujarat Gas has already completed the required due diligence and the deal is expected to be sealed before 31st March. No one is willing to reveal how much Gujarat Gas will pay, but one range of figures circulating is that it will be anywhere between Rs175cr ($39m) to Rs200cr ($45m).

Gujarat Gas has agreed to pay a good premium, we learn. Adani realised that it made better sense to sell off gas distribution to Gujarat Gas then to run it without any experience.

Gujarat Adani Energy is a privately held company with an initial paid up capital of Rs40cr ($9m). It has so far invested about Rs125cr ($28m) on gas distribution infrastructure in Ahmedabad and Vadodra.

Gujarat Gas has won support for the deal from an unlikely quarter: the state government. We understand state officials have in recent months decided to tone down their hostility to the British Gas owned subsidiary.

Acquisition was the only way Gujarat Gas could get entry into Ahmedabad, a state official tells us. Had it applied for Ahmedabad in the first instance it would have already commissioned half the network.

We hope it has learnt its lesson. (Back)

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