Gujarat State Petronet exits city gas retail

Vol 24, PW 15 (17 Jun 21) Midstream, Downstream, Renewables

Gujarat State Petronet (GSPL) shareholders never thought it a good idea that their pipeline transmission company should enter the very different world of gas retailing.

But instead of offloading Amritsar and Bhatinda to an outsider, GSPL wants to keep the two areas very much in the family! Six years after making its ill-advised entry into the CGD business, GSPL will complete the sale of Amritsar and Bhatinda to former BG-owned retailer and subsidiary Gujarat Gas by end-July (2021). Once it concludes the deal, GSPL will have no directly authorised city gas retail areas.

But it will continue as the biggest shareholder in Gujarat Gas, where it holds 54.17%, and retain a 27.47% stake in Sabarmati Gas, where it partners Bharat Petroleum. Gujarat Gas directors approved the move to buy Amritsar and Bhatinda on June 1 (2021) for Rs163.31cr ($22.4m).

"We carried out a due valuation process," confirms a source. Under the Business Transfer Agreement (BTA), Gujarat Gas will pay GSPL a lump sum without assigning any value to individual assets or liabilities.

On June 3 (2021), GSPL directors authorised their joint managing director and GSPC boss Sanjeev Kumar to execute the BTA following in-principal approval from the PNGRB on June 29. "Both areas were proving difficult for us," admits a GSPL source.

"We need to stay focused on our core pipeline and gas transmission business." In 2020-21, GSPL registered a combined turnover from Amritsar and Bhatinda of just Rs14.86cr ($2m).

"This is only 0.71% of GSPL's total turnover," acknowledges a company source. By March 31 (2021), Amritsar and Bhatinda's combined net worth stood at Rs112.94cr ($15.5m).

"GSPL might be India's second-largest gas pipeline and transmission company (after GAIL)," adds a Gujarat Gas source, "but city gas retail is a completely different business."