Gujarat Gas is making headlines after its board approved a scheme of arrangement and amalgamation involving Gujarat State Petroleum Corporation (GSPC), GSPC Energy, and Gujarat State Petronet (GSPL) merging into Gujarat Gas. This strategic move has prompted brokerages to revise their target prices upward for the city gas distribution company.
As part of the restructuring, the gas transmission business of Gujarat Gas will be demerged. It will separately be listed in the bourses, following the restructuring at GSPL Transmission Limited. The announcement saw shares of Gujarat Gas surge to a new 52-week high as it quoted at Rs 678.25 apiece on the NSE at 9:35 am, up 11.5% over the last close.
Analysts have given a thumbs-up to the merger and demerger plan. Equirus upgraded Gujarat Gas to ‘add’ in the report with a target price of Rs 667 apiece on improved prospects for this company which had now emerged as the second-largest gas trading company in the country. It is expected that rising gas consumption and broad value-chain presence will drive further growth.
Antique Broking, too, hailed the merger as value accretive, hiking its target price to Rs 726 per share from Rs 690, implying a potential upside of 20%. The brokerage flagged the benefits of Gujarat Gas rapidly availing GSPC’s Rs 72,000 crore in carry-forward losses, and higher intrinsic value of both GSPC and GSPL.
Meanwhile, Emkay Global has upgraded the rating on Gujarat Gas from ‘sell’ to ‘reduce’ with a revised target price of Rs 600 per share from Rs 500. The brokerage recognised the advantage of size and synergies arising from the merged entity, however, some challenges over business complexities, global exposure to gas are issues that would offset the synergies, significant stakes of Gujarat Government and its agencies.
Merger and Demerger Details:
- Shareholders of Gujarat State Petroleum Corporation will receive 10 equity shares of Rs 2 each in Gujarat Gas for every 305 equity shares of Rs 1 held.
- Shareholders of Gujarat State Petronet will receive 10 equity shares of Rs 2 each in Gujarat Gas for every 13 equity shares of Rs 10 held.
- For the new entity, GSPL Transmission Limited (GTL), Gujarat Gas shareholders will receive 1 equity share of Rs 10 each for every 3 equity shares of Rs 2 held in Gujarat Gas.
This restructuring is expected to create a more streamlined and competitive entity, well-positioned to capitalize on the growing demand for gas in India.
Do you have a news tip for Lakshmishree reporters? Please email us at media@lakshmishree.com
News Desk
