Oil sector leaders keen on BG Group's stake in Gujarat Gas

A host of Indian state-owned and privately owned oil companies are interested in buying British company BG Group's 65.12-per cent stake in Gujarat Gas Ltd.

State-owned Indian Oil Corp, ONGC, GAIL, Bharat Petroleum, Hindustan Petroleum, and Oil India Ltd, have shown their interest in buying the stake, which also includes Gujarat State Petroleum Corp, Cairn India and Adani Group.

Berkshire-based BG is divesting its stake in India's largest and oldest private sector city gas distribution company as part of its plan to focus on exploration and production, worldwide and has appointed Citigroup as an advisor to the proposed deal and opened a Data room till next week.

BG acquired the stake in 1997 from Gujarat Industrial Investment Corporation and Mafatlal Group for Rs170 crore, but is now seeking around Rs4,000 crore based on Gujarat Gas market capitalisation of nearly Rs5,500 crore.

The public sector firms are planning to form a consortium to jointly bid for the stake with GAIL taking the lead in the consortium that may include ONGC, the Business Standard today reported, citing unnamed industry sources.

GAIL, which is the largest gas supplier in the country, is finding the valuation for the stake as too high. It feels the Rs4,000 crore figure was 16 times the expected Rs250 crore net profit of Gujarat Gas and eight times an asset replacement ballpark estimate of between Rs400 and Rs500 crore, said the paper.