Mahanagar Gas IPO opens, anchor investors issued Rs309-cr worth shares

Mumbai-based natural gas distributor Mahanagar Gas has raised Rs309.35 crore by selling 7.35 million shares to a total of 25 anchor investors ahead of the opening of the company's initial public offer (IPO). The shares were allotted at Rs421 per share, the top end of the Rs380-Rs421 per share price band for the IPO.

The Rs1,040 crore initial public offer of Mahanagar Gas (MGL) hit the market today with the gas distribution company setting the price range on a Rs380-Rs421 band.

The anchor investors who were allotted shares include Abu Dhabi Investment Authority, First State Investments (Hong Kong), Amundi Funds Equity India, Morgan Stanley Mauritius Company, Merrill Lynch Capital Markets Espana SA SV, DB International Asia, BNP Paribas Arbitrage, Franklin Templeton Asset Management (India), Reliance Capital Trustee Co, National Westminster Bank Plc, SBI Life Insurance Co, and ICICI Prudential AMC among others.

The issue is an offer for sale (OFS) wherein the existing promoters, GAIL and Singapore-based BG Asia Pacific Holdings, since acquired by Royal Dutch Shell, intend to sell 12,347,250 shares each, aggregating to 24,694,500 shares of face value Rs10 each.

As of 31 March, the company claimed to have supplied CNG to over 4.7 lakh vehicles through a network of 188 CNG filling stations. It has PNG connection to approximately 8.6 lakh domestic households, over 2,866 commercial and 60 industrial consumers in Mumbai and its adjoining areas.

The company has clocked a 12.42-per cent a compound annual growth rate (CAGR) while total revenue increased to Rs2,121.62 crore in FY16 from Rs1,328.34 crore in FY12. Profit after tax (PAT) rose 0.08 per cent on annualised basis to Rs308.68 crore in FY16 from Rs307.74 crore in FY12.

According to brokerage Edelweiss, "MGL has high exposure to domestic city gas (85 per cent). Its Ebitda margin has declined in the recent past until FY15 in line with that of IGL. We expect margins to expand going forward given improved feedstock allocation and pricing. Furthermore, the company enjoys a strong financial profile - highest margin in the industry, high RoE (over 20 per cent), stable positive cash flows and virtually debt free."

The IPO of Mahanagar Gas comprises issue of 24.6 million shares through a 100-per cent book building process.

The IPO, which opened for subscription today, closes on 23 June 2016. The IPO includes an offer for sale of up to 12.3 million shares by GAIL (India) and up to 12.3 million shares by BG Asia Pacific Holdings PTE Ltd (BGAPH). The offer will constitute 25 per cent of the post offer paid-up equity capital of the company.

The IPO will not benefit the company except in getting its equity shares listed on the stock exchanges as all proceeds from the offer will go to the selling shareholders, namely, GAIL (India) and BGAPH.

The company is promoted by GAIL (India) and BGAPH, each of who holds 45 per cent of the company's equity shares.