Gujarat State Petronet (GSPL) share price today moved higher by 6 per cent to hit a new high of Rs 469.60 per share on the BSE on Monday. GSPL share price bounced back 13 per cent from its intraday low of Rs 415.85 (down 6 per cent intraday) amid heavy volumes.
In the past 11 trading days, the stock of Gujarat State Petronet has zoomed 47 per cent from a level of Rs 318.55 on August 16.
At 02:03 PM, GSPL was trading 3.5 per cent higher at Rs 457.70 as compared to 0.19 per cent rise in the BSE Sensex. The average trading volume on the counter jumped over two-fold today with a combined 43.9 million equity shares, representing 7.8 per cent of total equity of GSPL, having changed hands on the NSE and BSE till the time of writing of this report.
The board of Gujarat State Petroleum Corporation (GSPC) Group companies has approved the merger of GSPC, GSPL, GSPC Energy (GEL), and Gujarat Gas (GGL) with Gujarat Gas (GGL) and the subsequent demerger of the gas transmission business into a new listed company – GSPL Transmission Ltd (GTL).
GSPL is primarily engaged in the business of transmission of natural gas through pipeline on an open access basis from supply points to demand centers. Further, it is also engaged in the business of sale of electricity generated through windmills.
GSPC, on the other hand, is primarily engaged in the business of natural gas trading while also having participating interest in 11 operating exploration and production blocks. It, too, is engaged in the business of sale of electricity generated through windmills.
The rationale for amalgamation/merger is to achieve better business synergies and growth, simplification of GSPC Group holding structure, unlocking of shareholders’ value, improved efficiency and enhanced scale of operations and optimum utilisation of resources.
Under this arrangement, GGL will issue 10 equity shares of GGL for every 305 equity shares in GSPC; and 10 equity shares of GGL for every 13 shares in GSPL. Post the amalgamation, the resultant company’s (GGL) gas transmission business undertaking will be demerged into a new company GTL (Gas Transmission Ltd) which will be listed via issuance of 1 equity share of GTL for every 3 equity shares held in GGL.
According to analysts at JM Financial Institutional Securities this arrangement will result in value unlocking for GSPL shareholders’ as it will eliminate the current 50-60 per cent holding company discount that the market used, till now, to value GSPL’s 54.17 per cent stake in GGL.
Hence, the brokerage firm has raised its target price for GSPL to Rs 460 (from Rs 350) by reducing the holding company discount for its stake in GGL to 20 per cent (from 50 per cent holding discount assumed earlier). This is in-line with the management’s implied valuation of GSPL. However, JM Financial maintains ‘Hold’ rating on the stock given the recent sharp rise in the stock price.
Meanwhile, GSPL, in its FY24 annual report said, many analysts believe that once the Indian gas market is able to work on equitable distribution of gas infrastructure in the country, including gas pipelines, CGD networks and LNG receiving terminals, the industry shall witness major transformation of the gas industry. In-line with its global counterparts, India’s gas pipeline density needs to see significant growth for India to become a major gas consuming nation.
“India will also require a shift in gas consuming patterns, as for supporting a higher share of gas in the energy mix, it is imperative for the power sector to become a major consumer of gas. In this regard, very recently, an order was issued from the Central Government which stated that in order to help meet the high electricity demand in the country during the summer season; the Government of India has decided to operationalise gas-based power plants. Though this is for a short period, if global prices are able to stay in a competitive range, there is a chance that the Government may extend such directives to gas based power plants for a longer term,” GSPL said.
First Published: Sep 02 2024 | 2:47 PM IST
