The proposal involves merging Gujarat State Petroleum Corporation (GSPC), Gujarat State Petronet (GSPL) and GSPC Energy (GEL) with GGL.
As part of this restructuring, GGL’s Gas Transmission Business will be demerged and listed separately as GSPL Transmission Limited (GTL) on stock exchanges. The scheme also outlines specific shareholding arrangements for current shareholders of GSPL and GSPC.
Under the approved arrangement, GGL will issue 10 fully paid equity shares of Rs 2 each for every 305 fully paid equity shares of Re 1 each held by the shareholders in GSPC.
GGL will also issue 10 fully paid equity shares of Rs 2 each for every 13 fully paid equity shares of Rs 10 each held by the shareholders in GSPL.
The demerger of the gas transmission business would involves issuance of 1 fully paid equity share of Rs 10 each of GTL for every 3 fully paid equity shares of Rs 2 each held by the shareholders in GGL.
GGL stated that the merger of GSPC with itself, by combining the inter-linked businesses, will unlock business synergies, amplifying the scale of operations and improving efficiency due to optimum utilisation of resources.
The elimination of related party transactions will improve GGL’s EBITDA and RoCE. The synergistic benefit will also increase the market share of gas trading business while enabling focused growth strategies in other Energy sectors.
It further said that the merger of GSPL with GGL and subsequent demerger of the natural gas transmission business will lead to simplification of the existing layered structure between GSPL and GGL.
The main objective of demerger is to ensure adherence to the regulatory compliance and enable potential value unlocking for GSPL shareholders and enable the business to grow independently. The resulting company, namely, GSPL Transmission (GTL), will have equity shares listed on the stock exchange.
"Overall, over the years, the GSPC group has grown manifold, with diverse business presence across the entire natural gas value chain. Each of the companies enjoy leadership market position in their respective domain and inherent synergies are present amongst each of the group companies.
At this point in time, the management found it prudent to scale up the companies and consolidate the existing businesses with the main objective to simplify the layered structure in pursuance to which the board has today approved the scheme.
This scheme will firmly empower GGL and GTL to independently pursue their growth strategies with sharper focus, avail internal synergies, and ultimately increase their scale of operations.
The management’s business growth projections for GGL estimate it to become one of India’s largest integrated players with presence in gas trading & city gas distribution business. GGL will be able to better leverage the combined assets and expand capital base all put together, enhancing profitability and return ratios on account of varied gas sourcing portfolios.
The cash flow generated by the combined businesses can be deployed more efficiently in future to fund organic/inorganic opportunities,” the company said in a statement.
Gujarat Gas is the largest city gas distribution company in India. The company has a network of -39,000 km of gas pipeline, distributing approx. 9.7 mmscmd of natural gas. The company operates more than 800 CNG stations and has connected more than 21.15 lakh households in six states and one union territory.