GAIL India Ltd is firm on using its first right of refusal to acquire Asian Development Bank’s (ADB) stake in Petronet LNG Ltd.
B.C. Tripathi, Chairman and Managing Director, GAIL, told Business Line that the “objection is not on account of Government company or private company. The issue is that why should we give something that has been nurtured by us on a platter to someone when the time to get the dividend has come.”
“How far this can be called a financially prudent decision is what the GAIL board is questioning,” said Tripathi. However, he added, that if it has to be done, then there should be some value to it. Though he did not elaborate on the value, industry observers say it could be calculated in terms of the new stakeholder getting a long-term gas supply commitment.
The GAIL board had rejected the proposal to forego the first right of refusal to acquire ADB stake in PLL. The objections had come from the independent directors.
The board had felt that if a private stakeholder was brought in then there was always a fear of it acquiring a larger stake from the open market and threatening the position of the promoters.
ADB plans to sell its 5.2 per cent stake in Petronet, which has been formed as a joint venture by the Government with non-public sector character. The promoter stakeholders of the company were GAIL, ONGC, Indian Oil Corporation and Bharat Petroleum Corporation holding 12.5 per cent each.
The other stakeholder is GDF SUEZ, the largest importer of LNG in Europe, which is the strategic partner, holding 10 per cent equity. The balance is held by the public, financial institutional investors, and mutual funds.
Earlier, the promoter stakeholders were looking at acquiring ADB stake. But the Ministry of Petroleum and Natural Gas had refused permission. The Ministry was keen that the character of Petronet did not undergo a change. If the public sector promoter stakeholders are allowed to acquire ADB’s stake, it would make Petronet a public sector entity, as the combined stake of the promoters will be over 50 per cent.
The Petroleum Ministry had asked the promoter stakeholders to write to ADB asking it to explore the option of getting a strategic partner or selling in the open market. A strategic partner could also be a financial institution, sources said.
Dismissing the argument that the change in character of the company from non-public sector to a public sector, will affect its performance, Tripathi said, “the flexibility of operations does not get restricted in any way. GAIL has performed as a Government company. We have sourced gas at cheaper price being in the PSU domain.”
ADB has held a 5.2 per cent stake in Petronet LNG since 2004. ADB norms stipulate it to divest its holding in a company three years after it becomes public. With Petronet’s IPO in 2004, ADB was supposed to exit in 2007, but was persuaded to stay on.