GAIL keen to buy ADB stake in Petronet LNG for Rs 614 cr

The Asian Development Bank plans to sell its 5.2 per cent stake in Petronet LNG Ltd, which the State-owned gas utility GAIL India Ltd is keen to acquire and may have to pay over Rs 600 crore for it.

ADB has offered to sell its 39 million shares or 5.2 per cent stake in Petronet, which is valued at over Rs 614 crore at Monday’s trading price of Rs 157.85 per share on the BSE, sources privy to the development said.

GAIL, Oil and Natural Gas Corp, Indian Oil and Bharat Petroleum hold a 12.5 per cent stake each, to restrict the public sector holding in the company at 50 per cent. Gaz de France (GdF) holds 10 per cent stake. Under the Share Holders’ Agreement (SHA), the five have the first right of refusal over ADB stake.

GAIL has proposed to the Oil Secretary Mr G C Chaturvedi, who is the Chairman of Petronet, that it can buy the entire 5.2 per cent stake of ADB. In case other companies are also interested, the ADB stake can be split equally among GAIL, IOC, ONGC and BPCL with each buying 1.3 per cent stake.

ADB stake being bought by State firms would turn Petronet into a public sector company with shareholding of state firms rising above current 50 per cent, sources said, adding that GAIL is agreeable to this as it will bring more accountability in running of Petronet.

When contacted, an ADB spokesperson from Manila said: “ADB has held a 5.2 per cent stake in Petronet LNG since 2004.

ADB always looks to exit its equity investments once it believes that the development mission has been accomplished.”

ADB had in fact first proposed to exit Petronet in 2008 but the then company CEO Mr Prosad Dasgupta was in favour of a third party like Chevron or the steel baron Mr Lakshmi Mittal’s group buying the stake instead of the four promoters.

Sources said Mr Dasgupta had on February 29 in that year written to the then GAIL Chairman Mr U. D. Choubey to say that sale of “even one share” held by ADB to the four promoters or Gaz de France (GdF) would trigger the takeover code, turn the joint venture into a state-run firm and may result in delisting from the bourses.

ADB and German Development Bank KfW had in 2008 approved a loan of $ 169 million to Petronet for its expansion projects at Dahej and new terminal at Kochi, but the multilateral lending agency’s internal norms prohibit it from having both debt and equity exposure in a company.

“In 2004, ADB had sanctioned $ 75 million loan to Petronet. But once it took 5.2 per cent stake for less than $ 8 million, ADB could not disburse the balance due to its internal regulations,” a source said.

ADB norms also stipulate it to divest its equity holding in a company three years from the date of the company going public. Petronet’s IPO came in 2004 and ADB was supposed to exit Petronet in 2007, but was persuaded to stay on.