GAIL (India) board has rejected the proposal to forego ‘first right of refusal’ to acquire Asian Development Bank’s stake in Petronet LNG.
Sources close to the development said that at a recent board meeting, the independent directors of the company objected to the proposal to waive its ‘first right of refusal’.
The board felt that if a private stakeholder was brought in, there was always 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 a non-public sector character. The promoter stakeholders of the company were GAIL (India), 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, a strategic partner holding 10 per cent equity. The balance is held by the public, financial institutions, and mutual funds.
Permission refused
Earlier, the promoter stakeholders were looking to acquiring ADB stake. But the Ministry of Petroleum and Natural Gas had refused permission as it did not want the character of Petronet to undergo a change.
If the public sector promoter stakeholders are allowed to acquire ADB’s stake, it would change the very character of Petronet into 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 to explore the option of getting a strategic partner or sell in the open market. A strategic partner could also be a financial institution, sources said.
In fact, GAIL had earlier written to Petroleum Secretary G. C. Chaturvedi, who is the Chairman of Petronet, saying that it could buy the entire stake of ADB.
ADB has held 5.2 per cent stake in Petronet LNG since 2004. 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 was in 2004 and ADB was supposed to exit Petronet in 2007, but was persuaded to stay on.