Gail backs out of race to acquire BG stake in Gujarat Gas company Ltd

NEW DELHI: State-run Gail India finds the valuation of BG's stake in Gujarat Gas Co too high to make business sense to be in the race as the company has a market capitalisation of 5,000 crore and annual net profit is about 250 crore, government and industry officials said.

Gail, which aspires to be a countrywide player in the city gas distribution domain through its subsidiary Gail Gas Ltd, had initially considered acquiring BG's 65.12% stake in Gujarat Gas.

"An internal committee (of Gail) rejected the proposal to acquire Gujarat Gas, finding it over-priced," said an official with direct knowledge of the matter requesting anonymity.

At current market price, BG's stake in Gujarat Gas is valued around 3,000 crore and the company would expect some premium over that, making it a costly buy, the official said.

"Besides, the successful bidder is required to make a mandatory open offer for minimum 26% stake," the official added.

Gail spokesman confirmed that the company did not take part in the auction. "We are not interested and not evaluating," the spokesman said in an email reply. Gail is country's biggest gas utility company with stakes in several city gas distribution firms, including those supplying gas in Mumbai, New Delhi and National Capital Region.