GSIL to Acquire 70% Stake in GSPC

Source Press
Company Gujarat State Investment LtdGSPC Ltd 
Tags Corporate Deals, Deals, Renewable Energy, Power, Pipelines/ tankers/ distribution, Upstream Activities
Date May 04, 2019

() In a move to bail out and revive state-run Gujarat State Petroleum Corp (GSPC), Gujarat State Investment Ltd (GSIL), another state government entity, is aiming to get about 70% stake in the debt-laden company, making GSPC a subsidiary of GSIL.  

As part of its financial restructuring process, GSPC in the process of transferring Rs 6000 crore of of non-convertible debentures to GSIL, according to two senior state government official close to the development. “GSIL will become the holding company of GSPC with about 70% equity stake in it,” said one of the officials.

As per the ‘Scheme of Arrangement’ between GSPC, GSIL and GSPC NCD Holders, 60,000 long-term non-convertible debentures (NCDs) with a face value of Rs 10 lakh each and totaling Rs 6,000 crore are to be transferred to GSIL carrying annual interest ranging between 9.03 to 9.45%.

This will reduce GSPC’s financial burden from Rs 13,000 crore to about Rs 7,000 crore. GSPC is not a listed company but all the 60,000 NCDs issued by GSPC on private placement basis are listed on the National Stock Exchange (NSE). The ministry of corporate affairs had earlier this year cleared the decks for the proposal the NCD transfer.

GSPC will issue equity share to GSIL resulting in GSIL becoming the holding company of GSPC resulting in administrative synergies, simplification, focused management, streamlining and optimization of the group structure and efficient administration, according to details provided in the documents for the Scheme of Arrangement. The scheme of arrangement will improve the leverage/debt to equity ratio of GSPC. The move will also result into better tradability of the NCDs in the secondary market due to better credit rating of GSIL debentures to be issued to existing shareholders.

The Gujarat government holds 86.89% in GSPC while eight other state companies including Gujarat State Investment Ltd (7.47%), Gujarat Mineral Development Corporation (1.01%) and others.

The 60,000 debentures were issued in the financial 2012-13, the year which saw huge investments by GSPC in developing a difficult gas field in the offshore Krishna Godavari (KG) basin.

The company has been struggling to reduce its debt and had hired SBI (https://timesofindia.indiatimes.com/topic/SBI) Caps for financial restructuring process a few years ago.

Last year, the company sold a 28.4% stake in Gujarat Gas (https://timesofindia.indiatimes.com/topic/Gujarat-Gas) Ltd, its city gas distribution business, to its subsidiary Gujarat State Petronet Ltd (GSPL). This helped it reduce its Rs16,500 crore debt by over Rs3,250 crore. GSPC invested $3.5 billion (approximately Rs20,000 crore) in developing the KG Basin block. Two years ago, state-run Oil and Natural Gas Corp. Ltd agreed to pay $1.2 billion to GSPC for the purchase of its 80% stake in the Deen Dayal block.

A GSPC official, when contacted, declined to comment.

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Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd