GAIL India Plans to Sell Part of Stake in China Gas Holdings
OREANDA-NEWS. August 16, 2013. State-owned gas utility GAIL IndiaBSE -0.88 % plans to sell part of its 4.6 per cent stake in Hong Kong-listed city gas distribution firm China Gas Holdings.
GAIL, which made a strategic investment of Rs 137 crore by acquiring 210 million shares of China Gas in 2005, will sell part of the holding, Minister of State for Petroleum and Natural Gas Panabaaka Lakshmi told the Rajya Sabha in a written reply to a question.
The gas utility plans to keep a small strategic interest in the company that will help it retain its board position in China Gas, the Minister said.
"The board of GAIL has accorded approval to partially divest its equity stake in China Gas for recoupment of entire initial investment, while retaining the strategic advantage as envisaged at the time of initial investment," she said.
China Gas has exclusive rights to set up gas distribution projects in 42 cities in China. GAIL picked up equity in the company as China was keen to replicate Delhi's success in using natural gas as a vehicular and domestic fuel in its cities, primarily Beijing, before the 2008 Olympics.
GAIL saw synergies in city gas/CNG business. Now that the city gas distribution business is being pursued by GAIL's wholly owned subsidiary, GAIL Gas, the company feels continuation of the investment in China Gas does not appear to meet the original objectives.
Also, China Gas shares are currently performing well on the Hong Kong Stock Exchange, giving the company a market capitalisation of around USD 4.4 billion.
Sources said GAIL has earned only Rs 16.29 crore as dividend on its investment in China Gas over seven years. As the current share price is more than seven Hong Kong dollars, GAIL believes it is a good time to sell and re-invest the earnings from the stake sale in overseas upstream assets.