After Gujarat Gas, will GSPC exit Mundra LNG?

After Gujarat Gas, will GSPC exit Mundra LNG?

After selling its entire stake in Gujarat Gas to its subsidiary Gujarat State Petronet Limited (GSPL), debt-laden Gujarat State Petroleum Corporation (GSPC) is mulling sale of its stake in the Rs4,500 crore Mundra LNG project.

GSPC holds 50% stake in the 5 million Tonne Per Annum (TPA) Mundra LNG terminals, while Gautam Adani-led Adani Group holds 25% stake. The remaining 25% stake is earmarked to be sold to a strategic investor.

Even as GSPC’s efforts to rope in a strategic investor for Mundra LNG have failed so far, the Indian Oil Corporation is expected to acquire a significant stake in the project. In fact, in August, the IOC board had approved acquisition of up to 50% stake in the project. The size of the proposed transaction is pegged at about Rs750 crore.

A highly placed government official told DNA that they are waiting for IOC to get back to GSPC with the offer. “The ball is in IOC’s court. They have to get back to us,” the official said on condition of anonymity.

A senior official of GSPC LNG Limited, the GSPC subsidiary that has executed the Mundra LNG project, said that talks are “going on” with Indian Oil for the stake acquisition. State’s chief secretary and GSPC chairman & managing director JN Singh had told DNA earlier that GSPC did not plan to exit the Mundra project and would remain invested. He was non-committal when asked if GSPC would become a minority investor with 25% stake or retain a higher stake.

However, looking at GSPC’s precarious financial condition, there is a good chance that it may have to sell stake in the Mundra project. Even after selling its 28.40% stake in Gujarat Gas to subsidiary GSPL for about Rs3,200 crore, GSPC will still have a debt of more than Rs13,000 crore. The high, and almost unsustainable, debt is largely because of the loans taken to meet expenditure of Rs23,000 crore in its KG Basin project. Incidentally, GSPC sold 80% stake in the KG asset to ONGC for Rs7,738 crore last year, and booked loss for the remaining Rs15,000 crore.

“It is true that GSPC is not in good financial health, and all options are open,” said a senior official matter-of-factly.

GSPC has hired SBI Caps for preparing a financial realignment plan to improve its financial and operating performance. The stake sale in Gujarat Gas is a part of the business restructuring plan.

In the meanwhile, a GSPC LNG official said that construction of the terminal is complete, and only work related to the evacuation pipeline from Mundra to Anjar remains to be finished.

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