The Board of Directors of Gujarat State Petroleum Corporation Limited (GSPC), Gujarat State Petronet Limited (GSPL), and Gujarat Gas Limited (GGL) in their board meeting has approved the restructuring scheme among the group entities.

The proposed restructuring will eliminate the layered structure of the GSPC Group, unlocking value for its various stakeholders including public at large, and will include the following transactions:

Merger of GSPC with GGL

Issuance of 10 fully paid equity shares of Rs. 2 each of GGL for every three hundred and five fully paid equity shares of Rs. one only each held by the shareholders in GSPC.

Merger of GSPL with GGL

Ten fully paid equity shares of Rs. two each of GGL for every thirteen fully paid equity shares of Rs. ten each held by the shareholders in GSPL

Merger of GSPC Energy Limited (GEL) with GGL

Demerger of the gas transmission business from GGL into the newly incorporated entity GSPL Transmission Limited (GTL): issuance of one fully paid equity share of Rs. ten each of GTL for every three fully paid equity shares of Rs. two each held by the shareholders in GGL.

The merger of GSPC with GGL, by combining the inter-linked businesses, will unlock business synergies, amplifying the scale of operations and improving efficiency due to optimum utilisation of resources. The elimination of related party transactions will improve GGL’s EBITDA and RoCE. The synergistic benefit will also increase the market share of gas trading business while enabling focused growth strategies in other energy sectors.

The merger of GSPL with GGL and subsequent demerger of the natural gas transmission business will lead to simplification of the existing layered structure between GSPL and GGL. The main objective of demerger is to ensure adherence to the regulatory compliance and enable potential value unlocking for GSPL shareholders and enable the business to grow independently. The resulting company, namely, GSPL Transmission Limited (GTL), will have equity shares listed on the stock exchange.

Overall, over the years, the GSPC group has grown manifold, with diverse business presence across the entire natural gas value chain. Each of the companies enjoy leadership market position in their respective domain and inherent synergies are present amongst each of the group companies.

At this point in time, the management found it prudent to scale up the companies and consolidate the existing businesses with the main objective to simplify the layered structure in pursuance to which the board has today approved the scheme. This scheme will firmly empower GGL and GTL to independently pursue their growth strategies with sharper focus, avail internal synergies, and ultimately increase their scale of operations. The scheme entails value unlocking for the shareholders of the resulting company, GTL, and enables independent market driven valuation of GTL.

The management’s business growth projections for GGL estimate it to become one of India’s largest integrated players with presence in gas trading & city gas distribution business. GGL will be able to better leverage the combined assets and expand capital base all put together, enhancing profitability and return ratios on account of varied gas sourcing portfolios. The cash flow generated by the combined businesses can be deployed more efficiently in future to fund organic/inorganic opportunities.