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4
January 2018
 |
GAIL (The Total Investment
& Insurance Solutions)
The government is considering to split GAIL (India) Ltd
by spinning off the marketing operations into a separate company, according to
media sources. The plan is being discussed in the petroleum ministry, as the
central government is unhappy with the state-run player's performance in
building a pipeline network in addition to a possible conflict of interest in
its role as a infrastructure provider and carrier. The plan to split the
company had been discussed in the past too but it did not materialise.
The sources further added that the deal could help the government garner around Rs35,000cr by way of disinvestment receipts. Bharat Petroleum and Indian Oil are looking to take over GAIL, as per media reports of last month. The reports, however, said that the government would first prefer to unbundle GAIL before deciding on consolidation.
There is no formal decision on the issue, however it will be finalised only after consultation with all stakeholders. As of now, several private players are not happy with GAIL’s dominant position.
According to GAIL, its gas marketing and transmission businesses operate at arms length, and hence do not need to be separated.
The sources further added that the deal could help the government garner around Rs35,000cr by way of disinvestment receipts. Bharat Petroleum and Indian Oil are looking to take over GAIL, as per media reports of last month. The reports, however, said that the government would first prefer to unbundle GAIL before deciding on consolidation.
There is no formal decision on the issue, however it will be finalised only after consultation with all stakeholders. As of now, several private players are not happy with GAIL’s dominant position.
According to GAIL, its gas marketing and transmission businesses operate at arms length, and hence do not need to be separated.
GAIL’s marketing business formed 71% of its FY17 total sales and 25% of its FY17 segmental PBIT. We value GAIL’s marketing business at an enterprise value of Rs63 per share and its transmission business at an enterprise value of Rs220 per share. The Total Investment & Insurance Solutions
Government has a 54.89% stake in GAIL India. GAIL India’s current market cap is Rs84,041cr.The Total Investment & Insurance Solutions
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