The Rs 1,083 crore buyout by state-owned GAIL (India) opened today and will run until June 7. The 14-day buyback offer is priced at Rs 190 per share, representing a premium of 28.28% over BSE and 29.20 per cent over NSE.
The gas utility plans to buy back 57 million shares with a nominal value of Rs 10 each. It intends to redeem shares through two different categories: the category reserved for small shareholders, who hold shares not exceeding Rs 2 lakh, and the general category which applies to all eligible shareholders other than small shareholders. shareholders. Of this amount, the government intends to offer shares as long as the minimum stake after the buyout remains at least 51%.
The company, which aims to optimize its capital structure and improve return on equity through repurchase, has prescribed a repurchase ratio of 2 shares for 25 capital shares for the reserved class while 2 shares for 179 capital shares for the general category.
As the buyout offers more than a 25% premium on its price, analysts expect the retail entitlement ratio to be between 8 and 10%. According to Abhijeet Bora, energy analyst at BNP Paribas’ Sharekhan, the range of potential return can range from 2% to 4.3%, assuming a base acceptance rate of 30% and an exit price of Rs 140-150. for undeposited shares.
The entitlement ratio is the ratio of shares that a retail investor has offered in the buyout process, while the acceptance ratio represents the number of shares that the company will be able to accept in the buyout offer for 100 shares contributed by shareholders.
Gaurang Shah, senior vice president of Geojit Financial Services, meanwhile, suggests investors not offer their shares as he sees the stock as a long-term value bet.
“We are optimistic about the fortunes of oil exploration companies due to pent-up demand for alternative fuels. Aggressively rising natural gas prices and changes to gas exploration guidelines bode well for the company. We can expect a 15% upside for GAIL in the long term,” he said.
That aside, analysts expect the company’s gas and marketing businesses to see steady cash flow, supported by spot LNG prices, in FY23-24.
“We expect volumes from the gas transmission business to improve following the completion of the Eastern Gas Pipeline. With the installation of fertilizer plants in the country, it is possible that the entire volume of US LNG will be consumed by India itself. We expect the stock to perform well in the long term with a target price of Rs 196,” Sharekhan’s Abhijeet Bora said.
GAIL (India) is a PSU operating across the entire natural gas value chain which includes gas transportation or marketing, LPG transportation, gas processing, petrochemicals, LNG imports and distribution city gas. It supplies large consumers, fertilizer industries, steel mills, petrochemical plants and small industries. The company has also diversified into the renewable energy sector and is exploring business opportunities in green hydrogen.
Management believes that the buyout will not adversely affect the Company’s ability to pursue growth opportunities or meet its cash requirements for its business activities. They also don’t expect the takeover to have a significant impact on the company’s earnings.
Meanwhile, the company is expected to release its results for the January-March quarter (Q4FY22) on May 27, 2022. Analysts expect the company to post 44.8% year-over-year growth. (YoY) net profit to Rs 2,7616.6 from Rs 2,564.83 in Q3FY21. Net sales are expected to increase by 56.9% year-on-year to Rs 24,391.5 crore.
GAIL shares have jumped more than 16% this year, against an 8% decline in the S&P Sensex BSE. Previously, the stock hit a 52-week high at 173.45 rupees on April 19, 2022. It has outperformed peers like Gujarat State Petronet and Gujarat Gas which have lost more than 12% and 14%, respectively this year.