Yet another: Mahanagar Gas IPO to hit markets in June

Its raining Initial Public Offerings (IPOs) in Indian capital markets as Mahanagar Gas Ltd (MGL), a joint venture between state owned Gas Authority of India Limited (GAIL) Ltd and B G group (British Gas), UK which was recently acquired by Royal Dutch Shell Plc in the month of February, plans to hit the markets with an IPO in the third week of June.

MGL is one of India’s leading natural gas distribution companies established in 1995. MGL aims to be a leading consumer-friendly gas company and provide safe, efficient & reliable energy while contributing significantly for a pollution free environment. GAIL and British Gas group are expected to sell their 12.5 percent stakes in the company through an offer for sale (OFS) and fetch close to Rs. 1,200 crore.  BG group is expected to complete the transaction through its BG Asia Holdings Pte. Ltd.  The OFS values the company at around Rs. 4,800 crore. Gail and BG Asia based in Singapore together owns 49.75 per cent in MGL. BG group is  LNG company involved in international exploration and production. 

Interesting to note here is with 25 per cent stake sale by MGL, the company will be compliant with Securities Exchange Board of India's (SEBI) minimum public shareholding requirement. SEBI mandates that all listed public sector undertakings (PSUs) will have to raise the public shareholding to minimum 25 per cent by August 2017. 

Kotak Mahindra Capital Co. Ltd and Citigroup  Global Markets  India Pvt.  Ltd are expected to manage the share sale as per media reports. 2016 has been a good year for IPO markets with at-least 10 companies hitting the broader markets garnering Rs. 6,743 crores so far. 

CNG and LPG business should keep investors interested in MGL due to regulatory development and favourable policies such as domestic gas allocation and ban on heavy diesel passenger vehicles in certain geographies. Compared to petrol and diesel the pricing of CNG is extremely competitive leading to voluntary conversions to CNG .