Gujarat Gas surges 14% to record high following restructuring plan approval

Gujarat Gas share price surge: Gujarat Gas Limited (GGL) witnessed a remarkable 14 per cent surge in its share price today, hitting an all-time high of Rs 689.95 apiece on the NSE. This dramatic rise follows the approval of a major restructuring scheme by the company's board.

The approved restructuring involves the merger of Gujarat State Petroleum Corporation (GSPC), Gujarat State Petronet Limited (GSPL), and GSPC Energy Limited (GEL) into Gujarat Gas. This strategic move is aimed at enhancing operational efficiency and simplifying the complex holding structure among these entities.

Key details of the restructuring scheme:

• Merger Ratios: Under the scheme, GSPC shareholders will receive 10 shares of Gujarat Gas for every 305 shares held, while GSPL shareholders will receive 10 shares for every 13 shares held.
• New Entity Creation: Following the merger, a separate gas transmission unit, GSPL Transmission Limited (GTL), will be carved out and listed on the stock exchanges. This unit will focus exclusively on gas transmission, adding transparency and creating additional value for shareholders.
• Simplification: The merger aims to simplify the current complex holding structure, where GSPC owns a 37.6 per cent stake in GSPL, which holds a 54.2 per cent stake in Gujarat Gas. This consolidation is expected to streamline operations and eliminate related party transactions, such as Gujarat Gas’s current purchases from GSPC.

Phillip Capital's upgrade

Phillip Capital has revised its stance on Gujarat Gas, upgrading the stock from a "Sell" to "Neutral." The upgrade reflects an acknowledgment of the merger's potential to introduce cost efficiencies and operational synergies. Despite some concerns about the transition of Gujarat Gas from a pure city gas distribution (CGD) company to a more complex holding entity, Phillip Capital has raised its target price to Rs 580 per share from Rs 405, based on a “sum of parts” valuation approach.

The merger is anticipated to enhance Gujarat Gas's profitability by eliminating gas trading margins and state VAT costs. It is also expected to provide a more direct stake in the gas transmission business through the newly listed GSPL Transmission Limited.

The amalgamation is expected to be completed by August 2025, and it is anticipated to unlock significant value for shareholders. Gujarat Gas will emerge as a leading CGD company with direct access to gas sourcing and trading, further strengthening its competitive position in the energy sector.