“The stock is expensive compared to peers, which makes Total’s offer an attractive one for those who wish to exit. For those who wish to continue holding it, it is a word of caution that the stock is already expensive,” said one who did not wish to be identified.
Total aims to acquire up to 277.1 million fully paid equity shares of a Rs 1 face value each from Adani Gas’ public shareholders. It is to pay about Rs 5,700 crore for the 37.4 per cent stake. The agreement says Total will make an offer to the public shareholders to acquire up to 25.2 per cent and buy the residual shares from the Adani promoter family. “The deal is over-priced from the buyer’s point of view. Adani Gas’ peers have a higher margin business mix as compared to that of Adani Gas.
As the company is trading higher to its peers, the cash offer is a good one for retail (small) investors,” said a second oil and gas analyst who did not wish to be identified. Adding: “There is not much for institutional investors in this stock, as there is not enough free-float available for a true price discovery.”
The share price of Indrapastha Gas and Mahanagar Gas has gained 4 per cent since October 15, to close on Tuesday at Rs 381.6 and Rs 985.8, respectively. “The Adani deal announcement has given a sentimental push to other stocks in the same segment,” said the second analyst quoted earlier.
Adani has a city gas distribution network in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh. Also, it is in a consortium with Indian Oil in developing a network each at Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad and Udhamsingh Nagar.