Shell India, the local arm of Netherlands-based Royal Dutch Shell Plc, may finally exit the city gas distribution business by selling its 10% stake in Mahanagar Gas Ltd, said two officials aware of the development, requesting anonymity.
When Mahanagar Gas was listed on 1 July 2016, Shell, through its wholly-owned subsidiary, BG Asia Pacific Holdings Pte. Ltd, acquired a 34% stake in the company. Last year, it offloaded 24% of its shareholding in two tranches—8.5% in April and 14% in August—in the open market through bulk deals. This reduced Shell’s holding to 10%.
In 2016, Shell took over BG Group Plc and, subsequently, acquired its assets worldwide. “Shell plans to sell its stake in MGL and exit the city gas distribution. It wants to focus on other businesses in India. The company may sell its stake in Mahanagar Gas after July 2019, as the lock-in-period ends," said the first official quoted above.
Guidelines of capital markets regulator Securities and Exchange Board of India (Sebi) stipulate minimum promoters’ contribution shall be locked-in for three years from the date of allotment in a public issue. “Shell India does not respond to market speculation," the company said in an emailed response. Mahanagar Gas did not reply to queries sent on 27 February.
Last week, Ajay Shah, vice-president, Shell Energy Asia, on a call after the company issued its LNG Outlook said: “We think there are more opportunities in India, but we have to be smart about where and how we invest. City gas distribution is part of the value chain, but I think we recognize that this may not be the best use of our capital and our brain power."
“We think other entities are often better placed for city gas distribution. That does not mean to say that we would not look at investment here at all, but we would like to be a supplier of gas to those city gas networks." Mahanagar Gas is a joint venture between state-run gas utility GAIL (India) Ltd, BG Asia Pacific and the Maharashtra government. GAIL holds 32.5%, BG has 10% and the remaining 57.5% is held by public shareholders, which include the Maharashtra government and financial institutions.
“Shell may exit the city gas distribution business as part of its ongoing portfolio optimization to transform it into a simpler company and focus on its other businesses which deliver stronger returns," said the second official.
