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Energy

Total agrees to buy stake in Adani Gas as energy giant bets on India demand

French company to buy 37.4% stake in Adani venture

  © Reuters

MUMBAI (NewsRise) -- Indian conglomerate Adani Group said French energy giant Total agreed to buy a 37% stake in its city gas distribution unit, as foreign companies seek to cash in on the rising energy needs of Asia’s third-largest economy.

   Total’s investment comes at a time when India has pledged to cut down its greenhouse emissions even as it struggles to manage the growing energy needs of its prospering population.  The south Asian nation has also set an ambitious target of increasing the share of natural gas in its energy mix to 15% by 2030.

   The company’s move comes close on the heels of British Petroleum’s entry into India’s fuel retail market. In August, Indian oil-to-chemicals conglomerate Reliance industries formed a joint venture with British Petroleum to create a fuel retail network spanning 5,500 sites over five years.

   “Total’s investment in Adani Gas reinforces India’s natural gas and demand potential,” Gautam Adani, the group’s billionaire founder, said in a statement.

  As part of the deal, Total will buy up to a 25.2% stake in Adani Gas via a tender offer to public shareholders at 149.63 rupees a share, an 8.6% premium to Friday’s closing price of 137.65 rupees.

   It will buy an additional 12.2% from the Adani family, the Indian company said in the statement. The 37.4% holding is valued at $867 million, according to Reliance Securities.

   After the deal, Adani family and Total will each hold 37.4% stake in Adani Gas, while the remaining will be held by public shareholders.

   “Energy needs in India are immense and the Indian energy mix is key to the climate change challenge,” Patrick Pouyanné, the chairman and chief executive of Total, said in a separate statement. “The natural gas market in India will have a strong growth and is an attractive outlet for the world's second-largest LNG player that Total has become.”

   The two companies will also establish a joint venture to market liquefied natural gas in India and Bangladesh, Total said. Meanwhile, Adani said it will also be setting up 1,500 compressed natural gas stations across India over the next 10 years.

   Adani shares surged after the announcement, with the stock rising as much as 18% in Mumbai trading. The shares later pared the gains to close up 13%, while the benchmark S&P BSE Sensex closed 0.2% higher.

   At the current price, Adani shares are trading at about 100% premium to other city gas distribution peers such as Mahanagar Gas and Indraprastha Gas, Reliance Securities said in a report. Adani Gas has the supporting infrastructure, including LNG terminals, on both coasts of India to cater to the gas demand from piped natural gas industrial segment, the brokerage said. 

   The group had in January 2018 spun out the gas distribution business from parent Adani Enterprises in a bid to gain financial flexibility for raising capital. Over the years, Adani Group has been diversifying with interests straddling across oil and gas, coal infrastructure, power, and renewable energy.

   In June, it won the final clearance from an Australian state government to start construction of the controversial Carmichael coal mine, a project that has been stuck amid concerns about carbon pollution and climate change. 

   --Dhanya Ann Thoppil

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