Gujarat State Petroleum Corporation plans to raise 1,500 crore

The Gujarat State Petroleum Corporation (GSPC) has initiated steps to raise Rs1,500 crore through private placement, highly placed sources said. The move comes in the backdrop of the state-owned company failing to come out with an initial public offering (IPO) to raise money to fund its ambitious Deen Dayal West field development plan.

Sources said that GSPC, which has interests in oil & gas exploration, development and production, plans to raise around Rs1,500 crore through private placement of its shares to financial institutions. The company plans to dilute around 5 - 7% stake to raise the funds. It has recently approached merchant bankers for the stake sale to raise the funds.

GSPC managing director Tapan Ray was out of country and could not be reached. However, state energy minister Saurabh Patel, confirmed the development. “Yes, we are looking to raise funds through private placement of GSPC equity. Talks have been initiated with merchant bankers in this regards,” Patel told DNA.

He, however, declined to reveal the funds GSPC planned to raise and the exact stake the company would sell, saying they were being worked out.

Patel refused to divulge any more information, but claimed that many companies had evinced interest in acquiring stake in GSPC, and exuded confidence that the company would be able to raise the funds easily. The sources said that the stake sale should be a smooth affair, pointing out to the significant progress achieved in DD West in the past few months. They said that while construction of wellhead platform was already complete, contracts had been awarded for building the process platform, onshore gas terminal and submarine pipeline.

GSPC, one of the largest gas trading companies in the country, had raised Rs1,040 crore by diluting 5% equity in December 2009. It had also planned to raise around Rs3,500 crore through an IPO last year, but the plan ran into rough weather owing to adverse market conditions and litigations. It hopes to raise money to meet the huge funding requirements through private placement.

According to officials, the state-owned company had so far spent more than $1.50 billion - approximately Rs7,000 crore - on the project. The total expenditure in DD West, from where gas is likely to start flowing in mid-2013, is expected to increase to $ 2.1 billion (approx Rs10,000 crore). GSPC expects to produce 6 million metric standard cubic metre per day from DD West once the project goes on stream.