Adani Gas Ltd: City gas!
(BSE Code: 542066) (CMP: Rs.111.35) (FV: Re.1)
Adani Gas Ltd (AGL) belonging to the renowned Adani group was listed on the bourses this month at around Rs.80/share post its demerger from the parent company Adani Enterprises Ltd (AEL). The demerger was aimed at unlocking the value of AEL’s city gas distribution (CGD) business including the piped natural gas (PNG) business and enable shareholders to get direct exposure to the high growth CGD business by dispensing the holding company discount.
The promoters hold 74.92% stake in AGL. AGL operates CGD networks in Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh covering ~3,50,000 households. It supplies CNG to over 2,00,000
vehicles. It has obtained rights to set up CGD networks in 13 other cities independently and another 16 through a joint venture with state-owned Indian Oil Corporation (IOC). This makes it the largest listed private CGD player in India with a pipeline network of over 5,500 kms, 70+ CNG stations and a client base of 4,50,000+. For FY18, it reported a top-line of Rs.1394 crore with EBITDA of Rs.374 crore. Currently, there are 3 government-owned listed CGD firms in India - Indraprastha Gas Ltd, Mahanagar Gas Ltd and Gujarat Gas Ltd. AGL’s future looks bright given the phenomenal potential of the CGD business in India where the number of players is very low but the entry barriers in the industry are high.
The Adani group owns 25% stake in a 5 MMT (million metric tonne) LNG import terminal at Mundra in Gujarat where it runs the country’s biggest port apart from a 5
MMT LNG import terminal at its Dhamra port in Odisha and a 3.2 MMT LPG terminal at Mundra. Another 1.2 MMT
LPG terminal at Dhamra is under construction.
AGL is a solid domestic growth story. Investors can accumulate the stock at every decline since it has the potential to touch Rs.200 in the next 2-4 years just like
Adani Transmission. Its market cap stands at Rs.12246.39 crore.