IBEF: October 14, 2019
French oil and gas giant Total S.A. has acquired a 37.4 per cent stake in Adani Gas Ltd, the listed gas unit of the diversified Adani Group, for Rs. 5,662 crore (US$ 0.81 billion) as the company is relying on India’s shift towards a gas-based economy to address climate change concerns by using cleaner and greener fuels.
The deal delivers TOTAL joint control of Adani Gas. In India’s city gas distribution (CGD) sector, the acquisition is the largest Foreign Direct Investment (FDI).
In Adani Gas, 37.4 per cent shares was purchased by World’s Second-Largest LNG company “TOTAL” through a tender which offer to public shareholders to acquire up to 25.2 per cent shares subject to the applicable regulations also to purchase the residual shares from Adani Group.
On Friday, closing price of Rs. 137.65 a share, deal drives of about Rs. 5,662 crore (US$ 0.81 billion).
As part of the acquisition, Total will bring its LNG and retail expertise and also supply up to 3 mt of LNG to Adani Gas. Total and Adani will also establish a joint venture to market LNG in India and Bangladesh.
As per the gas partnership with Adani, in 2019-20, net acquisition cost for TOTAL is about US$ 600 million by considering the sale of its 26 per cent stake in LNG regasification terminal which is located at Hazira in Gujrat in 2019.
Patrick Pouyanné, Chairman and CEO of TOTAL said, “This partnership with Adani is cornerstone to our development strategy in this country”. “Energy needs in India are immense and the Indian energy mix is key to the climate change challenge. Firmly investing to develop the use of natural gas in India is in line with Total’s ambition to become the responsible energy major. 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”, he added.
As per the September 2019 presentation on ‘Strategy and Outlook’ deal is a part of TOTAL’s plan to deliver growth by investing US$ 18 billion between the year 2019-2023, mostly through higher LNG sale of 50 million tonnes.
Gautam Adani, Chairman, Adani Group, said, “Total’s investment in Adani Gas reinforces India’s natural gas and demand potential,” also added the statement “The partnership will derive significant synergies between Adani’s capabilities of developing world-class assets and Total’s global best practices as well as leveraging business synergies across LNG, fuel retail and city gas distribution”.
TOTAL said in presentation that by 2015, it intends to open around 4,000 service station in new markets out of which 1,000 would be in India.
City Gas Distribution is a natural extension of the plans of both partners to invest in infrastructure and assets worth over US$1 billion, which span Liquefied Natural Gas (LNG) infrastructure and marketing and fuel retail business, announced in October 2018.
To develop India’s gas infrastructure, distribution and marketing business, TOTAL and Adani would make an investment in next 10 years with the presence in over 15 states reaching out to 7.5 per cent of India’s population also setting up global-scale LNG, Gas distribution in India.
TOTAL and Adani will target to build a fuel retail network on the main road of country with the 1,500 retail stations in coming years.
After China and US, India is the world’s second largest energy market also the growing one with the 5 per cent of growth rate.
Government has drew the plans to double the share of Natural Gas with India’s overall energy mix from 6.2 per cent to 15 per cent by 2030 which are determined by abundant supply , competitive pricing, infrastructure expansion and regulatory initiatives to tackle severe emission norms and meet global climate change obligations.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.