GSPL shares rise up to 14%, know the price target of the stock

GSPL : Following the announcement of a scheme of amalgamation and arrangement, under which Gujarat State Petroleum Corporation (GSPC), GSPL, and GSPC Energy (GEL) will merge with Gujarat Gas, shares of Gujarat Gas Ltd.

surged 14%, while those of Gujarat State Petronet Ltd. (GSPL) also gained in Monday’s trade. Analysts pointed out that the combined company will then de-merge the transmission division into a new company, GSPL Transmission Limited (GTL). It is anticipated that the exercise will be finished by August 2025.

Gujarat Gas’s stock increased 13.69% to Rs. 689.45. GSPL’s stock increased 1.45% to Rs 448.80.
Gujarat Gas will get lucrative business from gas trading, renewable energy, gas-based power production, LNG terminals, and city gas distribution (CGD). Conversely, with the reorganization, GSPL will operate only as a transmission company.

By December 2024, stock markets and SEBI approval are expected. By Ma 2025, approval from the MCA, shareholders, and regulatory bodies is anticipated. After receiving all necessary permissions, shares under the plan will be distributed within a month, at which point GSPL trading would be terminated. By August 2025, both the listing of GTL and the extra shares of Gujarat Gas will be finalized.

According to our estimations, with the recent surge in GSPL, the deal is 5–6% more favorable for GSPL minority (in comparison to Gujarat Gas minorities). Rather than following its own principles, GSPL should advance in lockstep with GGL until de-listing (probably not till June 2025). We revoke our previous BUY recommendation of GSPL,” said Kotak Institutional Equities.

In light of the suggested share transaction, MOFSL believes that GSPL may gain 5%. It projects a total company value of Rs 633 per share for Gujarat Gas stockholders, meaning a 4.7% increase over Friday’s closing price.

“EPS is expected to be Rs 28.70, up 39% from our forecast for FY25. Due to cumulative tax losses at GSPC of Rs 7,200 crore (based on FY24 PBT), the firm may not be able to pay taxes for the next four years,” the statement said.

Analysts observed that the pipeline assets that were taken out of GSPL would be carried by GSPL Transmission. The primary goal of the merger is to resolve the rather complicated holding structure and to maximize the value of the GGL shares that GSPL already owns.

“We believe that the merger is value accretive from day one for Gujarat Gas as: 1) It will enable GGL to make quick use of the Rs 7,200 crore carry-forward losses lying with GSPC; Rs 2 per scm trading margin being charged by GSPC from GGL will now be valued at a higher multiple of the CGD business; and There is a higher intrinsic value of both GSPC and GSPL’s business (as per our estimate) than being assigned,” Antique stated.

It is anticipated that there would be relatively little synergy advantages from cost reductions and decreased indirect taxes.

“We reiterate BUY recommendation on Gujarat Gas and increase our target price to Rs 726 (based on a PE multiple of 23 1HFY27 earnings) from Rs 690 on account of the value accretion from the scheme,” it said.

For every 305 shares, GSPC owners will get 10 shares of Gujarat Gas, and for every 13 equity shares held by GSPL shareholders, 10 shares of Gujarat Gas. Gujarat Gas’s gas transmission division will thereafter be split out and listed as GTL.

There will be one GTL share for every three Gujarat Gas shares. April 1, 2024 is the scheduled date for the merger and April 1, 2025 for the demerger.