AG&P Pratham, Think Gas Distribution to begin $1.1 billion merger

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Representative image by Freepik

I-Squared Capital-backed city gas distribution companies in India, AG&P Pratham and Think Gas Distribution, are on the verge of merging, according to a report by the Economic Times (ET). This move is valued at over $1.1 billion and aims to consolidate its market presence and enhance competitiveness against industry rivals. The merger, structured as a stock-for-stock transaction, will involve the exchange of shares between the two entities.


The companies had initially applied for approval of the merger in January and received approval from the European Commission in February.


At present, I-Squared Capital holds a 100 per cent stake in Think Gas Distribution and a 73 per cent stake in AG&P Pratham. The remaining stakes are held by AG&P and a consortium led by Japan’s Osaka Gas. Given their shared focus on the city gas distribution (CGD) business, the promoters have decided to streamline operations to optimise resources and manpower utilisation through this proposed merger. Moreover, Osaka Gas and Sumitomo Corp are poised to inject $200-250 million in primary capital into the company to support its growth trajectory.


CGD involves the transportation and distribution of natural gas to various sectors through a pipeline network, including domestic, commercial, industrial, and transport segments. The merged entity’s scale will position it to compete effectively with major players, including Mahanagar Gas, Gujarat Gas, and Indraprastha Gas, among others.


India is already pushing to increase the share of natural gas in its energy mix to 15 per cent by 2030. CGD networks are important in achieving this goal as they align with India’s efforts to reduce carbon emissions and address climate change challenges.


Upon completion of the merger, I-Squared Capital is expected to hold over 60 per cent of the combined entity, with AG&P retaining up to 15 per cent and the Osaka Gas and Sumitomo-led consortium holding the remaining 25 per cent.


The merger between AG&P Pratham and Think Gas Distribution represents a significant step toward enhancing operational efficiency and market competitiveness, positioning the combined entity for sustained growth in India’s evolving energy landscape.

First Published: Mar 11 2024 | 10:29 AM IST