Mukesh Ambani is keen to divest a minority stake in Reliance Gas Transportation Infrastructure (RGTIL), a pipeline company that he controls, to get better returns on his initial investment, an official close to the promoters said.
"The 12% fixed rate of return on RGTIL's pipeline projects is no longer viable as gas volumes have fallen. So,in order to get better returns for the initial capital invested,the promoter (Mukesh Ambani ) has decided to bring in fresh equity investment. He will retain majority control," the official said.
"Of the 8-10 foreign companies queuing up for this stake, some are large global oil companies that want the promoter and the current management to manage the business while they will put in the investment," he added.
RGTIL currently operates the $3.75-billion East-West gas pipeline that transports gas from Kakinada, the land-fall point of the D6 block in the Krishna Godavari basin, to other industrial hubs in the country.
RGTIL has appointed JPMorgan, Citi and SBI Caps as advisors to the stake sale and is seeking a valuation of up to.10,000 crore. State-run gas distributor GAIL and energy explorer OIL India are also interested in buying the stake. RGTIL started operating the pipeline in April 2009.
It was set up as a 100% subsidiary of RIL in 2003, but has been privately held by Mukesh Ambani since 2006. It reported a net loss of.210 crore on net sales of.2,560 crore for the year ended March 2010. In 2010-11,RGTIL received.652 crore as hire charges from RIL for the use of its pipelines. RGTIL is also in the eye of a storm as the petroleum regulator, the Petroleum and Natural Gas Regulatory Board, has recommended the cancellation of licences of four pipelines that it was supposed to build to transport gas from RIL's D6 block.
Gas output from D6 block has fallen to 34 mmscmd, declining steadily since it peaked at 61.5 mmscmd in March 2010."RGTIL cannot build these pipelines as no gas has been allocated to these projects. So, there is no business-case and also it needs more clarity on prospective customers that it will be supplying to as currently that is decided by the regulator," said the official.Profit zone of the 8-10 foreign firms queuing up for this stake, some are large global oil companies.
These companies want the promoter and the current management to manage the business while they will put in the investment RGTIL currently operates the $3.75-billion East-West gas pipeline that transports gas from Kakinada to other industrial hubs in the country.