Gas cos explore JV for distributing gas, CNG

State-run gas utility GAIL India Ltd said on Monday it is in talks with Engineers India Ltd to set up a joint venture to sell CNG to automobiles and piped natural gas to households in cities.

"EIL has a long association with GAIL. We are interested in having them as partners even in city gas distribution  projects," GAIL chairman and managing director B C Tripathi told reporters in New Delhi.

The two firms are discussing bidding jointly for CGD projects in cities that would be put on offer by the sector regulator, Petroleum and Natural Gas Regulatory Board in the future.

"They (EIL) could take equity stake in CGD projects bid by GAIL in the future," he said. "Also, they could give us consultancy (for CGD projects)." GAIL has formed a city gas subsidiary called GAIL Gas Ltd for selling compressed natural gas to automobiles and piped natural gas to households and industrial consumers in cities.

Tripathi said a memorandum of understanding for cooperation in CGD projects was under discussion with EIL.

"We hope to sign it soon," he said.

Last week, EIL chairman and managing director A K Purwaha had stated that the company's further public offer may come in the second quarter of 2010-11 fiscal.

As a prelude to the divestment of 10 per cent government equity through the FPO, EIL paid a 1,000 per cent (Rs 100 per share) special dividend totalling Rs 561.65 crore (Rs 5.61 billion).

Of this, the government, which holds 90.4 per cent equity, got Rs 507.65 crore (Rs 5.07 billion) plus a dividend tax of over Rs 96 crore (Rs 960 million).

He said the company will now issue two bonus shares for every one held and subsequently split the Rs 10 share into two of Rs 5 each.

The process would be completed by May-end. Thereafter, the company will finalise audited accounts for 2009-10 fiscal before filing draft red herring prospectus for the follow-on public offering, where the government is proposing to sell its 10 per cent stake. "The public offering looks more realistic in the July- September quarter," he said.

At the current market price, the government is expected to raise about Rs 1,000 crore (Rs 10 billion) through sale of its 10 per cent stake in EIL, which provides engineering consultancy services mostly to oil and gas firms.

EIL, which had a cash reserve of Rs 1,320 crore (Rs 13.2 billion) as on March 31, 2009, has till date given Rs 600 crore (Rs 6 billion) in dividends to the government on a Rs 25 lakh (Rs 2.5 million) share capital that formed the company in 1965.

EIL had reported a 67 per cent jump in net profit to Rs 310.65 crore (Rs 3.1 billion) in April-December period of the 2009-10 fiscal. Turnover had risen 20 per cent to Rs 1,353.46 crore (Rs 13.53 billion).