While the swap ratios have been announced, there are not many details on valuations, treatment of debt, reduction of GDNLs shareholding, etc. These will likely be announced at a later date.
Key details announced include: (a)All assets of GGAS, GSPC Gas and GGAS subsidiaries will be transferred to GDNL; (b) For each GGAS share, minority shareholders will get one GDNL share. For GSPC Gas shares, the swap ratio is 81:76; (c)GSPC Gass current holding of 44.5% in GDNL will be extinguished. Also, the paid-up capital of GDNL will be reduced.
We use a DCF methodology to value GUJS, assuming a WACC of 11.6% and a terminal growth rate of 2.5%. Our DCF model covers cash flows from FY15F to FY25F. Our DCF-based target price is R70.
It is difficult to take a view as details are sketchy and recent rally too sharp. Our interaction with GGAS/GSPC indicates that post deal, minority shareholders in GGAS and GSPL (buy) will own ~25% of GDNL, while GSPC and other Gujarat government firms will have the other 50%.