The shares of Mahanagar Gas Ltd jumped 9.11% on Monday to reach a 52-week high of ₹ 989.50 on the National Stock Exchange (NSE) after the company announced that it has entered into definitive documents to acquire 100 percent of the shareholding of Unison Enviro Pvt. Ltd., an arm of Ashoka Buildcon for ₹ 531 crores.
This acquisition will happen through the purchase of shares from its existing shareholders which shall take place upon the receipt of approval for a 100 percent transfer of shares from Petroleum and Natural Gas Regulatory Board (PNGRB). The objectives of the acquisition were to enter new geographical areas to pursue inorganic growth opportunities.
Unison Enviro (UEPL) is an entity owned by Ashoka Buildcon and Morgan Stanley India Infra Fund. It is the authorized entity for Ratnagiri and Latur/Osmanabad geographical areas (GAs) in Maharashtra and Chitradurga/Davanagere GA in Karnataka, and this will provide MGL with new avenues for long-term growth.
This transaction is of strategic importance to the firm and the extended footprint will help the company to scale its future business development activities across a larger network and customer base.
Kotak Institutional Securities has reiterated a buy rating on the shares of Mahanagar Gas with a price target of ₹ 1,100. This implies an upside of 11.40% as compared to its closing price of ₹ 987.40 apiece on Monday.
The brokerage said that MGL’s volume growth has been weaker (versus IGL/Gujarat Gas) and UEPL acquisition provides Mahanagar Gas an opportunity to expand its operations beyond Mumbai and should help address growth concerns.
ICICI Securities has a buy call on the shares with a target price of ₹ 1,125, which translates to an upside of 13.94% as compared to its share price.
The brokerage noted, “we note UEPL has 3 reasonably large GAs in its portfolio (37,362 sq km, ~10mn population and ~2mn households in aggregate).”
“We believe volumes can easily ramp up to ~1 mmscmd by FY28E, subject to meaningful investments (Rs7bn-8bn from FY21-FY27E) and good execution,” it added.
Written by Simran Bafna
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