Mahanagar Gas shares hit 52-week high on acquisition of Ashoka Buildcon's gas arm

Shares of Mahanagar Gas Ltd hit a 52-week high today after the firm inked an agreement to buy rival private sector city gas distributor Unison Enviro from its promoters and existing shareholders Ashoka Buildcon and an investment fund managed by Morgan Stanley India Infrastructure, for an undisclosed sum.

Mahanagar Gas stock rose 7.21% to Rs 972 against the previous close of Rs 906.60 on BSE. The stock opened 2.14% higher at Rs 926 today. Mahanagar Gas shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The stock has gained 34.08 percent in a year and risen 14.76 per cent in 2023. Market cap of the firm rose to Rs 9536 crore on BSE.

A total of 0.73 lakh shares of the firm changed hands, amounting to a turnover of Rs 6.99 crore on BSE.

The acquisition will enable Mahanagar Gas to expand to newer geographical areas in Maharashtra (Ratnagiri, Latur & Osmanabad) and Karnataka (Chitradurga & Davanagere), thereby providing new avenues for long-term growth.

The 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.

Ashu Shinghal, Managing Director of MGL, said, "We are delighted to sign the agreement for acquisition of 100% stake in Unison Enviro Private Limited. There is great potential of integrating resources and derive synergies from this acquisition. MGL, with its deep-domain knowledge, strategies for long-term growth and capable workforce, is well equipped to seize the opportunities that lie ahead of it. MGL is strategically poised to leverage new opportunities in the CGD sector, as it continues to expand its areas of operations while providing high quality services to its customers. The acquisition would help MGL expand its network within and beyond Maharashtra and offer its quality services with safety to a broader customer base, thereby contributing towards long term growth of the organisation."

Meanwhile, CITI has assigned a target price of Rs 1,030 to the stock, projecting an upside of 13.68% to the previous close of Rs 906. The brokerage said the acquisition is the company’s first organic foray. The stock is not cheap and is available at 6.4 times trailing P/B but strategically positive. The deal could improve growth outlook of the stock.

Unison Enviro is a small city gas distributor with licences for 3 geographical areas. It is a subsidiary of highway developer Ashoka Buildcon and is into city gas distribution in the districts of Ratnagiri, Latur and Osmanabad in Maharashtra, and Chitradurga and Davanagere in Karnataka, to domestic, commercial, industrial and transport sectors.

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