Bhagyanagar Gas Ltd, a company setting up city gas distribution projects in Andhra Pradesh, may be raising up to $25 million (Rs 114 crore) in equity funding from International Finance Corporation (IFC). The funds from the private investment arm of World Bank will be used to

in the roll-out of the gas distribution infrastructure in Hyderabad, Vijayawada and Kakinada.

Bhagyanagar Gas is promoted by government-owned GAIL (India) Limited and Hindustan Petroleum Corporation Limited (HPCL).

Bhagyanagar Gas was incorporated by HPCL and GAIL to distribute and natural gas for use in residential, commercial, industrial and automotive sectors in Andhra Pradesh. The firm will use the funds to lay, operate and maintain its own gas distribution pipeline and as well as retail outlets for Compressed Natural Gas (CNG).

While Bhagyanagar Gas was authorized to operate in Hyderabad and Vijayawada, it won the rights last year to operate in Kakinada through a competitive bidding process conducted by Petroleum & Natural Gas Regulatory Board.

The total capex of setting up the operation in the three cities stands at $276 million, which includes purchase of steel pipelines, polyethylene pipelines, valves, meters, regulators and filters.

Several gas utility companies have raised private equity funding in the past. IDFC Private Equity invested in Gujarat State Petronet and completed the exit last year with returns of 3x-6x last year. It has also invested in Krishna Godavari Gas Network and Maharashtra Gas Network Ltd.

IL&FS Investment Managers has also backed companies like Indraprastha Gas Ltd and Central UP Gas Ltd. One of the most recent deals was when IFCI Venture Capital Fund, UTI India Infrastructure and IDFC Project Equity investing in Sabarmati Gas.

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