AG&P Pratham, the India arm of Singapore-based Atlantic Gulf & Pacific City Gas, and Think Gas Distribution, both operating under the umbrella of I-Squared Capital, are set to undergo a stock-for-stock merger, reported the Economic Times (ET).

This strategic move would create an entity valued at more than $1.1bn, with the scale to challenge competitors such as Mahanagar Gas, Gujarat Gas and Indraprastha Gas.

The merger is aimed at optimising resources and improving manpower utilisation within the two companies.

Currently, I-Squared Capital holds a 100% stake in Think Gas Distribution and a 73% stake in AG&P Pratham.

The remaining shares of AG&P Pratham are held by AG&P at 21% and a consortium led by Japan's Osaka Gas at 6%.

As part of the merger agreement, Osaka Gas and Sumitomo are expected to invest between $200m and $250m of primary capital as growth capital, the sources told the publication.

Following the merger, I-Squared Capital will maintain a controlling stake of more than 60%, with AG&P holding up to 15%.

The consortium led by Osaka Gas and Sumitomo could hold the remaining 25% stake.

The companies, which agreed to the deal in principle, are due to receive regulatory approvals.

One of the sources said: “With the formation of a new entity, there will be a pan-India presence. The management will become one and the AG&P's managing director will be the managing director of the combined entity.”

Established in 2018, Think Gas holds seven licences to operate in 13 districts across various Indian states.

This development comes amid India's ambitious plans to expand its compressed natural gas stations to 17,500 and achieve 120 million piped natural gas connections by 2030, as stated earlier this month by the country’s Union Minister for Petroleum and Natural Gas Hardeep Singh Puri.

In 2023, the ET reported that Mubadala Investment and multiple Japanese investors including Sumitomo were looking to acquire a 30% stake in I Squared Capital’s natural gas distribution business in India.