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Gujarat Gas: Analysts meet

Mar 9, 2000

Gujarat Gas (GGCL) reported impressive results for the nine-month period ended December 1999. The company reported a turnover of Rs 18.30 m on sales of 1 million cubic metres per day of gas. GGCL’s operating margin stands at around 22%. (In India around 60 million cubic metres of gas is produced per day.)

  Dec 1999
(9 months)
Dec 1998
(9 months)
Income from operations 1834.14 1351.96
Other Income 78.55 96.30
Total expenditure 1385.85 978.14
Interest 84.09 12.72
Depreciation 82.42 52.23
PBT 360.34 405.17
Tax 70.34 102.69
PAT 290.00 128.25
Equity 128.30 128.30
EPS 22.60 10.00

British Gas (BG) owns 65% of the Rs 128.30 million equity of the company. The company is mainly a distributor of gas in the state of Gujarat. It buys gas from Gujarat State Petroleum Corporation (GSPCL) and Gas Authority of India and sells it to residential, industrial and commercial users (such as hotels, restaurants etc).

The company has already put in place a pipeline between Hazira and Ankleshwar to transmit gas. BG is setting up its own terminal at Pipavav (Gujarat) which will have the capacity of 5 million cubic metres of gas per day. Gujarat Gas will be able to source gas from its parent’s terminal apart from GSPCL and GAIL.

GGCL’s volumes are expected to soar to 1.5 million in the coming year (the company has changed its calender year to December) and is expected to report a turnover in the range of Rs 3.40 bn. (The company’s average realisations are in the range of Rs 7.50 per cubic metre.) It’s interest burden in the current year is also expected to go down since it plans to prepay its debt (it borrowed Rs 8 bn for setting up the Hazira Ankleshwar Pipeline which went on stream last year).

Another upside for the stock could be from the laying down of optic fibre cable alongside its pipeline. This would provide it further revenues from the sale of bandwidth to cable operators and the telecom companies. However the management refused to give any further information about the plans for this venture. The company has also tied up with ICICI for providing financial services such as car finance, credit cards etc since its already owns a database of its customers. It would share the credit appraisal of its customers along with ICICI and earn fee–based income for provision of these services to its gas customers.

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