X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GAIL: A brief overview... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 14, 2007

    GAIL: A brief overview...

    With increased supplies from the private sector players, the Indian gas market is likely to see heightened activity over the next 4-5 years. Recent discoveries by Reliance, Gujarat State Petroleum Corporation (GSPC) and ONGC augur well for mid-stream companies such as GAIL, which is engaged in the transmission and distribution of natural gas in the country. With this background in mind, over the next few weeks, we will try to provide an exhaustive overview of the business operations of GAIL, with particular emphasis on how it has performed in the recent past, what would be the catalysts for the business and its future prospects.

    About the company

    GAIL is the country's largest gas distribution and transmission company with a pipeline network of over 5,600 kms across the length and breadth of the country. The company's HBJ (Hazira- Vijaipur-Jagdishpur) pipeline is the lifeline for major gas consumers like power and fertilizer units. The company has also ventured into upstream gas exploration business and is a participant in the gigantic Myanmar gas fields, which are likely to commence production in 2007. Given the fact that GAIL is largely dependent on ONGC for its gas requirements, the exploration business will decide to what extent the dependence reduces.

    After huge discoveries in the West Coast in 70s by ONGC, bulk of the natural gas was allowed to flare, as there was no proper infrastructure in place to transmit the same. In order to effectively utilise the gas available, a separate transmission company in the form of Gas Authority of India Limited was established and its major role was to take the gas to the fertilizer and power plants. For this purpose, HBJ and other pipelines were laid. Thus, the key operations of the company revolved around designing and constructing pipelines and transmission of natural gas. Although it started off primarily as a gas distribution and trading company, GAIL, over the years has further diversified its business portfolio into a number of businesses, and following is a snapshot of its key businesses as they stand today:

    • Gas processing, gas cracking and production of LPG and liquid hydrocarbons: Rich natural gas is composed of four fractions (C1, C2, C3, C4) but the gas required by the power and fertilizer units need not to be a rich gas. Hence, to effectively utilise the various components of the natural gas, the company has set up fractionation and extraction facilities. GAIL has 7 gas processing facilities with an installed capacity of 1 MMTPA (million metric tonnes per annum).

    • Petrochemicals: GAIL has a plant in Uttar Pradesh, with an installed capacity of 3.3 MMTPA of polymers. Company has India's largest gas based petrochemical plant with an installed capacity of 3,10,000 TPA of polyethylene (HDPE, LDPE, LLDPE), which is undergoing expansion upto 4,40,000 TPA. GAIL is also working on two petrochemicals projects, one in Northeast and another in Kerala. It is also proposing to set up a plant in Iran.

    • City gas distribution: CNG (Compressed Natural Gas) as a transport fuel is much cheaper than Petrol and Diesel, and also less damaging to the environment. Thus, in order to tap its business potential, GAIL has ventured into city gas distribution JVs with various OMCs (Oil Marketing Companies). In Delhi, it has partnered with BPCL to establish a JV in the form of Indraprastha Gas Ltd. (IGL). In Mumbai, GAIL has partnered with BG (British Gas) for city gas distribution services. GAIL also has city gas distribution projects in Hyderabad, Argartala, Indore, Pune, Kanpur and Lucknow. India has significant under-penetration as far as CNG consumption is concerned. As per reports, India utilizes just 3% to 4% of the total gas available, while for other countries the share of city gas distribution is around 20%. Thus, the potential for growth is immense in this segment. GAIL has further identified 22 cities more for the city gas distribution venture.

    • Gas transmission and trading: GAIL is an operator and owner of India's largest gas transmission networks (5600 kms. of pipelines). It owns large networks like the world's longest exclusive Jamnagar-Loni-pipeline (1,269 kms) and Vizag-Secunderabad LPG pipeline (653 kms).

    • Upstream activities: GAIL has also forayed into the upstream segment with stakes in 13 blocks in India, two in Myanmar and one in Oman. While one of these blocks has already started producing oil, gas discoveries have also been confirmed in two blocks. GAIL is also planning to bid for CBM (coal bed methane) blocks in the near future.

    • Telecom: GAIL also has a small presence in the telecom sector via GailTel. The company has an optic fibre cable network of more than 9,000 kms that offer bandwidth as carrier's carrier in the telecom sector.

    As seen above, the portfolio of the company appears well diversified with the majority of the revenues coming in from the gas transmission and trading business. For the nine month period ended December 2006, the revenue break-up was as follows: the natural gas transmission business accounted for 11.6% of the revenues, LPG and liquid hydrocarbon (11.3%), natural gas trading (60.4%), petrochemicals (12.2%), LPG transmission (1.7%) and the remaining was accounted for by others.

    While the natural gas trading and transmission business is a stable one with visible cash flows, the risk are on the higher side in the commodity business such as liquid hydrocarbons and petrochemicals.

    In the next article, we will take our analysis of the company a step higher.

     

     

    Equitymaster requests your view! Post a comment on "GAIL: A brief overview...". Click here!

      
     

    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    GAIL: Petchem Division Turns Around (Quarterly Results Update - Detailed)

    Oct 19, 2016

    GAIL (India) Ltd has announced results for the quarter ended June 2016. The company has reported 14.6 % year on year (YoY) decline in sales, while bottom-line grew 244% YoY. Here is a brief summary of the results.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    GAIL: Better Prospects Ahead (Quarterly Results Update - Detailed)

    May 31, 2016

    GAIL has reported 9.8% and 28.7% YoY decline in the topline and bottomline for the year ended March 2016.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    GAIL SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK GAIL

    GAIL 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE GAIL WITH

    MARKET STATS