Gujarat Gas posts 50% increase in net profit - Views on News from Equitymaster

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Gujarat Gas posts 50% increase in net profit

Apr 19, 2000

Gujarat Gas (GGCL) has reported excellent results for the first quarter of the current year. 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’s average realisations are in the range of Rs 7.50 per cubic metre. British Gas (BG) owns 65% of the Rs 128.30 million equity of the company.

In the first quarter of the current year, the company has been able to increase the volume of gas it supplies to its customers by 14%. It has however been able to post a 37% increase in sales and a 54% jump in operating profits. This indicates that the company has been able to comfortably, pass on the 15% increase in gas prices charged by its suppliers GAIL and GSPCL.

(Rs m) FY1999 FY2000 Change
Sales 514 705 37.3%
Other Income 22 35 60.0%
Expenditure 398 526 32.3%
Operating Profit (EBDIT) 116 179 54.5%
Operating Profit Margin (%) 23% 25%  
Interest 7 27 319.4%
Depreciation 18 29 61.4%
Profit before Tax 113 158 39.2%
Other Adjustments      
Tax 30 32 6.7%
Profit after Tax/(Loss) 83 126 50.9%
Net profit margin (%) 16.2% 17.8%  

The company has already put in place a pipeline between Hazira and Ankleshwar to transmit gas. Besides, BG is setting up its own terminal at Pipavav (Gujarat) which will have the capacity of 5 million cubic metres of gas per day. GGCL will be able to source gas from its parent’s terminal apart from GSPCL and GAIL from 2003 onwards.

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 the company can be expected to report a turnover in the range of Rs 3.40 bn. We had mentioned this almost six weeks back when the company declared its annual results and the projection continues to hold good.

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