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: Strength in adversity - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 2, 2001

    GAIL: Strength in adversity

    Reflecting the downturn in industry, Gas Authority of India Ltd. (GAIL) has reported a much subdued sales growth for 2QFY02. In the same quarter of the previous fiscal the company accrued benefits arising from commissioning of the polymer plant in FY00. In the current fiscal the company is operating on a like to like basis resulting in lower growth.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Net Sales 25,824 26,333 2.0% 49,816 52,082 4.6%
    Other Income 270 370 36.9% 580 680 17.3%
    Expenditure 20,287 20,535 1.2% 39,444 40,100 1.7%
    Operating Profit (EBDIT) 5,537 5,798 4.7% 10,372 11,983 15.5%
    Operating Profit Margin (%) 21.4% 22.0%   20.8% 23.0%  
    Interest 454 613 35.1% 896 1,186 32.3%
    Depreciation 1,448 1,502 3.7% 2,626 2,996 14.1%
    Profit before Tax 3,906 4,053 3.8% 7,430 8,481 14.1%
    Tax 2,078 1,795 -13.6% 2,808 3,045 8.4%
    Profit after Tax/(Loss) 1,828 2,259 23.5% 4,622 5,436 17.6%
    Net profit margin (%) 7.1% 8.6%   9.3% 10.4%  
    No. of Shares (eoy) 846 846   846 846  
    Diluted Earnings per share* 8.6 10.7   10.9 12.9  
    P/E Ratio   5.7     4.7  

    With demand for gas far in excess of supply, the company does not face much of demand risk rather it faces supply risk. With a slowdown in business the demand for gas is likely to have declined but not to the extent of altering the demand supply balance. Consequently, gas transportation -- the core business of GAIL -- to that extent is relatively safe vis-a-vis fluctuations in the economy. That said, the company has moved into the polymer business, which reported a marked weakness in product prices.

    Speaking of supply risk, as per reports, the company is witnessing a drying up of its Gandhar gas fields. Supply to large consumers have reportedly been reduced. The company itself has a gas processing plant at Gandhar for extracting LPG. Although, GAIL will favour supply to its plant, in the medium term constraints in availability will arise. The company believes liquified natural gas (LNG) imports are likely to help mitigate the risk in the long term.

    During the first half of the current fiscal key polymer product prices have dropped by 6% - 16% YoY. This has put realisations from the business under pressure. Corrobrating this view are results from competing players. Demand, however, continues to be healthy having grown by an estimated 15% YoY over the concerned period. But new capacity (Haldia Petrochemicals Ltd.) has been commissioned, which has eaten into the pie. Despite economic weakness, the company has shown strength in operations with an improvement in operating margins. OPM for 1HFY02 increased by 120 basis points.

    The company has capitalised Rs 948.8 m on account of exchange rate variations arising due to the repayment of foreign exchange debt raised for the GREP project. The statutory auditor has opined that this amount should be passed through the income statement. The matter is being referred to the Expert Advisory Committee of ICAI. Adjusting for this amount in 1HFY02, pre-tax profits show a growth of only 1.4%. At the end of FY01, GAIL had capitalised similar expenses amounting to Rs 742.6 m.

    The company has provided for deferred tax and last year's tax provision has been restated to reflect deferred tax liability. Aggregate deferred tax upto March '01 will be provided at the end of the current fiscal. At Rs 61 the scrip is trading on a multiple of 4.7x 1HFY02 annualised earnings.



    Equitymaster requests your view! Post a comment on "GAIL: Strength in adversity". 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.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    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...

    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


    Aug 16, 2017 (Close)



    Compare Company With Charts