DEPARTMENT OF FINANCIAL STUDIES
(2019-21)
FINANCIAL ANALYSIS AND VALUATION
TRACK A COMPANY – Gas Authority of India LTD
Presented By:
Vijay Chandra Gutti
MBA(Finance) Part 1
3327
Gas Authority of India LTD
Gail (India) Limited (GAIL) (formerly known as GAS AUTHORITY OF INDIA
LTD) is Government of India undertaking company. Gail is the largest
state-owned natural gas processing and distribution company in India. It
is headquartered in New Delhi. It is a state-owned enterprise of
the Government of India, under the administrative control of the Ministry
of Petroleum and Natural Gas. It has the following business segments:
natural gas, liquid hydrocarbon, liquefied petroleum,
gas transmission, petrochemical, city gas distribution, exploration and
production, GAILTEL and electricity generation. GAIL was conferred with
the Maharatna status on 1 Feb 2013, by the Government of India. Only
eight other Public Sector Enterprises (PSEs) enjoy this coveted status
amongst all central CPSEs. GAIL was listed in the 131st position among
India's most trusted brands according to the Brand Trust Report 2014, a
study conducted by the Trust Research Advisory.
Listing details:
Date of Listing (NSE) : August 16 1984
Face Value : 10.00
ISIN : INE129A01019
INDUSTRY : Energy
Revenue: ₹74,808 crore
Operating income: ₹9,085 crore
Net income: ₹6,026 crore
Total assets: ₹74,379 crore
Business Model and key Value drivers:
Natural gas
Natural gas transmission
GAIL has built a network of trunk pipelines covering the length of around
11,000 km. Leveraging on the core competencies, GAIL played a key role as gas
market developer in India for decades catering to major industrial sectors like
power, fertilizers, and city gas distribution. GAIL transmits more than 160
million cubic metre per day at standard conditions of gas through its dedicated
pipelines and have more than a 70% market share in both gas transmission and
marketing.
Gas marketing
Since inception in 1984, GAIL has been the undisputed leader in the marketing,
transmission and distribution of natural gas in India. As India's leading natural
gas major, it has been instrumental in the development of the natural gas
market in the country. GAIL sells around 51% (excluding internal usage) of the
natural gas sold in the country. Of this, 37% is sold to the power sector and
26% to the fertiliser sector. GAIL is supplying around 60 million cubic metre per
day at standard conditions of natural gas from domestic sources to customers
across India.
LNG
By the end of 2009–10, the gas consumption in India stood at 165 million
cubic metre per day at standard conditions with LNG occupying 15% (25
million cubic metre per day) of the entire gas market. The proportion of
imported LNG is expected to increase to anywhere between 20% and 30%
by 2015. GAIL has been playing a principal role on its part in ensuring that
the government's objective of achieving energy security is achieved
through a judicious mix of energy portfolio.
Liquid hydrocarbons
GAIL has marketing gas processing units (GPUs) products, namely
liquefied petroleum gas, propane, pentane, naphtha and by-products of
polymer plant, namely MFO, propylene and hydrogenated C4 mix. LPG is
being sold exclusively to PSU oil marketing companies (OMCs) while other
products are sold directly to customers in the retail segment.
Petrochemicals
GAIL diversified from gas marketing and transmission into the polymer
business by setting up North India's first gas based Petrochemicals
complex. Even without having any prior experience in petrochemicals,
GAIL commissioned the plant successfully in the year 1999, by rigorous
teamwork and project management capabilities. The petrochemical
business is one of the core focus areas of GAIL.
City gas distribution
GAIL is the pioneer of city gas distribution in India. GAIL took many
initiatives to introduce PNG for households and CNG for the transport
sector to address the rising pollution levels. Pilot projects were launched
in the early 1990s in two metros Delhi and Mumbai through joint venture
companies Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited
(MGL) leading to the start of commercial operation of city gas projects.
Exploration and production
GAIL is participating in 10 exploration blocks, in Basins such as Mahanadi,
Mumbai, Cambay, Assam-Arakan, Tripura Fold Belt, Gujarat Kutch,
Krishna Godavari, Cauvery and Cauvery Palar. GAIL has partnership in
these blocks with various companies such as ONGC, OIL, GSPC, Hardy
Exploration & Production, Petrogas, JOGPL, Eni and Daewoo as Operators.
Indraprastha Gas
Indraprastha Gas Limited (IGL), is one of India's leading natural gas
distribution companies. IGL supplies natural gas as cooking and vehicular
fuel. Established in 1998, the company operates primarily in the indian
state of Delhi.
Listing details:
Date of Listing (NSE) : November 28, 2003
Face Value : 10.00
INDUSTRY : Gas Distribution
Revenue: ₹42.68 billion
Net income: ₹6.06 billion
Business Model and key Value drivers:
GL was incorporated in 1998, to take over and operate the Delhi City Gas
Distribution Project from GAIL for laying a network of gas distribution
pipelines in the Delhi. The company started as a joint venture between
GAIL, Bharat Petroleum and Govt of NCT of Delhi.
The company went public in 2003, listing on the Bombay Stock Exchange
and the National Stock Exchange. As of 31 December 2017, IGL supplied
piped natural gas to over 900,000 homes, over 2000 of commercial and
more than 1150 industrial establishments in the NCR. It also operates 425
CNG filling stations for natural gas vehicles.
Gujarat Gas
Gujarat Gas Limited,[2] is an Indian natural gas distribution company.
Gujarat State Petroleum Corporation owns the company. Established in
1980, and headquartered in Ahmedabad,[3] the company operates
primarily in Gujarat. It is India's largest City Gas Distribution (CGD)
company.
Listing details:
Date of Listing (NSE) : September 15, 2015
Face Value : 10.00
INDUSTRY : Oil and Gas
Revenue: ₹18.67 billion
Net income: ₹2.57 billion
Business Model and key Value drivers:
Gujarat Gas Company Limited (GGCL) was incorporated in 1980, and is in
the business of procurement and distribution of natural gas. The
company went public in October 1991, listing on the Bombay Stock
Exchange and the National Stock Exchange. The BG Group acquired a
majority stake in the company in 1997. In 2010, it operated over 3,700
kilometres (2,300 mi) of gas pipelines.
In October 2012, the majority owner in the firm, BG Group, sold its 65%
stake for a fee of around $470 million. The buyer was GSPC Gas, a unit of
the state-run Gujarat State Petroleum Corporation (GSPC).[6] GSPC Gas
and GGCL were merged in 2015 and the new company was named
Gujarat Gas Limited. As of 2017, it has the largest customer base in gas
distribution sector in India: 10,80,000 domestic households, 2,835
industrial customers, 11,900 commercial and non-commercial customers,
233 CNG stations selling more than 7,65,000 kg of CNG per day serving to
more than 1,60,000 vehicles per day. It has achieved the highest total
daily gas sales volume in India, up to 6.5 million cubic metre per day at
standard conditions. It market capitalisation was Rs. 10,600 crore.
Mahanagar Gas
Mahanagar Gas Limited, (MGL), one of the India's leading Natural Gas
Distribution Companies was incorporated on 8 May 1995. MGL is an
enterprise of GAIL (India) Limited (Maharatna Company of Govt. of India),
Government of Maharashtra and BG Asia Pacific Holdings Pte. Limited
(owned by Royal Dutch Shell group).
Listing details:
Date of Listing (NSE) :July 1, 2015
Face Value : 10.00
INDUSTRY : Oil and Gas
Revenue: ₹22 billion
Net income: ₹6.97 billion
Business Model and key Value drivers:
MGL connects 1.2 million households as well as over 3800 small
commercial and industrial establishments. They also supply CNG to more
than 700,000 vehicles in Mumbai, Thane, Mira-Bhayander, Navi Mumbai
and beyond. Besides 3342 ST/TMT/MSRTC/NMMT/PMPML buses, more
than 6580 /Tempos/Trucks/Private buses are using CNG supplied through
its wide distribution network. Consisting of about 430 km (270 mi) steel
and over 470 km (290 mi) PE Pipeline over 220 CNG stations through
1268 dispensing points.
PROFITABILITY ANALYSIS – Levered
GAIL:
LEVERED (ROCE) PROFITABILITY 6,930.6 5,709.5 3,172.8
ANALYSIS 9,411.15 8 5 0 4221.5
GAIL
PARTICULARS 2019 2018 2017 2016 2015
ROCE= Comprehensive
Income/CSE 0.22 0.17 0.15 0.09 0.12
Breakdown of ROCE
Return on Net
operating
Assets(RNOA) 0.34 0.34 0.29 0.30 0.34
Financial
Leverage(FLEV) -0.15 -0.24 -0.17 -0.18 -0.13
Operating Spread 0.87 0.71 0.83 1.13 1.64
ROCE= RNOA+(FLEV*Operating
Spread) 0.22 0.17 0.15 0.09 0.12
GAIL
2.00
1.50
1.00
0.50
0.00
1 2 3 4 5
-0.50
Indraprasta Gas limited:
LEVERED (ROCE) PROFITABILITY 6,930.6 5,709.5 3,172.8
ANALYSIS 9,411.15 8 5 0 4221.5
IGL
PARTICULARS 2019 2018 2017 2016 2015
ROCE= Comprehensive
Income/CSE 0.29 0.29 0.29 0.26 0.31
Breakdown of ROCE
Return on Net
operating
Assets(RNOA) 1.02 0.97 0.89 0.66 0.63
Financial
Leverage(FLEV) -0.52 -0.49 -0.44 -0.27 -0.15
Operating Spread 1.40 1.40 1.37 1.50 2.17
ROCE= RNOA+(FLEV*Operating
Spread) 0.29 0.29 0.29 0.26 0.31
Indrapasta Gas
2.50
2.00
1.50
1.00
0.50
0.00
1 2 3 4 5
-0.50
-1.00
Gujarat Gas
LEVERED (ROCE) PROFITABILITY 9,411.15 6,930.6 5,709.55 3,172.8 4221.5
ANALYSIS 8 0
Gujara
t Gas
PARTICULARS 2019 2018 2017 2016 2015
ROCE= Comprehensive
Income/CSE 0.28 0.25 0.18 0.13 0.32
Breakdown of ROCE
Return on Net
operating
Assets(RNOA) 0.31 0.28 0.23 0.21 0.46
Financial
Leverage(FLEV) -0.48 -0.73 -0.90 -0.67 -0.18
Operating Spread 0.06 0.04 0.05 0.11 0.76
ROCE= RNOA+(FLEV*Operating
Spread) 0.28 0.25 0.18 0.13 0.32
Gujarat Gas
1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 5
-0.20
-0.40
-0.60
-0.80
-1.00
Mahanagar Gas
LEVERED (ROCE) PROFITABILITY 6,930.6 5,709.5 3,172.8
ANALYSIS 9,411.15 8 5 0 4221.5
MGL
PARTICULARS 2019 2018 2017 2016 2015
ROCE= Comprehensive
Income/CSE 0.35 0.35 0.33 0.27 0.32
Breakdown of ROCE
Return on Net
operating
Assets(RNOA) 0.81 0.77 0.68 0.61 0.64
Financial
Leverage(FLEV) -0.41 -0.39 -0.35 -0.36 -0.29
Operating Spread 1.13 1.08 1.02 0.94 1.11
ROCE= RNOA+(FLEV*Operating
Spread) 0.35 0.35 0.33 0.27 0.32
Mahanagar Gas
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 5
-0.20
-0.40
-0.60
Profitability Analysis: Unlevered
UNLEVERED (RNOA) PROFITABILITY
ANALYSIS
GAIL
PARTICULARS 2019 2018 2017 2016 2015
RNOA=OI/NOA 0.34 0.34 0.29 0.30 0.34
Breakdown of RNOA
Operating Profit
Margin(PM) 0.17 0.19 0.18 0.14 0.16
Asset Turnover(ATO) 2.04 1.79 1.56 2.11 2.04
RNOA=PM*ATO 0.34 0.34 0.29 0.30 0.34
GAIL
2.50
2.00
1.50
1.00
0.50
0.00
1 2 3 4 5
Indraprasta Gas limited
UNLEVERED (RNOA) PROFITABILITY
ANALYSIS
IGL
PARTICULARS 2019 2018 2017 2016 2015
RNOA=OI/NOA 1.02 0.97 0.89 0.66 0.63
Breakdown of RNOA
Operating Profit
Margin(PM) 0.65 0.67 0.64 0.46 0.42
Asset Turnover(ATO) 1.56 1.45 1.39 1.43 1.48
RNOA=PM*ATO 1.02 0.97 0.89 0.66 0.63
Indrapasta Gas
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 5
Gujarat Gas
UNLEVERED (RNOA) PROFITABILITY
ANALYSIS
Gujara
t gas
PARTICULARS 2019 2018 2017 2016 2015
RNOA=OI/NOA 0.31 0.28 0.23 0.21 0.46
Breakdown of RNOA
Operating Profit
Margin(PM) 0.26 0.29 0.28 0.19 0.27
Asset Turnover(ATO) 1.17 0.97 0.83 1.12 1.72
RNOA=PM*ATO 0.31 0.28 0.23 0.21 0.46
Gujarat Gas
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 5
Mahanagar Gas
UNLEVERED (RNOA) PROFITABILITY
ANALYSIS
MGL
PARTICULARS 2019 2018 2017 2016 2015
RNOA=OI/NOA 0.81 0.77 0.68 0.61 0.64
Breakdown of RNOA
Operating Profit
Margin(PM) 0.71 0.75 0.66 0.51 0.47
Asset Turnover(ATO) 1.15 1.03 1.03 1.20 1.34
RNOA=PM*ATO 0.81 0.77 0.68 0.61 0.64
Mahanagar Gas
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1 2 3 4 5