>GAIL LTD.- BUY (INDIA INFOLINE)

COMPANY UPDATE

Core transmission business to witness robust growth
India's gas demand is expected to register a strong growth driven by current under utilization of gas-based capacities in the power, fertilizer and other industries. Additional gas-based capacities in these sectors will only shore up demand. The demand-supply gap is set to reduce the commencement of production from fields of ONGC and GSPC would further reduce the gap. This would need higher transmission capacity. Gail, being the nodal tansmission agency in the country would be the key beneficiary as its capacity would double over the next five years.

CGD and E&P businesses to be value accretive
GAIL is planning to set up city gas distribution projects in 20 cities over the next two years. Despite price cuts of petrol abd diesel, economics still favor CNG as an auto fuel. We believe, this venture would be margin accretive for GAIL.To further extend its value chain, GAIL has increased its presence in exploration and production sector. It currently has 30 E&P and three CBM blocks. Few discoveries have been made, but it will take couple of years before they achieve any scale. On a longer term perspective, this business would be value accretive for GAIL.

To see full report: GAIL