>GAIL INDIA LIMITED (HEM SECURITIES)

Company Snapshot
Gas Authority of India Ltd. is India’s flagship Natural Gas company. India's principal gas transmission and marketing company, was set up by the Government of India in August 1984 to create gas sector infrastructure for sustained development of the natural gas sector in the country. GAIL today has diversified into Petrochemicals, Telecom and Liquid Hydrocarbons besides gas infrastructure. The company has also extended its presence in Power, Liquified Natural Gas (LNG) re-gasification, City Gas Distribution (CGD) and Exploration & Production (E&P) through equity and joint ventures participations.

Quarterly Financial Highlights
GAIL posted decent results for the quarter ended March 2009. There was an increase in the net sales by 26.11% from the corresponding quarter last year standing at Rs.62339.50 million up from Rs.49430.70 million. The operating profits for the company have fallen from Rs.11677.40 million to Rs.10871.30 million from Q4FY08 showing a dip of 6.90% from the same quarter last year. The company’s net profit has surged from Rs.2533.60 million in Q3FY09 to Rs.6300.20 million in Q4FY09 and dropped from Rs.7223.80 million in Q4FY08 depicting a fall of 12.79%. This fall can be attributed to lower price realization and exploration & production costs. Both the margins have shown a decline. The Operating Profit Margin fell from 23.62% to 17.44% this fiscal and the Net Profit Margin stood at 10.11% as compared to last financial year’s 14.61%. EPS for the quarter ended March 2009 stood at Rs.4.97. as compared to Rs.8.54 last fiscal. The EPS is calculated based on the equity standing in the corresponding quarter.

Segmental Outlook
The Oil and Gas industry has been playing a major role in the rapid growth of the Indian economy. The natural gas sector along with petroleum including their transportation, refining and marketing constitute more than 15% of the GDP. The production of Natural Gas has only increased year on year. The New Exploration Licensing Policy (NELP) designed to address the increasing gap in the demand and supply gap of Gas in India has attracted both domestic and foreign players. Demand for Gas in India is dominated by the power and fertilizer sectors that accounts for 66% of consumption. The demand for oil and gas is likely to increase from 176.40 million tonnes in 2007-2008. The gas sector is set for a major upturn due to the increase in availability of gas as a result of large scale gas finds in India. The share of natural gas in the overall fuel mix is expected to increase to 20% by 2025. Apart from RIL and GSPL’s network in Gujarat, Gail has a monopoly in long distance gas transmission. Reliance industries is planning to invest between US$5.45 billion to US$6.54 billion in the coming three years to lay a 10,000 km pipeline. ONGC also plans to invest US$696 million to increase its facilities at their Assam and Western Offshore oilfields to boost the output.

To see full report: GAIL