Transcript
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PROJECT REPORT
ON
GAIL
Submitted To: Submitted By:
Prof. Sanjeela Mathur Manvi Dani (18)
PGDM-IB VII
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TABEL OF CONTENT
CHAPTER NO. TOPIC NAME PAGE NO.
1. INDUSTRYANALYSIS 4
2. COMPANYANALYSIS 10
3. PROFITABILITYANALYSIS
19
4. CUSTOMERSATISFACTION
23
5. EMPLOYEEENGAGEMENT
24
6. COMPETITIVEANALYSIS
25
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7. CONCLUSION 30
8. BIBLOGRAPHY 31
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INDUSTRY ANALYSIS
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To understand the Indian gas market and its current issues, it is necessary to have a look back
at the historical development of the energy industry, and in particular the gas industry, and
see how gas market players were created or entered the market. The Indian gas market is
expected to be one of the fastest growing in the world over the next two decades: the IEA
forecasts gas demand to increase at 5.4% per annum over 2007-30 (IEA, 2009) reaching 132
bcm by 2030. Indian primary energy supply is currently dominated by coal (37%), biomass
and waste (27%) and oil (26%) while the share of natural gas is only 6%.It is also crucial to
understand how the regulatory framework was set up and the interactions between the
government and the industry. Before 2009, gas demand potential was estimated to be 20 or
30 bcm higher than actual use as consumption had been constrained by the lack of supply for
over a decade (MoPNG, 2000). To address the supply shortfall, the Indian government passed
some reforms at the end of the 1990s to encourage domestic production and the construction
of liquefied natural gas (LNG) terminals. In particular, the New Exploration Licensing Policy
(NELP) opened Exploration & Production to private and foreign companies. This has been
relatively successful: after Stagnating since the early 2000s, Indian gas production is
expected to double between 2008 and 2011 due to the start of the Krishna Godavari KG-D6
field in April 2009.The year 2009 therefore marks a turning point for the Indian gas market:
with new supplies available, Indian gas consumption increased to 59 bcm in FY 2009/10,
from 43 bcm in FY 2008/09.Meanwhile a third LNG terminal is expected to start in 2010.
But challenges remain, illustrated by NELPs failure to attract the major international oil
companies and the long battle over the allocation and price of KG-D6 gas. The government is
now considering introducing an Open Acreage Licensing Policy (OALP).
Like in many markets, the Indian energy (and gas) sector has been built on state-owned
companies such as ONGC, OIL and GAIL, but has seen the entrance of some significant
private Companies in the past few years. Some players are present at many levels of the gas
value chain. The conditions for private companies to operate in the Indian market are
difficult, due to government interventions on gas prices and allocation, the existence of a dual
pricing system and the lack of a transparent, predictable and stable regulatory framework.
An Industry Analysis provides an objective analysis on the Oil & Gas sector in India along
with detailed information on the exploration, production and other processes. Annual
consumption figures and future growth projections are also included in this report.
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It gives a detailed overview of the opportunities, challenges and critical success factors for
the growth of the industry.
This industry includes the global processes of:
Exploration,
Extraction,
Refining,
Transporting (often by oil tankers and pipelines), and;
Marketing petroleum products.
Figure: 1
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The largest volume products of the industry are fuel oil and gasoline (petrol). Petroleum is
also the ra w materi al for many chemi cal products, including pharmaceuticals, solvents,
fertilizers, pesticides, and plastics. The industry is usually divided into three major
components:
1. Upstream,2. Midstream and ,3. Downstream.
The upstream sector includes the searching for potential underground or underwater oil and
gas fields, drilling of exploratory wells, and subsequently drilling and operating the wells that
recover and bring the crude oil and/or raw natural gas to the surface.
Midstream operations are usually included in the downstream category.
The downstream oil sector is a term commonly used to refer to the refining ofcrude oil, and
the selling and distribution ofnatural gas and products derived from crude oil. Such products
include liquefied petroleum gas (LPG), gasoline or petrol, jet fuel, diesel oil, otherfuel oils,
asphalt and petroleum coke.
The downstream sector includes oil refineries,petrochemical plants, petroleum product
distribution, retail outlets and natural gas distribution companies. The downstream industry
touches consumers through thousands of products such as petrol, diesel, jet fuel, heating oil,
asphalt, lubricants, synthetic rubber, plastics, fertilizers, antifreeze, pesticides,
pharmaceuticals, natural gas, and propane.
Petroleum is vital to many industries, and is of importance to the maintenance of
industrialized civilization itself, and thus is a critical concern for many nations. Oil accounts
for a large percentage of the worlds energy consumption, ranging from a
Low of 32% for Europe and Asia, Up to a high of 53% for the Middle East. Other geographic regions South and Central America 44%, Africa 41%, and North America 40%.
http://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Oil_refineryhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleum_producthttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Gasolinehttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Diesel_oilhttp://en.wikipedia.org/wiki/Fuel_oilhttp://en.wikipedia.org/wiki/Asphalthttp://en.wikipedia.org/wiki/Petroleum_cokehttp://en.wikipedia.org/wiki/Oil_refineryhttp://en.wikipedia.org/wiki/Petrochemicalhttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Heating_oilhttp://en.wikipedia.org/wiki/Asphalthttp://en.wikipedia.org/wiki/Lubricantshttp://en.wikipedia.org/wiki/Synthetic_rubberhttp://en.wikipedia.org/wiki/Plasticshttp://en.wikipedia.org/wiki/Fertilizershttp://en.wikipedia.org/wiki/Antifreezehttp://en.wikipedia.org/wiki/Pesticideshttp://en.wikipedia.org/wiki/Pharmaceuticalshttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Propanehttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Pharmaceuticalshttp://en.wikipedia.org/wiki/Pesticideshttp://en.wikipedia.org/wiki/Antifreezehttp://en.wikipedia.org/wiki/Fertilizershttp://en.wikipedia.org/wiki/Plasticshttp://en.wikipedia.org/wiki/Synthetic_rubberhttp://en.wikipedia.org/wiki/Lubricantshttp://en.wikipedia.org/wiki/Asphalthttp://en.wikipedia.org/wiki/Heating_oilhttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Petrochemicalhttp://en.wikipedia.org/wiki/Oil_refineryhttp://en.wikipedia.org/wiki/Petroleum_cokehttp://en.wikipedia.org/wiki/Asphalthttp://en.wikipedia.org/wiki/Fuel_oilhttp://en.wikipedia.org/wiki/Diesel_oilhttp://en.wikipedia.org/wiki/Jet_fuelhttp://en.wikipedia.org/wiki/Gasolinehttp://en.wikipedia.org/wiki/Liquified_petroleum_gashttp://en.wikipedia.org/wiki/Petroleum_producthttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Oil_refineryhttp://en.wikipedia.org/wiki/Natural_gashttp://en.wikipedia.org/wiki/Petroleum7/28/2019 Gail Report
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The world consumes 30 billion barrels (4.8 km) of oil per year, with developed nations being
the largest consumers the production, distribution, refining, and retailing of petroleum taken
as a whole represents the world's largest industry in terms of dollar value.
KEY FINDINGS:
India, in 2004-2005, met 75 %of its crude oil demand through imports. Thedomestic production of crude oil has been in the range of 30-34 Million Metric Tons
from 2001-2005. About 60 % of its crude import is from Middle East.
The consumption of natural gas grew at a CAGR of 2.7 % in the period 1999-2005,supported by rise in availability through domestic and imported sources of gas.
Oil comprises 36 % of Indias primary energy consumption in 2005, and is expectedto grow both in absolute and percentage terms driven by overall economic growth.
Growth in demand catapult the overall demand to 196 Million Metric Tons in 2011-
2012 and 250 Million Metric Tons in 2024-25.
Demand for oil is expected to grow from 119 Million Tons Oil Equivalent (MTOE),from 2004, to 250 MTOE, during 2025, at an annual growth of 3.6%. During the same
period domestic production from existing developed reserves is expected to grow at
approximately 2.5 %.
Natural gas comprises 14% of Indias primary energy consumption at present and demand for
natural gas is also likely to increase at an annual growth rate of 7.3%.
INDUSTRY HIGHLIGHTS:
IRG has recently downgraded its positive outlook on the Crude & Natural GasIndustry to Neutral outlook in December 2011.
Favourable demand outlook for natural gas in India to continue: Demand fornatural gas has been growing and continuing to grow at an unrelenting pace. From the
current share of 10% of the energy basket of the country, it is anticipated to grow
about to 25% by 2025. The demand from a variety of consuming sectors. However
power and fertilizer would require the maximum amount of gas in quantitative terms.
Future Prospects: Indias current gas transmission pipeline length is estimated at11900km (GAIL: 8000km; GSPL: 2000km; RGTIL: 1400km; OIL/AGCL: 500km)
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with a capacity of around 283MMSCMD as per a report format from ICRA dated
October 2011.Further, the pipeline network in India currently covers mainly the
western, central and northern parts, with the network being limited in southern and
eastern India.
GAS COMPANIES MARKETING SETUP
COMPANIES MARKETING THROUGH
ONGC & JVs GAIL OIL OIL ITSELF (EXCEPT RAJASTHAN
THROUGH GAIL)
CAIRN ENERGY LTD. ITSELF GSPCL ITSELF
Table: 1
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COMPANY PROFILE
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INTRODUCTION TO GAIL
GAIL (India ) Limited was incorporated in August 1984 is engaged in transmission, gas
processing and downstream petrochemicals (which use natural gas as a primary input).Apart
from these businesses, GAIL also has interests in the Liquefied Natural Gas (LNG) business
and in city gas distribution projects both in India and overseas.
GAIL enjoys dominant position in the natural gas business with a market share of 75%. The
company is the only transmitter of gas with a national presence through its pipeline network
covering 7850km.
GAIL group of companies accounts for:
About 3/4th of natural gas transmitted in India through pipeline. More than of the natural gas sold in India. Almost 1/5th (21%) of polyethylene produced in the country. LPG produced for every 10th LPG cylinder in the country. Pipeline transmission of around 1/4thof the countrys total LPG. Gas supply for about of the countrys fertilizer produced. Gas supply for about of the countrys gas based power generation. Operating more than 2/3rd of countrys CNG station. More than countrys piped natural gas supply.
MAJOR PRODUCTS AND BRANDS:
Petrochemicals (G-Lex, G-Lens)
Liquid hydrocarbons (propane , pentane)City distribution gas (CNG, PNG)
Telecom (Gailtel)
Since 1984, GAIL has made significant contribution to the nations economy by supplying
natural gas through its pipeline network for:
Generation of over 87,000 MW of power. Production of over 145million tonnes of urea.
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Production of LPG for over 7cr. Households in the country Over 5.7 lakhs vehicles inthe country today running on CNG supplied by GAIL and over 7 lakhs households on
piped natural gas (PNG) in the country.
Production of petrochemicals of around 4 lakhs MTs which is used in the plasticindustry.
GROWTH:
The company has completed nearly two and half decades of an eventful journey. Starting
with a natural gas transmission co., it is today and integrated energy company along the
natural gas value chain with global footprints. Having started as a gas transmission company
in the year 1984, it grew organically over the years by building a large network of natural gas
trunk pipelines covering a length of around 7000 km. and over 1900 LPG Pipeline
Transmission network. The Company has added another 5000 km. of new pipelines in the
year 2011 at the estimated cost of Rs. 14,500 crores which have been approved by the Board
of the Company under Navratna Power? Today the company has interest in the business of
natural gas, LPG, liquid Hydrocarbons and Petrochemicals, Exploration and Production, City
Gas Distributions and is steadily developing its overseas presence. The major focus of the
company is to maintain its dominant position in the gas business, specially the transmission
segment. The thrust is to continue the relationship with existing customers as well as add new
customers. These new Pipeline would include large trunk Pipelines along with smaller
Pipelines which would connectivity along trunk lines so that prospective sources and
consumers are connected. In the year (2007-08) the Board of the Company has recommended
the issuance of one bonus share for every two equity shares held, subject to requisite
approvals.
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GAILS PIPELINE NETWORK TO THE GAS CONSUMERS IN THE
STATES OF:
GUJRAT
MAHARASHTRA
RAJASTHAN
MADHYA PRADESHDELHI
HARYANAUTTAR PRADESH
ANDHRA PRADESH
TAMILNADU
ASSAMTRIPURA.
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Figure: 2
In addition to supplying natural gas to various consumers, GAIL has also setup 7LPG plants and a petrochemical plant to extract value added products from gas.
GAIL produces around 1.35 MMTPA of liquid Hydrocarbon including LPG fromdomestic consumption.
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In the area of corporate social responsibility, one of the major projects of GAILhas been setting up of AIR POLLUTION RELATED DISEASE DIAGNOSTIC
CENTRES (APRDCs) in over 20 cities in various parts of the country, at a cost of
about Rs.4 cr. APRDC also works as R&D for development of facilities for
diagnosing suspended particles, which are known to cause acute heart diseases.
With the APRDC going functional, the hospital has acquired a system for
pulmonary lung function testing and other base line investigation of air pollution
related diseases.
To Combat the Pollution, GAIL is set to supply Natural Gas in 23 cities underBlue Sky Project in Mumbai, Pune, Sholapur, Agra, Allahabad, Kanpur,
Lucknow, Mathura, Ahmadabad, Hyderabad, Vijayawada, Gwalior, Indore,
Jhansi, Bareilly, Delhi, Ujjain, Kota, Kochi, Rajahmundry, Chennai, and
Bangalore.
GAIL has initiated steam conversion project based on waste heat recovery systemfrom GAILs gas turbines. This rare, multi-benefit project would not only utilize
clean development mechanism (CDM) for power generation, but also lead to
conversion of gas as well as increased energy efficiency.
Gail has consistent track record of dividend payment. So far GAIL has disburseddividend of Rs. 6,230 cr. to the shareholders including Govt. of India, which is
more than seven times the original investment of rs.845.65 cr. by the Government
in its equity capital. The Government has been disinvesting its shareholding in
GAIL from time to time, bringing down its equity holding to 57.345 % and
thereby contributing to the exchequer and additional amount of Rs. 3400cr.
CORPORATE STRATEGY ADOPTED BY GAIL:
The company has develop a long term strategic plan which has been reoriented during the
year, keeping in view the unfolding demand and supply scenario, entry of new competitors,
and changing dynamics in the market place. The goal set by the company includes doubling
of top and bottom lines in the near future. The strategy developed to realize the set goals is as
under:
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1. Tying up with producers and suppliers for marketing and transmission of natural gas on
long term and sustainable basis. This is likely to be realized by security more gas from new
gas finds and pursuing early finalization of contract with customers and suppliers.
2. Expanding of the pipeline structure from 7000 km. to 12000 km. with the laying of new
pipelines by 2011-12.
3. Pursuing of city gas distribution opportunities in the country. This requires the introduction
of Compressed Natural Gas for the automotive sector and Piped Natural Gas for commercial
and domestic use in 230 cities in a phased manner. The company also plans to strengthen
E&P capability and resources by participating as major partner/operator in domestic E&P
bidding. This would help in developing E&P as a self sustainable business for augmenting
additional supplies of natural gas. This would involve investment both domestic on-land and
offshore fields, with a balance portfolio of developmental and exploratory projects.
The natural gas demand in India is at an inflection point and increase forces are at work that
could dramatically increase the natural gas demand. The present sources of natural gas are
projected to deplete in the coming years and therefore, there is a need to look at new sources
that are coming up. The company is aggressively pursuing gas sourcing options both from the
new domestic sources as well through international sources by way of Pipelines and LNGroutes. Collectively, such a rapid rise in expected demand and realignment of sources of gas
supply will interact to determine the robust future gas structure.
In the area of Petrochemical business, the company is examining the possibility of expansion
of petrochemical complex and exploring Greenfield opportunities in the sector in India and
abroad. On the globalization front, the company is stepping areas having synergy with
existing businesses by entering into new and emerging gas rich countries with focus on
sourcing of gas and participating in downstream activities.
BUSINESS SEGMENT PERFORMANCE
The company has been achieving an all round excellent rating by government of India since a
MOU signing. During the year under review, the segment wise business performance of the
company is as under.
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1) NATURAL GAS
The company owns and operates a network of 7000km of natural gas high pressure trunk
Pipeline. It supplies over 80 million cubic meter of natural gas per day as fuel to power
plants, feedstock for gas based fertilizers plants to over 500 small, medium and large
industrial units to meet their energy and process requirements. The companys share of gas
transmission business is 79% and it holds 70% market share in gas marketing in India.
Natural Gas continues to constitute the core business of the company. The company
continues to have focus on securing gas supplies from international markets.LNG and
transnational Pipelines are the two prevalent modes of cross border gas trade and the
company has been making all efforts to bring Natural Gas in the country.
2) PETROCHEMICALS
The company owns and operates gas based integrated petro chemical plant at Pata, UP with a
capacity of producing 4,10,000 TPA of polymers i.e. HDPE and LLDPE, which has been
enhanced by 1,00,000 TPA from the earlier capacity of 3,10,000 TPA. The company is
currently in the process of setting up of 2,80,000 TPA Assam Petrochemical Complex at a
investment of Rs. 5460 cr. During 2007-08, the production of polymer was 3,86,000 MT and
polymer sales was 3,91,000 MT.
3)LPG TRANSMISSION AND OTHER LIQUID HYDROCARBONS
The company has 7 LPG plants in the country. In the year 2007-08, total liquid hydrocarbon
liquid production was over 1.348 million MT which mainly include 1.043 million MT of
LPG,0.156 million MT of Propane and 0.074 million of Pentane. The company is the only
company in India which owns and operates Pipelines for LPG Transmission. IT has 1900 km
LPG Pipeline network, 1300 km. of which connects western and northern parts of India and
600 km. of network is in the southern part of the country. The LPG transmission system has a
capacity to transport 3.8 MMTPA of LPG. LPG transmission throughput was 2.754 million
MT in the year 2007-08.
4) EXPLORATION AND PRODUCTION
In line the companys strategy and towards integration along the energy chain, E&P activities
had gathered momentum. The gas discoveries in blocks A1 and A3 in Myanmar are maturing
to development stage and various studies preliminary to finalization of the development plan
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and its implementation is underway. Presently, the company is involved in oil and gas
exploration activities over and acreage of 1.7lacs sq km. The company now holds a
participating interest between10% to 80% in 27 oil and gas exploration blocks. Of these 9 are
on land blocks and 18 are off shore blocks.
In India, there are 24 blocks which are in basins such as Mahanadi, Bengal, Gujarat-
Saurashtra, Mumbai, Cambay, Assam and Cauvery. The company has got stake in A1 and A3
blocks in Myanmar and block no. 56 in Oman .A beginning has been made by a company in
earning revenue from E&P activities. One of the on-land block in Cambay basin started
commercial production from Feb 2008 and Rs.6.90 Crore has been generated as revenue.
5) COAL BED METHANE
The company has been participating interest in 3 coal bed methane blocks within the area
of 1561 sq.km. two of which are in Chhattisgarh and one in Jharkhand. These blocks were
awarded to GAIL consortium in CBM-III bidding round.
6) TELECOMMUNICATION
Leveraging on its Pipeline network, the company has build up an OFC network for leasing
ofbandwidth as a carriers carrier. The companys telecom business unit-GAILTEL hasapproximately 13,000 km. network. During the year under review, GAILTEL achieved profit
before tax of Rs.3 cr.
BUSINESS HIGHLIGHTS: Dominant position in the natural gas transmission business with around 75% market
share domestically.
PROMOTERS AND STOCK INFORMATION DETAILS
Key Promoters Govt of India
Market Cap Rs 47758 crores
Promoters Holding 57.34%
% Pledged Nil
Table: 2
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FINANCIAL HIGHLIGHTS: Satisfactory liquidity position with cash / bank balance (including FDs) of Rs 2131
crores as on 31.03.2011
Comfortable leverage owing to more reliance on internal accruals for funding thecapex requirement.
In Rs. Crore FY 10 FY 11 FY 12(Estimate)
Net Sales 24996.4 32458.64 39346.14
OPM % 19.65% 17.05% 16.35%
PAT % 12.56 10.97 10.45
CASH PROFIT 4000.18 4534.17 5180.55
TNW 16601.75 19040.49 22729.05
ATNW 15028.63 17009.57 20698.13
TOL /ATNW 1.52 1.43 NA
TOTAL DEBT / ATNW 0.19 0.23 0.27
DSCR 16.73 19.64 43.3
CURRENT RATIO 1.29 1.23 1.39
Table: 3
MANAGEMENT / INDUSTRY HIGHLIGHTS: Govt. of India holding 57.34% Industry outlook- Neutral (IRG)
PROFITABILITY ANALYSIS:I. PAT MARGIN (%)
PAT margin is also known as net margins. It is a ratio which is used to determine the final
earnings of the company on every one Rupee of sales generated. It is used to determine the
net earnings of the company after paying the production as well as finance expenses. It is a
useful tool in analyzing the companys earnings after tax. For example, a companys sales
could rise, but if costs also rise, that leads to a lower profit margin than what the company
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had when it had lower profits. This is an indication that the company needs to curb its
expenses.
YEAR 2009 2010 2011 2012
PAT MARGIN % 11.79% 12.56% 10.97% 10.45%
Table: 4
Figure: 3
Interpretation:
PAT margin i.e. Profit after tax divided by net sales has shown an increment in 2010and then it has declined YOY but it does mean the profit has declined.
This is an indication that the company needs to curb its expenses.II. EBIDTA MARGIN (%)
EBITDA Margin is also known as operating margin. It is a ratio which is used to
determine operating efficiency of the company. The ratio is used to measure
11.79%12.56%
10.97%10.45%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2009 2010 2011 2012
PAT MARGIN %
PAT MARGIN %
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companys operating profits i.e. what would be the earnings of the company after
paying of fixed and variable costs of production. The higher the operating margins its
good for the company as it has a higher income available to take care of its other fixed
cost such as interest on debt. One must look at the operating margin ratio on Y-O-Y
and Q-O-Q basis and also compare the same with the peer group.
YEAR 2009 2010 2011 2012
EBIDTA MARGIN% 18.23% 19.65% 17.05% 16.35%
Table: 5
Figure: 6
Interpretation:
The higher the EBITDA margin value, the less operating expenses and the biggercompanys earnings are.
An increasing EBITDA ratio indicates better performance of the company. A higher value would indicate that the company is able to keep its income at a
sufficient level.
18.23%19.65%
17.05%16.35%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2009 2010 2011 2012
EBIDTA MARGIN%
EBIDTA MARGIN%
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PERFORMANCE ANALYSIS
I. CASH PROFIT:
YEARS 2009 2010 2011 2012
CASH PROFIT 3606.37 4000.18 4534.17 5180.55
Table: 7
Figure: 8
Interpretation:
It is the profit i.e. obtained by adding depreciation to PAT (profit after tax). GAIL has consistent increase in its cash profit YoY.
3606.374000.18
4534.17
5180.55
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
2009 2010 2011 2012
CASH PROFIT
CASH PROFIT
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GAIL CUSTOMER SATISFACTION
In an effort to increase customer satisfaction and provide a one-point destination to all
customers, GAIL opened its Delhi Branch Office on April 15, 2004. The office was
inaugurated by Chairman and Managing Director Mr Proshanto Banerjee in the presence of
more than 200 customers of R-LNG, Petrochemicals, Propane, SBPS & Pentane products.
Speaking on the occasion, Mr. Banerjee said, The Delhi Branch Office will provide a single
point destination to our customers located in the NCR. The branch office will enable
customers to acquaint themselves with the products and services offered by GAIL.
On the occasion, the online customer ledger was demonstrated to show the dynamic ledgers
of some customers who were present at the inauguration. Mr. Banerjee informed, We have
also put in place an accounting system which will allow our customers to have instantaneous
access to their ledger details over the internet. The customers appreciated the initiatives
being taken by GAIL to improve the customer services.
During 2003-04, the Delhi Branch Office was part of the Corporate Office and had total sales
of Rs 1,805 crore. It catered to 296 customers: 20 for natural gas and R-LNG; 138 for
polymer; 42 for propane; 89 for SBPS and 7 for pentane. The major customers include
Indraprastha Power Generating Company Limited, Maruti Udyog Limited, Kajaria Cermaics,
Parle Biscuits, Honda SIEL, Yamaha Motors Private Limited, OSRAM, Duraline India
Private Limited and Resham Polymers.
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GAIL EMPLOYESS ENGAGEMENT
GAIL has been one of the success stories amongst the PSU over the last two decades and the
relentless pursuit of excellence has been possible only due to GAIL talented and highly
motivated workforce. Since inception, the objective has been to achieve highest levels of
business growth with a lean and thin workforce. GAIL being a dynamic organization believes
that investing in people by means of training and development and by providing growth
opportunities to its employees, the organization would attain greater heights. In fact,
Engaging our employees for superior results" has been one of GAIL success mantras as it
fall under Hewitts Best Employer Zone in terms of the latest Employee Engagement Survey.
This is demonstrated not only by continuously increasing "Year-wise Value added per
employee ratio" but also GAIL has one of the highest profitability per employee ratio
amongst all the PSUs.
GAIL as an organization values commitment, dedication, integrity and sincerity. Right from
the early stages, employees are expected to take initiative and surpass the expectations of the
organization. Freedom to work and respect for individual's opinion are the mantras very
much prevalent in day-to-day working of GAIL. Close working relationship with peers &
superiors, collaborative & supportive working environment and informal work culture are
some of the facets of GAIL which makes it a very exciting company to work for.
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COMPETITIVE ANALYSIS:
The gas transmission has significant natural barrier which include substantialinvestment that would be required by a new entrant in order to duplicate the natural
gas transmission and processing facilities operated by GAIL and the relatively long
lead time before such assets would generate a reasonable return on investment.
Besides, GAIL is better positioned, given its existing asset base, to expand its existing
pipelines at relatively low cost to meet any increase in supply arrangements with all of
the major natural gas producers in India and purchases substantially all the natural gas
produced by ONGC, OIL and the existing JVs operating in India, potential
competitors could face issues in locating adequate supplies of natural gas.
Another natural gas transmission player GSPL (Gujarat state PETRONET Ltd) hasPNGRB to lay three cross country pipelines across India. The length of the said
pipeline is 3800 kms. This could compete with GAILs transmission pipelines thus
impacting the revenues and the overall performance of the company. RGTL is another
private sector player who could provide competition to GAIL in future.
SUBSTITUTION THREATS:
In India, growth in demand for gas has continuously out spaced its supply, leading to a
gas deficit scenario. Going forward, although supply is expected to increase at faster rate,
it will be insufficient to meet the entire demand. Moreover, Natural Gas primarily
competes with alternate fuels such as Naphtha and LPG. The price of natural gas is not
only competitive to these alternative fuels but also less volatile resulting in demand
growth out spacing the supply. Given below the data and graph for demand for natural
gas for various segments in India and supply for natural gas as projected by MoPNG in
India.
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YEARS
2011-12 2012-13 2013-14 2014-15SECTORS(mmtpa)
POWER 149 186 213 243
FERTILISER 57 68 68 68
CITY GAS 18 22 29 37
PETRO CHEM REFINERY 4 4 4 4
Table: 9
Figure: 10
YEARS
2012-13 2013-14 2014-15 2015-16SUPPLIERS
ONGC 25 28 27 24
OIL 3 3 3 3
JVs/ PRIVATE 13 13 12 11
Table: 11
149
186
213
243
5768 68 68
18 2229
37
4 4 4 4
0
50
100
150
200
250
300
2011-12 2012-13 2013-14 2014-15
MMTPA
YEARS
DEMAND FOR NATURAL GAS FOR DIFFERENT SEGMENTS IN
COUNTRY
Power
Fertiliser
City GasPetro Chem Refinery
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Figure: 12
I. BUSINESS MODEL - SWOT ANALYSIS
STRENGTH:
Leadership position in natural gas transmission sector, which is characterized by highentry barriers.
Regulated and stable returns have resulted in healthy profitability and stable cashgeneration in the past.
Benefits derived from downstream integration into Liquefied Petroleum Gas (LPG)and petrochemicals.
Low financial risk profile, considering its strong structure, high profitability, andcomfortable debt protection measures.
High financial flexibility, considering the value of its investments, access to surplusdeposits, and good standing among lenders.
Significant sovereign ownership and strategic importance.
WEAKNESS:
GAIL being a PSU confronts procedural delays from government of India withrespect to certain approvals. This t times delay the companys projects and could act
as an impediment for further growth as well.
25
2827
24
3 3 3 3
13 1312
11
0
5
10
15
20
25
30
2012-13 2013-14 2014-15 2015-16
MMTPA
NATURAL GAS SUPPLY PROJECTION
ONGC
OIL
JV/Pvt
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Since Government of India is a major stakeholder in GAIL, it is exposed to the risk ofsharing the under recoveries with the Oil marketing companies is taken by the
government of India and could differ from time to time. However one of the
advantages enjoyed by GAIL against other upstream players is that as of now, it share
the subsidy burden relating to only LPG not on any other fuel like petrol and diesel.
As per the government of India directives, in order t make LPG affordable to
domestic consumers, GAIL has been sharing the under recoveries of the national Oil
marketing companies, since the 2003-2004. Till FY 11 the total subsidy burden shared
by GAIL amount to Rs 10650 crores. For FY 11 the company had made a provision
of Rs 2111crs on account of sharing the under recoveries of OMCs.
The regulator has revised the gas transmission pricing norms. PNGRB has fixed thereturns for natural gas transmission companies at 12% of ROCE as against of 12%of
ROE earlier. This could affect the revenues from the existing pipelines while it could
enhance the revenue from new pipelines. Since GAIL has a chunk of revenues coming
from old pipelines, its revenue could be impacted in the next few years, in the process
also impacting ROCE.
Since FY 11 the output of the KG D6 block operates by reliance industries has startedto decline. The output has declined to 30 MMSCMD from the level of 50+
MMSCMD. This results inavailability of gas in domestic markets. Since GAIL in the
transmission business, low availability of gas results in lower capacity utilisation and
hence lower revenue. Therefore if KG D6 gas production does not improve in near
future, it could impact the GAILs revenue.
OPPORTUNITIES:
GAIL finds huge gas in KG (Krishna & Godavari) and Mahanadi basin increasing theavailability of natural gas.
Petrochemical industry expected to grow at CAGR of 17% over a period of 3years.This growth need petrochemicals capacity expansion
The overall gas production is set to double within 3 to 4 years thus demand meetingthe supply .This may result in government deregulating the natural gas prices.
Leveraging pipelines for Telecom. Entering into exploration business, which is going to boost the realization.
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Potential for efficiency gains Transmission system upgrading/expansion Strong domestic energy demand growth.
Increasing Demand for LNG. Expanding Indian Natural Gas Market.
THREATS:
Rise in natural gas prices can lead to reduction in margin in petrochemical business.The main problem is that the price of gas is regulated by the government.
Domestic marketing makes the company subject to threat of subsidy burden and
pricing policies of petroleum ministry.
Petrochemical prices may go down in the next two years on account of capacityadditions in the industries.
Rising investment requirement for new upcoming project. Changes in national energy policy. Intense Domestic Competition
Shift to Alternative Sources of Energy like hydro energy, nuclear energy, windenergy, thermal energy.
Fluctuation in Gas and Petrochemical Price.
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CONCLUSION
RevenueThe companysrevenue registered a growth of around 30% in FY2011 over FY2010.This
was mainly backed by improved physical performance in gas transmission segment and
increase in APM gas prices.
Non operating IncomeThe company enjoys dividend and interest income on account of its investment in various
group companies/JVs and through fixed deposits with banks. During FY2011, the
company earned Rs. 301.2 crores and Rs. 91.77 crores from dividend and FD interest
income respectively.
Cash flow / LiquidityThe company liquidity position is satisfactory on account of high net profit earned by it
resulting in high cash accruals. The companys cash & bank balance (including fixed
deposits) stood at Rs 2131croresas on March 31, 2011.
LeverageThe companys leverage ratios are at comfortable level on account of substantial net
profit and low dependence on external debt, with more reliable on internal accruals for
funding the capex requirement. Due to healthy cash generation , GAILs borrowing level
have remained below expectation with TOI/TNW for FY11 at 0.67.GAIL enjoys high
financial flexibility on account of strong financial position and good standing among
lenders. With healthy growth in profits, the companys debt coverage indicators remain
robust.
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BIBLIOGRAPHY AND REFERENCES
Book Referred:
- P.N Varshney- Banking Law & Practices.Websites and Blogs:
- http://www.indiainfoline.com/Markets/Company/Background/Company-Profile/kotakmahindra
http://www.greenbackforex.net/elearn/dev/principal_only_swap.htm
- http://en.wikipedia.org/wiki/Interest_rate_swap- http://www.answers.com/topic/transfer-agent- http://www.investopedia.com/terms/b/bond-trustee.asp#axzz1vu9Uwoq8- http://en.wikipedia.org/wiki/Merchant_banker- www.economictimes.indiatimes.com/kotak-mahindra-bank-
ltd/quotecompare/companyid-12161.cms
- http://www.ibef.org/download/Banking_Story_KOTAK_MAHINDRA.pdf- http://business-standard.com/content/research_pdf/kmb_110512.pdf- http://www.gailtenders.in/tender_report.asp- http://www.epa.gov/airquality/oilandgas/basic.html- www.indianfirms.com- www.moneycontrol.com- www.gail.nic.in-
www.gailtenders.in
- http://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAIL
- http://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scrips
- http://Gailgasannualreport.pdf
http://en.wikipedia.org/wiki/Merchant_bankerhttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://www.ibef.org/download/Banking_Story_KOTAK_MAHINDRA.pdfhttp://business-standard.com/content/research_pdf/kmb_110512.pdfhttp://www.gailtenders.in/tender_report.asphttp://www.epa.gov/airquality/oilandgas/basic.htmlhttp://www.indianfirms.com/http://www.moneycontrol.com/http://www.gail.nic.in/http://www.gail.nic.in/http://www.gailtenders.in/http://www.gailtenders.in/http://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/GAIL%20%28INDIA%29%20LTD/GAIL/532155/Scripshttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=GAILhttp://www.gailtenders.in/http://www.gail.nic.in/http://www.moneycontrol.com/http://www.indianfirms.com/http://www.epa.gov/airquality/oilandgas/basic.htmlhttp://www.gailtenders.in/tender_report.asphttp://business-standard.com/content/research_pdf/kmb_110512.pdfhttp://www.ibef.org/download/Banking_Story_KOTAK_MAHINDRA.pdfhttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://www.economictimes.indiatimes.com/kotak-mahindra-bank-ltd/quotecompare/companyid-12161.cmshttp://en.wikipedia.org/wiki/Merchant_banker
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