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GAIL (India) Ltd.

BSE: 532155 Sector: Others
NSE: GAIL ISIN Code: INE129A01019
BSE LIVE 15:40 | 13 Dec 491.50 -0.45
(-0.09%)
OPEN

493.00

HIGH

502.55

LOW

486.95

NSE 15:51 | 13 Dec 491.80 -0.10
(-0.02%)
OPEN

493.85

HIGH

502.80

LOW

486.40

OPEN 493.00
PREVIOUS CLOSE 491.95
VOLUME 1124607
52-Week high 502.55
52-Week low 308.18
P/E 21.79
Mkt Cap.(Rs cr) 83,127
Buy Price 0.00
Buy Qty 0.00
Sell Price 491.50
Sell Qty 468.00
OPEN 493.00
CLOSE 491.95
VOLUME 1124607
52-Week high 502.55
52-Week low 308.18
P/E 21.79
Mkt Cap.(Rs cr) 83,127
Buy Price 0.00
Buy Qty 0.00
Sell Price 491.50
Sell Qty 468.00

GAIL (India) Ltd. (GAIL) - Chairman Speech

Company chairman speech

Dear Shareholders

GAIL (India) Limited registered record profits during the last fiscal year reflectinggrowth across business segments. The petrochemicals segment delivered doubling of marketedvolumes with additional volumes from Pata expansion and Assam subsidiary. Successfulre-negotiation of the long-term LNG contracts with suppliers brought stability and growthin the gas markets. The year was significant for GAIL as it was authorized the prestigious'Pradhan Mantri Urja Ganga' pipeline project in East India for implementation by 2020.This encouraging development has unleashed a fresh wave of capex cycle by GAIL tocapitalize upon promising opportunity of growth in newer markets.

Operating Environment

Last fiscal year your Company's business continued to operate in an uncertainenvironment on many accounts triggered by domestic and international factors. The Asianmarker price for LNG hovered around $5.5/mmbtu during CY 2016 signifying an average dropof 40% in LNG spot trade prices over the previous year. Newer markets across the globe andAsia in particular seized the opportunity to grow LNG consumption by 5% on a year-on-yearbasis supported by copious flow of volumes from sources in Australia and USA. Influence ofa fragile understanding of OPEC members to control flow of crude oil had little tonegligible impact on the LNG trade as gas flowed in surplus. Globally the industry ruedlack of sufficient interest by participants to embark upon the next cycle of capex as theend consumers have settled into a here-and-now decision making approach for buyinggas/LNG. Industry for now remains on a wait-and-watch mode.

On several accounts markets remained on tenterhooks due to geopolitical developmentssuch as Britain's exit from the European Union changes in outlook on trade policy of USAmarked by a transition in the political leadership and growing universal fondness forelectric vehicles and solar power.

On the back of the bullish buying spree by Asian economies India too imported a record19 MMTPA of LNG supported by consumption in the power sector under the PSDF scheme andregistered a near equal share of domestic and imported gas consumption during the fiscalperiod. Gas consumers in India cutting across categories are now mirroring global trendof contracting supplies for short to medium term basis. Alongside domestic producers areexperimenting auction based marketing of gas from newer finds on medium term basis. At thesame time the nodal Ministry is also keen to establish a gas trading hub. Thesedevelopments though at an exploratory stage signify a movement towards structural shiftfor natural gas business in India.

Growth was witnessed in the petrochemicals portfolio of your Company amidst short-termvolatility triggered by game-changing policies by Government of India (GoI) spanningacross industries to usher greater transparency and ease of doing business. Also the muchanticipated transition towards Goods & Service Tax (GST) based tax codefinecessitatedoperational changes during the year to gear-up for imminent change-over. Consumersentiments prevailing in the market during closing quarter of the year against thebackdrop of macro-economic developments led to buoyant sales of petrochemicals and creatednew record.

Growth amidst Odds

Amidst the uncertainties and challenges the year gone by has been path-breaking andeventful on several fronts for your Company. Physical performance across all the businesssegments registered an impressive uptrend over the previous year and contributed to thegrowth in the Company's net profit by about 73%. Several cost optimization and revenuemaximization e orts too yielded healthy returns. Your Company had to re-work the salesstrategy such as re-opening exports market options in the wake of demonetization tomaintain growth momentum in the segment and achieve record sales. GAIL having switched toelectronic payment system in the earlier years welcomes the digitalization drive of GoI.The digital infrastructure that your Company has nurtured over the years has also enabledeasier switch-over of operations in the GST regime.

In a historic move GAIL received an approval for construction of the prestigious'Pradhan Mantri Urja Ganga' natural gas pipeline project spanning 2600 kilometers fromJagadishpur to Haldia-Bokaro-Dhamra covering five States with a thrust to connect easternIndia with the gas grid network. GoI accorded 40% capital grant for financially supportingthe project a first of its kind move in the natural gas infrastructure development in thecountry. Additionally city gas distribution at seven locations enroute the pipeline andan in-principle nod for suitable implementation of uni ed tari mechanism for the pipelinegrid of GAIL were also included in the comprehensive package to ensure high rate ofutilization from the very commissioning of the project. Execution of the pipeline networkis underway in phases and is expected to be within schedule to connect the threefertilizer plants under revival mode at Gorakhpur Barauni and Sindri and also the ureamanufacturing unit at Durgapur. GAIL has initiated synchronous measures to ensure adequateflow of gas from both ends of the pipeline by tying up 1.5 MMTPA liquefaction capacity atthe upcoming regas terminal at Dhamra Odisha and also upgrading theVijaipur-Auraiya-Phulpur section for ensuring feed at times from the western coastsources. Along with these projects in east India GAIL is pursuing completion of othermajor pipeline projects including Kochi-Mangaluru segment and has an aggregate capitaloutlay of over Rs.17000 crores to be executed by 2020. This wave of common carrierpipeline infrastructure addition of your Company shall be a significant engine of growthonce completed as it tends to expand market base for natural gas in the country.

The year also brought renewed hope for the RLNG segment with novel and market savvycontract structuring for supply of gas to fertilizer sector and for RGPPL in the powersector. Your Company also exploited the current conditions prevailing in the shippingmarket to put in place a swap contract concept for reducing charter rates to India fromthe upcoming volumes from USA to ensure competitive delivery of LNG for Indian consumers.Initiatives have also been taken to de-risk exposure of USA contracted LNG by tying upinnovative time-swap options with international parties for significant volumes. At thesame time GAIL strives to orient customer relationships led by shifting realitiesunderpinning the market so as to provide unmatched service based on trust and maintenanceof contractual sanctity that form the bedrock of international trade practices in thisindustry.

Your Company's petrochemicals division clocked over 70% higher sales during the yearover the earlier fiscal on the back of additional ramp-up volumes available from the newcapacity at Pata and BCPL Assam. Development of niche grades is underway and in thequarters to come GAIL shall continue to roll-out products for niche applications toconsumers across India and overseas. Petrochemical exports to the neighbouring Asiancountries were resumed by your Company to strategically spread into international marketsas we continue to deeply engage and create value for home-grown consumers. Your Company iscurrently engaged in examining the next wave of investments into the petrochemicalsbusiness in southern India as the expansion at Pata unit and green-field BCPL plant havenow stabilized operations post their commissioning.

Leveraging Growth Opportunities

Considering the incremental gas in the main grid system your Company is taking severaloperational measures to enhance extraction of rich hydrocarbons for expanding market-shareof mainly LPG and Propane products. Your Company is also engaged in exploring setting-upgreenfield value added petrochemicals plant around Kakinada area Andhra Pradesh incollaboration with other partners. New project investments across NG/LPG pipelinespetrochemicals regasification terminals and coal gasification project for TalcherFertilizer revival are expected to run concurrent in the ensuing wave of capex cycleunder active consideration.

Authorisation of city gas distribution at seven towns/cities of eastern India to yourCompany and the recent inauguration of the Bengaluru city gas project by the Hon'bleMinister of State (I/C) for Petroleum & Natural Gas denote the growing thrust of GoIfor ensuring rapid reach of natural gas for consumption by the general public as a cleanand convenient fuel.

The apex think-tank institution NITI Aayog has envisioned in its series reportsreleased during the recent months that natural gas will inevitably make progressivestrides for usage as a fuel for domestic cooking and transport sectors in the medium tolong-term.This serves as an encouraging reference for the industry's growth story inserving India's energy mix. During the last year gas retailing segment constituting PNGand CNG recorded double digit growth ranging 12-15% in consumption of gas across variousdistribution companies. An impressive spell is expected from this sunrise sector toupstage gas consumption by the power sector. Sixty- five times over-subscription of yourCompany's joint venture company - Mahanagar Gas Limited - during the last fiscal year andcurrently trading at 2.5X its o er price is an encouraging sign for the promise that thesector as a whole is going forward.

Your Company is also actively involved in supporting and shaping policies for spurgrowth of natural gas in the country across various sectors including the anchor industrysegments of power and fertilizers. Your Company has also been submitting various reportsto the GoI for inclusion of natural gas under the reformist GST structure sincetransmission services are already covered for ensuring competitiveness of the environmentfriendly fuel vis-a-vis other polluting fuels. I am con dent that your Company's closeknit working with the policy makers as a pioneer of the gas industry in India would helpexpand and mature the gas based economy in the country in an equitable and transparentmanner.

Continuing Trust & Investments for Value Creation

In this exciting journey of your Company in the midst of uncertainties around the gasmarkets in an increasingly competitive landscape I express my gratitude for your unshakenfaith in continuing your investments in the Company's management and employees. 'NIL'report for the eighth successive year by the Comptroller & Auditor General of India isyet another convincing fact on the accounting standards devoutly followed by your Company.

I would like to place on record my indebtedness to the various communities that weengage across the country and for their overwhelming response to the 'Hawa Badlo'awareness campaign that has now swelled to over two million strong advocates for naturalgas.

Your Company appreciates the unwavering faith of the consumers to continue with theirconviction of using our diverse range of natural gas petrochemicals liquid hydrocarbonproducts and transmission services towards the creation of a better tomorrow.

As the Board strives to create value for the enterprise on behalf of the entire BoardI take the opportunity to acknowledge the support of central and state governmentsregulators vendors partners and other stakeholders for supporting our devout push toexpand clean energy solutions.

On behalf of the Board I record my appreciation to all the employees for theirinvaluable contribution in shaping growth of your Company.

B. C. Tripathi

Chairman & Managing Director