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Gujarat Gas Ltd.

BSE: 539336 Sector: Others
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OPEN 859.00
52-Week high 973.95
52-Week low 721.60
P/E 45.57
Mkt Cap.(Rs cr) 11,783
Buy Price 0.00
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Sell Price 0.00
Sell Qty 0.00
OPEN 859.00
CLOSE 854.95
52-Week high 973.95
52-Week low 721.60
P/E 45.57
Mkt Cap.(Rs cr) 11,783
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Gujarat Gas Ltd. (GUJGASLTD) - Director Report

Company director report

Dear Members Gujarat Gas Limited

Your Directors have pleasure in presenting the 5th Annual Report and the AuditedFinancial Statements for the Financial Year ended on 31st March 2017.

Financial Highlights

Standalone Financials Consolidated Financials

12 Months ended 31/03/2017

12 Months ended 31/03/2016

12 Months ended 31/03/2017

12 Months ended 31/03/2016

Rs. in Cr. Rs. in Cr. Rs. in Cr. Rs. in Cr.
Total income 5264.19 6289.98 5264.21 6289.99
Gross profit before interest depreciation and tax 769.62 746.57 769.63 746.58
Less: Interest 208.96 247.44 208.96 247.44
Depreciation 257.33 245.42 257.33 245.42
Profit before tax and share of profit of associate 303.33 253.71 303.34 253.72
Share of Profit from Associates - - 1.35 2.14
Minority Interest - - - -
Profit/(Loss) Before Tax 303.33 253.71 304.69 255.86
Tax expenses 83.83 65.38 84.10 65.82
Net Profit after tax for the period 219.50 188.33 220.59 190.04
Other Comprehensive Income ( after tax)(OCI)
-Equity Instruments through OCI (40.11) (31.97) (40.11) (31.97)
- Re-measurements of post-employment benefit obligation net of tax (2.56) (1.98) (2.56) (1.98)
Share of Other comprehensive income of associate - - (0.02) 0.01
Total Comprehensive Income 176.83 154.38 177.90 156.10
Net Profit after tax for the period carried to retained earnings 219.50 188.33 220.59 190.04
Add : Other Comprehensive Income carried to retained earnings (2.56) (1.98) (2.58) (1.97)
Add: Undistributed profit /(loss) of earlier years 396.46 292.96 414.23 309.01
Balance available for Appropriation 613.40 479.31 632.24 497.08
Less: Appropriations:
Transfer to general reserve - - - -
Preference dividend - - - -
Equity dividend paid (34.42) (68.84) (34.42) (68.84)
Corporate dividend tax on Equity dividend (7.01) (14.01) (7.01) (14.01)
Interim Dividend - - - -
Corporate dividend tax on interim dividend - - - -
Add; Transfer from Debenture Redemption Reserve 125.00 - 125.00 -
Surplus / (Deficit) retained 696.97 396.46 715.81 414.23
Earnings per Share (Face value of Rs. 10 each)
(Basic & Diluted) 15.94 13.68 16.02 13.80


Your Company continues to hold the leadership position as the largest CGD Company inthe country catering to 1164461 residential customers 12341 commercial customersdispensing CNG from 252 operational CNG stations for automotive sector and providing cleanenergy solutions to 3067 industrial units across its operational area with a spread ofaround 19974 kilometers of pipeline network.

While Gujarat Gas Limited (GGL) has been resilient in sustaining the industrial volumessuccessfully in the ever dynamic oil & gas industry it has continued to focus itsefforts for developing and growing PNG (Domestic) and CNG business. GGL connected around85441 household customers and commissioned 22 CNG stations during year. Sales volume hasgrown by 4% in the residential segment and 8% in transport (CNG) segment.

The stand-alone net profit after tax (Total comprehensive income) for the current year2016-17 increased to Rs. 176.83 Crores from Rs. 154.38 Crores in the previous year. TheCompany had healthy net cash flows from operations of Rs. 701.61 crores during the year2016-17.


Your Directors recommend for consideration of the shareholders at the 5th AnnualGeneral Meeting the Dividend of Rs. 3.00 per fully paid up equity share of Rs. 10/- eachon 137678025 equity shares for the Financial Year 2016-17.


Your Company's equity shares have been listed and trading on BSE Limited (BSE)National Stock Exchange of India Limited (NSE) Ahmedabad Stock Exchange Limited (ASE) andVadodara Stock Exchange (VSE) with effect from 15th September 2015. The ISIN of EquityShares is INE844O01022. Further it is brought to the notice of Shareholders that SEBI videits Order No. WTM/RKA /MRD/144/2015 dated 9th November 2015 had provided the exit toVadodara Stock Exchange Limited and in view thereof the Company is no longer listed onVSE. It is also brought to the notice of the Shareholders that the Company has received aletter dated 11/01/2017 from Ahmedabad Stock Exchange Limited wherein it has been informedthat Ahmedabad Stock Exchange Limited (ASEL) is undergoing its exit policy and because ofthat all the Companies listed with ASEL are shifted to NSE BSE or dissemination BoardNSE. So the Company is requested to do all the Compliance with relevant exchanges wherethe Company is further listed or with Dissemination Board NSE and not with ASEL. As yourCompany is already listed with NSE and BSE no additional compliance is required.


Your Company does not have any subsidiary and joint venture and Guj Info Petro Limitedis the Associate of your Company a statement containing salient features of financialstatements of Guj Info Petro Limited under first proviso to sub section (3) of section 129in form AOC-1 is attached at Annexure-7.


The Consolidated Financial Statements of the Company represents consolidation ofFinancial Statements of Guj Info Petro Limited (GIPL) an associate company and GujaratGas Limited Employees Welfare Stock Option Trust (ESOP Trust) in accordance with IND AS.

1. Investment in associate has been accounted for using Equity Method in accordancewith IND AS 28 - Investments in Associates and Joint Ventures.

2. Consolidation of Employees Welfare Stock Option Trust (ESOP Trust) resulting intoadjustment of underlying treasury shares and disclosed in the statement of other Equity infinancial statement in accordance with IND AS.

The Audited Consolidated Financial Statements are provided in the Annual Report.


The financial statements have been prepared in accordance and compliance of allmaterial aspects of Indian Accounting Standards (Ind AS) notified under Section 133 of theCompanies Act 2013 (the Act) [Companies (Indian Accounting Standards) Rules 2015] andother relevant provisions of the Act read with Rule 3 of the Companies (Indian AccountingStandards) Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules 2016.


The Group has adopted all the Ind AS standards and the adoption was carried out inaccordance with Ind AS 101 - First time adoption of Indian Accounting Standards includingrelevant clarifications issued by Ind AS Transition Facility Group (ITFG) on variousissues. The transition was carried out as the Indian Accounting Principles generallyaccepted in India as prescribed under Section 133 of the Companies Act 2013 read withRule 7 of the Companies (Accounts) Rules 2014 (IGAAP) which was the previous GAAP.


During the year under review your Company has not accepted deposits from the publicfalling within the ambit of Section 73 of the Companies Act 2013 read with Companies(Acceptance of Deposits) Rules 2014.


The details of Loans Guarantees Securities and Investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in the Notes to theFinancial Statements.


All Related Party Transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. A statement givingdetails of all Related Party Transactions is placed before the Audit Committee forapproval/ ratification on a quarterly basis as the case may be. The Policy on Materialityof Related Party Transactions and Dealing with Related Party Transactions as approved bythe Board is uploaded on the Company's Website. None of the Directors has any pecuniaryrelationships or transactions vis-a-vis the Company. The particulars of contracts orarrangements with Related Parties referred to in Section 188 (1) of the Companies Act2013 as prescribed in Form AOC - 2 of the Companies (Accounts) Rules 2014 is enclosedherewith as Annexure -4 to this Report.


The Company has constituted a Corporate Social Responsibility (CSR) Committee inaccordance with Section 135 of the Companies Act 2013 read with Companies (CorporateSocial Responsibility Policy) Rules 2014. Pursuant to provisions of Section 135 of theCompanies Act 2013 the Company has also formulated a Corporate Social ResponsibilityPolicy which is uploaded on the website of the Company at The Annual Report on CSRactivities as required under the Companies (Corporate Social Responsibility Policy) Rules2014 is enclosed herewith as Annexure - 2 to this Report.


Shri G.R. Aloria IAS ceased to be the Director of the Company w.e.f. 30th July 2016Shri Atanu Chakraborty IAS ceased to be the Director of the Company w.e.f. 11th April2016 Shri L Chuaungo IAS ceased to be the Director of the Company w.e.f. 27th June 2016and Shri Mukesh Kumar IAS ceased to be the Director of the Company w.e.f. 8th August2016. The Shareholders of the Company in its 3rd Annual General Meeting held on 28thDecember 2015 had appointed Prof Pradip Khandwalla and Shri Ajit Kapadia as theIndependent Directors of the Company for the period of two years effective from 21stApril 2015.On account of expiry of their tenure as the Independent Directors of theCompany they ceased to be the Independent Directors of the Company w.e.f. 21st April2017. Shri Sanjeev Kumar IAS whose appointment had been regularized by the Shareholdersin the 4th Annual General Meeting held on 29th September 2016 ceased to be the Directorof the Company w.e.f. 27th June 2017. Your Directors wish to place on record theirappreciation for the services rendered by them as the Directors of the Company.

Dr. J. N. Singh IAS had been appointed as the Additional Director with effect from25/04/2016. Upon his appointment as the Chief Secretary Government of Gujarat he wasappointed w.e.f. 11th August 2016 as the Chairman on the Board of Directors in place ofShri G. R. Aloria IAS who retired from the office of Chief Secretary to Government ofGujarat w.e.f. 31st July 2016. The appointment of Dr. J. N. Singh IAS was regularized inthe 4th Annual General Meeting of the Company held on 29th September 2016. Shri SujitGulati IAS Additional Chief Secretary Energy & Petrochemicals Department had beenappointed as Additional Director with effect from 11th August 2016. His appointment wasregularized by the Shareholders in the 4th Annual General Meeting held on 29th September2016. The appointment of Dr. T. Natarajan IAS Jt. Managing Director GSPC wasregularized in the 4th Annual General Meeting of the Company held on 29th September 2016.He will retire by rotation and it is proposed to reappoint him as the Director of theCompany in the ensuing 5th Annual General Meeting. Shri Milind Torawane IAS had beenappointed as the Additional Director by the Board of Directors in its Meeting held on 10thAugust 2017 it is proposed to regularize his appointment in the ensuing 5th AGM. ShriJal Patel Smt. Manjula Shroff and Shri K.D. Chatterjee had been appointed as theIndependent Directors of the Company for the period of two years effective from 21stApril 2015 by the Shareholders of the Company in its 3rd Annual General Meeting held on28th December 2015. On account of expiry of their tenure and they being qualified andeligible for re-appointment as the Independent Directors of the Company in accordance withprovisions of Section 149 152 read with Schedule IV and all other applicable provisionsof the Companies Act 2013 and the Companies (Appointment and Qualification of DirectorsRules) 2014 they had been re-appointed by the Board of Directors vide CircularResolution dated 21/04/2017 for second term of 5 years effective from 21/04/2017 subjectto approval of shareholders at Annual General Meeting vide special resolution. Theirre-appointment is being placed for approval of the Shareholders in its ensuing 5th AnnualGeneral Meeting.

A brief resume of the Directors to be appointed at the ensuing Annual General Meetingnature of their expertise in specific functional areas and details regarding the Companiesin which they hold Directorship Membership / Chairmanship of committees of the Board aregiven in the Explanatory Statement forming part of the Notice of the 5th Annual GeneralMeeting.


Mr. Nitin Patil was appointed as the In-charge CEO of your Company with effect from 2ndMarch 2016. Further he was redesignated as the CEO of your Company w.e.f. 11th August2016.


Pursuant to the provisions of Section 149 (6) of the Companies Act 2013 theIndependent Directors of the Company have given confirmation/declaration to the Board thatthey meet with the criteria of Independence and are Independent in terms of Section 149(6) of the Companies Act 2013.


Pursuant to the provisions of the Companies Act 2013 the performance evaluation ofindividual Directors for FY 2016-17 was carried out as per the terms and conditions oftheir appointment based on the various parameters.


The Board meets at regular intervals to discuss and decide on Company / business policyand strategy apart from other Board business. The Board / Committee Meetings arepre-scheduled to enable the Directors to plan their schedule and to ensure meaningfulparticipation in the Meetings. However in case of a special and urgent business need theapproval is taken by passing resolutions through circulation to the Directors aspermitted by law which are noted in the subsequent Board/Committee Meetings.

During the period beginning from 1st April 2016 up to 10th August 2017 Eight (8)Board Meetings were convened and held the details of which are given in the CorporateGovernance Report. The intervening gap between the Meetings was within the periodprescribed under the Companies Act 2013.


As your Company is a Government Company the Statutory Auditors are appointed by theComptroller & Auditor General of India (CAG). Accordingly the CAG had appointed M/s.Manubhai & Shah LLP Chartered Accountants as the Statutory Auditors of the Companyfor the Financial Year 2016-17. The CAG has carried out supplementary audit of yourCompany pursuant to Provisions of Section 143 (6) of the Companies Act 2013. The CAG hasissued the NIL comment report on the Financial Statements of the Company for FY 2016-17.The Shareholders are further informed that CAG has appointed M/s. S R Goyal & CoChartered Accountants as the Statutory Auditors of the Company for Financial Year 201718.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company had appointed M/s Manoj Hurkat & Associates Practising CompanySecretaries to conduct the Secretarial Audit of the Company for the Financial Year2016-17. The Report of Secretarial Auditor on Company's Secretarial Audit for theFinancial Year 2016-17 is enclosed herewith as Annexure - 3 to this Report. TheSecretarial Audit Report is self explanatory in nature.


Your Company is required to carry out Cost Audit pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014.Accordingly the Cost Auditor M/s Dalwadi & Associates Cost Accountants have carriedout the Cost Audit for the Financial Year 2016 17. The Cost Audit Report for FY 2016 17has been submitted to the Central Government in the prescribed format within stipulatedtime period.

Further the Board of Directors has on the recommendation of the Audit Committeeappointed M/s. Kailash Sankhlecha & Associates Cost Accountants as the cost auditorto audit the Cost Accounts of the Company for financial year 2017-18 on remuneration ofRs. 150000/- (Rupees One Lakh Fifty Thousand only) plus GST and out of pocket expenses.

As required under the Companies Act 2013 the remuneration payable to the Cost Auditoris required to be placed before the Members in General Meeting for their ratification.Accordingly the necessary resolution seeking Member's ratification for the remunerationpayable to the Cost Auditors for FY 2017-18 is included in the Notice convening the 5thAnnual General Meeting.


The Audit Committee at its Meeting held on 23rd May 2017 approved the FinancialStatements for the Financial Year ended on 31st March 2017 and recommended the same forapproval of the Board which had been subsequently approved by the Board of Directors atits meeting held on 24th May 2017.


The Company has a well-defined Risk Management Framework for reviewing the major Risksand has adopted a Business Risk Management Policy. Further pursuant to the requirement ofRegulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Company has voluntarily constituted a Risk Management Committee inter-alia tomonitor the Risk Management Plan of the Company.


The Company has a proper and adequate system of Internal Controls commensurate with itssize of operations and nature of business. These are routinely tested and certified byAuditors. Significant audit observations of audit team and follow up actions thereon arereported to the Audit Committee. The details about the identification of elements of Riskand Internal Control Systems are provided in detail in the Management Discussion &Analysis Report forming part of this Board's Report.


The Company has in place adequate internal financial controls with reference tofinancial statement. The internal financial controls have been documented in the businessprocesses. Such controls have been assessed during the year under review and wereoperating effectively.


The Company has established a Whistle Blower Policy/Vigil Mechanism for DirectorsStakeholders and Employees to report their genuine concerns details of which have beengiven in the Corporate Governance Report forming part of this Boards'' Report.


1. The Eligible Employees were entitled to Revised Grants (with effect from the RevisedGrant Date) of equivalent number of Options - I under the ESOP 2016 against theequivalent number of Options Granted and Vested in them pursuant to the ESOP 2008 whichhad not been Exercised by them on the Effective Date under the Scheme of Amalgamation. 2.The Eligible Employee had been issued Revised Grant of 13000 number of Options - I underthe ESOP 2016 against the equivalent number of Options Granted and Vested pursuant to theESOP 2008.

3. The above Revised Grants of Options - I were on the basis of the Share ExchangeRatio of 1 (one) equity share of Rs.10/- each of GGL for every 1 (one) equity share ofRs.2/- each of erst while GGCL pursuant to the Scheme of Amalgamation.

4. These Options - I continued to bear the Exercise Price as per the ESOP 2008. TheExercise Price payable for Options - I under ESOP 2016 was based on the Exercise Pricepayable under the ESOP 2008 that has been adjusted after taking into account the effect ofthe Share Exchange Ratio of 1:1.

5. Upon the Revised Grant of Options - I the Options Granted under the ESOP 2008 stoodcancelled and the Eligible Employees were not entitled to any further eligibility criteriaunder the ESOP 2016 neither any further Grants were made under the ESOP 2016.

6. The Eligible Employees continued to be bound by all the terms and conditions of theESOP 2008 in addition to the ESOP 2016.

The Gujarat Gas Limited Employee Welfare Stock Option Trust Deed (“ESOP 2016 TrustDeed”) that is supplementary to the Deed of Gujarat Gas Company Limited EmployeeWelfare Stock Option Trust together with the Variation Deeds thereto (“the ESOP 2008Trust Deed”) was formed to hold the shares under ESOP 2016 Trust Deed to meetobligation in respect of the ESOPs granted to the Eligible Employees. The ESOP 2016 Trustshall be an irrevocable Trust.

13000 Options-I were granted to four eligible employees of the Company in terms of ESOP2016 and those 13000 options had been exercised by them. . It is confirmed that the ESOP2016 was in compliance with SEBI (Share Based Employee Benefits) Regulations 2014. Theapplicable disclosures as stipulated under Regulation 14 of SEBI (Share Based EmployeeBenefits) Regulations 2014 with regard to Employees Stock Option Plan of the Company areavailable on the website of the Company at and weblink for the same is investors-information.

The Nomination & Remuneration Committee in its meeting held on 6th February 2017approved the winding up of the Gujarat Gas Limited Employee Stock Option Plan 2016(“ESOP 2016”) together with the Addendum thereto as it had ceased to be in forceon account of all the outstanding Options thereunder having been exercised. It furtherapproved the sale in the secondary market of 92000 equity shares of GGL held by theGujarat Gas Limited Employee Welfare Stock Option Trust (ESOP Trust) on account of thewinding up of the ESOP 2016 and recommended the proposal for the approval of the Board ofDirectors which had subsequently been approved by the Board in its Meeting held on 6thFebruary 2017. On account of aforesaid approval the ESOP Trust sold surplus 92000 equityshares of the Company held by it in the secondary marketon 6th March 2017 and an amountof Rs. 2.58 crores had been paid by way of repayment of loans advanced by GGL (erstwhileGGCL) to the ESOP Trust for acquisition of shares.


Health Safety and Environment (HSE) is a core value in Gujarat Gas Limited a GSPCGroup Company. The Company believes that all injuries are preventable. We recognize thatHSE is everyone's responsibility and we each of us have a duty to intervene to preventunsafe actions and to reinforce safe behaviors. We conduct our business in a safe andresponsible manner and ensure compliance with the legal and regulatory requirements. TheCompany practices high level of HSE standards with an aim to protect health and safety ofpeople to minimize the environmental impact of our business activities and to assure theintegrity and safe operation of our assets. We set HSE targets and closely monitor toachieve continual improvement in our performance.

We are committed to ensure that the assets are safe and fit for purpose throughouttheir life cycle. The safe delivery of our projects and safe operations of our assets is acritical success factor for our business. The Company has completed certification of itsEmergency Response & Disaster Management Plan (ERDMP) as well Integrity ManagementSystem (IMS) from PNGRB approved Third Party Inspection Agency in line with therequirements of the PNGRB regulations.

Gujarat Gas Limited being a prudent organization has joined hands in initiative likeSwachh Bharat Abhiyaan and is actively participating in various events & celebrationslike National Safety Week Road Safety Week and World Environment Day to make the societya cleaner greener and safer place.

The Company was awarded the ‘Golden Peacock Occupational Health and Safety Award2016' for its exemplary performance and excellence in maintaining high standards of safetyin Gas Sector. The prestigious award was received by the Company from the hands of PiyushGoyal Hon'ble Union Minister of State (I/C) for Power Coal & Renewable Energy Govt.of India at the Golden Peacock Awards function held at New Delhi on the 10th of July2016.


The Management Discussion & Analysis is as under:


Natural gas plays a significant role in the global energy arena with its presence andusage across all activities in the economy and India is no exception to this rule.Globally natural gas accounts for around 24% of primary energy consumption while Indiacurrently accounts for around 6.5% which demonstrates the immense potential for growth ofthis fuel in the overall energy mix of India. Natural gas has grown at a consistent paceof around 4% in the last decade buoyed by import of natural gas at a CAGR of around 9.3%1. It is worth mentioning that the share of natural gas in Gujarat's energy basket is 25%which is higher than the global average2 . The use of Natural Gas has been predominantlyin fertilizers industry 34%; followed by power generation 23%; City or Local Natural GasDistribution 11%; Refinery 11%; Petrochemicals 8% and others 13%. Industry wise off-takeof natural gas shows that natural gas has been used both for Energy (55.76%) andNon-energy (44.24%) purposes1. This has been complemented by continuous improvement andadvancement in techno-economic dynamics evolving the sector from the primitive mode oftapping the fuel from land shore off-shore coal seam etc. to the recentcommercialisation of natural gas found in shale and channelized to markets in liquid orgaseous state through viable modes of infrastructure including cargos pipelinescryogenic containers etc.

Energy has profound implications on mankind and their socio-economic-political spheresintegrated across the globe. The global energy basket is led by oil closely contested bycoal and then followed by natural gas and other fuels in respective order of their sharein global consumption pattern. Among the leading nations of energy consumption India hashad a tremendous growth trajectory of around 5% over the last one and half decade toconsistently position itself at the third3 place only next to China and United Statesrespectively for nearly a decade. India has been highly dependent on imports of oil andgas with a CAGR of around 8% since the last decade. The Government of India has urged allstakeholders to increase the domestic production of Oil and Gas to reduce importdependence from 77% to 67% by the year 20224 . India has been rated the fastest growingG20 economy registering an economic growth of around 7.1%5 in the fiscal concluded onMarch 31 2017 even after recording a sluggish index of industrial production6 . This isfurther complemented by the fact that the energy intensity of GDP of India is lower thanthe world average including that of United States BRICS among others. The world economyis expected to almost double over the next 20 years with India and China accounting foraround half of the expected increase3.

Globalisation is an economic phenomenon but impacts all fields of human life making ita boon and a bane. The consolidation brings in efficiency and equitable access toresources across the globe but also makes it vulnerable to the changes happening in theglobal arena like Britain's exit from the European Union (Brexit) Paris Agreement (onClimate Change) the refugee crisis conflict in the Middle East few nation's electoralmandate China's economic sluggishness OPEC and Non-OPEC Nation's decision for oilproduction cut to name a few. While these may not have a direct impact on the Indianeconomy per se however they do create volatility in the global trade. The same isreflected in one of the globally traded commodities crude which settled at levels belowUS$ 60/ bbl after an inconsistent trajectory in the recent past.

The disruption in the global oil and gas market impacted the prices starting FY2014-15 after having a stable run for more than half a decade attributed to theincreased supplies and dwindling global demand which piled up inventories. The stabilitywas reinstated to the levels of around US$ 50-55/ bbl through the production cut agreed byOPEC and Non-OPEC countries. This phase left the stakeholders globally guessing about theprices and the consequential impact on the economic activities all across.

In addition to the above the Indian economy evidenced some major policy changes in thefiscal concluded on March 31 2017 including the passing of the Goods and Services Tax(“GST”) bill in both the houses of Parliament which received the assent of theHonourable President of India on September 08 2016 demonetisation of the legal tender ofall currency having denomination of Rs. 500/- and Rs. 1000/- with an intention to curb -corruption counterfeiting antisocial activities; changing from cash economy to digitalpayments etc. complementing the initiatives like Start-up India Digital India Make inIndia Smart Cities etc. The demonetization along with the implementation of the GST islikely to have a positive impact over the medium term including widening of the tax netand improved tax compliance. Further the currency so channelized into the banking systemwould reduce the lending rates and augment the growth of Indian economy. The fiscal andmonetary policy reforms were supported by sectoral initiatives which included introductionof Hydrocarbon Exploration and Licensing Policy LPG Give it up Campaign Pradhan MantriUjjwala Yojana (PMUY) marketing and pricing freedom for new gas production Diesel PriceDeregulation Discovered small field policy etc4. Notwithstanding the aforementionedfactors and ever dynamic business environment the Indian economy and the oil and gasindustry (including City Gas Distribution (CGD)) could sustain and maintain the growthmomentum. While the geo-political events policy changes and other chaos posed globallyand within the country could be meted out gallantly during the bygone fiscal reflected insustenance of demand but nevertheless failed to leave its mark denting the CGD growth.The CGD business is a sun-rise business drawing focus of policy makers and associatedstakeholders towards tapping the immense growth potential and though may be subjected tochallenges due to the ever dynamic business environment would not deter from the growthpath in the long run. In addition the global consensus exhibited during the Parisagreement on climate change makes it evident the clean and green fuels would continue toenjoy priority and support from policy makers and key stakeholder alike.


At the twenty-first session of the “Conference of the Parties” (COP) held inParis France the parties adopted the Paris Climate Change Agreement under the UnitedNations Framework Convention on Climate Change. The Agreement was opened for signature onApril 22 2016 at a high-level signature ceremony convened by the Secretary General in NewYork. India also deposited its instrument of ratification of the Paris Agreement with theUnited Nations in October 2016. The agreement further translated into action basedpolicies by the Ministry of Petroleum and Natural Gas Ministry of Road Transport andHighways

Ministry of Environment and Forests etc. Among other initiatives that marked the focuson natural gas usage includes introduction of Hydrocarbon Exploration and LicensingPolicy marketing and pricing freedom for new gas production discovered small fieldpolicy Gas4India campaign smart cities etc. The Government of India's commitment for agas-based economy is patent in its efforts to increase the share of natural gas in thecountry's energy basket from 6.5%7 towards achieving global benchmark.

To increase the share of natural gas in India's energy mix harness domestic sourcesexpand existing and erect new terminals for LNG imports floating storage facilities gastransportation etc. for catering the growing needs of existing and new demand centresthe efforts have assertively been augmented7 under the vision of the Government of India.Complementing these efforts public and private sector companies including City GasDistribution (CGD) companies Natural Gas Pipeline companies LNG Terminal companies andother industry stakeholders have joined hands to promote the natural gas sector with zeal.Gas4India an unified cross-country multimedia multi-event campaign aims to communicatethe national social economic and ecological benefits of using natural gas as the fuel ofchoice to every citizen who uses or will use in the near future gas in any way - tocook travel light their homes and power their businesses. Harmonising these initiativesthe sectoral regulator the Petroleum and Natural Gas Regulatory Board (PNGRB) whichgoverns and regulates the downstream gas industry has been proactive and aggressive inauthorising about 75 City Gas Distribution Networks and 53 Natural Gas Pipeline projectsto integrate and roll out infrastructure development on pan India basis.

Your Company has been optimally making the best utilisation of these opportunities byparticipating actively in the CGD bidding process tendered by PNGRB in the CGD Bid RoundVI. Your Company is proud to claim that it was victorious in 6 Geographical Areas (GA's)contiguous to the existing areas of operation in State of Gujarat which includes theDahej-Vagra Taluka (District Bharuch) Panchmahal District Ahmedabad District (excludingareas already authorized) Anand District (excluding areas already authorized) DahodDistrict and Amreli District. These contiguous areas and the potential demand loads wouldenhance the customer base across all business area propelling growth in volume andsynergise the Company's overall business. Your Company would continue to evaluate newopportunities to diversify its existing business into new markets organically andinorganically.

In addition to the aforesaid opportunities the industry is glaring at yet anotheravenue of growth and abundance in the form of commercially introducing CNG in two wheelerbusiness. Two wheelers comprise around 25% of the total vehicles on road at national level. Further there are other initiatives in the pipeline such as CNG stations for CNG runtrain LNG by trucks Green Corridor among other in-house research initiatives beingcarried out relentlessly.

Similar to any other business the Company faces challenges in the form of competitionfrom other conventional fossil fuels due to the abundance accessibility and availabilityat much cheaper rates notwithstanding the other subsidized/ non-subsidized renewablefuels as well. The fuel also faces threat in the form of disparity in the tax structurecompared to alternate fuels. The impetus on growth of natural gas sector as mentioned inthe above sections has attracted a lot of new players in CGD business. Notwithstandingthese your Company shall continue to focus placing environmentally clean natural gas toaffordable markets for sustainable growth.


Your Company which has an expanse of around 96000 square kilometres of licensed areaunder its umbrella and continues to hold the leadership position of being the largest CityGas Distribution Company in the country catering to more than 11.6 lakh residentialconsumers over 12750 commercial customers dispensing CNG from 252 operational CNGstations for vehicular consumers and providing clean energy solutions to over 3050industrial units through its wide spread operations with around 20000 kilometres ofnatural gas pipeline network.

After growing by 8.2% in FY2015 the industry decelerated to 5.8% in FY2016.Manufacturing value added grew by a healthy 7.7% though down from the 10.6% recorded ayear earlier. Growth reflected robust performance by large private manufacturers whichbenefited from lower input costs. However healthy growth in manufacturing value added isat odds with the volume-based index of industrial production which registered hardly anygrowth. Construction was muted growing by 3.1% as the cash crunch possibly hit realestate activity in the second half of the fiscal year. The growth slowdown in FY2016 wasprimarily the result of sluggish investment and of consumption slowing in the second halfbecause of the cash crunch6.

The services and manufacturing indexes improved significantly from April to October2016 before slipping in November and December as demonetization hit demand. However theyhave recovered since January to signal a return to expansion with recovery in domestic andexport orders.

Despite the dynamic business environment and intensely competitive energy market; YourCompany has been resilient to connect 202 new industrial units and 943 new commercialestablishments during the year. The volume loss in industrial sector is broadlyattributable to the global demand slump and also due to abundance of cheaper alternatepolluting fuels. Your Company has continued its focused efforts for developing and growingPNG (Domestic) and CNG business. GGL added more than 84000 residential customers andcommissioned 22 new CNG stations during the year. Your Company has been able to sustainthe volumes with growth of around 7.4% in the residential sector and around 7.7% in CNG

(transport) sector. Your company is aggressively planning for penetration in PNG(domestic) PNG (commercial) and CNG (transport) sector which is comparatively lessvolatile.

Your Company through competitive bidding as already stated above has won 6 newgeographical areas in State of Gujarat and has aggressively rolled out the expansion plansto develop networks to tap the unexplored CGD potential in new geographies. GGL has nowtotal 18 CGD licenses spread across 22 districts which accounts to almost 24% of total CGDlicenses issued by PNGRB in India and 1 pipeline license.


The consumption dampened and deferred in the second half of FY2016 due to the cashcrunch will resurface in FY2017 and lift consumption growth in the country. The increasein central government capital expenditure targeted in the FY2017 budget augurs well forpublic investment. The union budget continues to prioritize infrastructure and ruraldevelopment with higher outlay on roads and highways electric power affordable housingamong others. The growth is projected to pick up to 7.4% - 7.6% in FY2017-2018 owing toimproved consumption public and private investment which is expected bears fruits. Theimplementation of a new goods and services tax beginning in July 2017 should lower pricesfor capital goods providing impetus to investment. This coupled with various initiativesin the natural gas sector as mentioned in earlier sections is expected to propel growthfor the business going forward.

While India stands at the third position as the world's largest energy consumershowever it has immense potential to grow its base from about one-third of the globalaverage in the per capita consumption. The economy which is evenly poised for growth atover and above 7% in the coming fiscals would also correspondingly increase the energydemand thereto. Government of India is aggressive in pushing the usage of clean and greennatural gas across sectors with special focus to the growth of PNG in the household andCNG for vehicles. This shall lead to impending development of robust downstream gasdistribution infrastructure in the country. Your Company has been continuously growing andexpanding its horizon by venturing into new geographic areas and is committed to reachevery possible natural gas users across its licensed expanse of around 96000 squarekilometres through its ever growing pipeline network spread across 22 districts. YourCompany shall continue to focus on growing the penetration in the current operating areasby increasing the PNG connections and additional CNG stations while tapping the untappedpotential by expeditious rollout of distribution network in the newly acquired geographicareas as well. With this focused endeavour GGL shall continue its efforts in providingclean fuel solutions across all operational area to augment an energetic top-line andbottom-line in coming years.


The business environment due to its inherent dynamics is placed alike withopportunities and risks. The opportunity and risk could arise ranging from but not limitedto growth for expansion (organic & inorganic) turmoil in sector change in politicalscenario economy consolidation within the country and globally tax reformstechno-commercial disruptions governmental policy etc.

CGD business like any other business is also exposed to risks influencing thesustenance and growth of an organisation either due to internal and/ or external factors.To name a few the risks could vary from continuous availability of economic gas suppliespipeline connectivity for expansion in unconnected areas abundant availability ofeconomical alternate fuels global economic downturn crude market volatility delay inpermissions from various statutory bodies for laying the infrastructure etc.

While some of these risks may be beyond the mitigation capability of any Company;industry and even the policy makers however as a prudent and responsible Company allpossible measures are being taken to safe guard the interest of the Company from beingimpacted due the above listed risks and concerns. Your Company has adequate internalcontrol procedure for assessing various business risks which the Company is likely toface in near to mid-term future and also prepares mitigation measures.


The Company has a proper and adequate system of Internal Controls commensurate with itssize of operations and nature of business. The Company's Internal Control Systems arefurther supplemented by extensive programs of audits i.e. Internal Audit ProprietaryAudit by the Comptroller & Auditor General of India (CAG) and Statutory Audit byStatutory Auditors appointed by the CAG. The Internal Control System is designed to ensurethat all financial and other records are reliable for preparing financial statements andother data and for maintaining accountability of assets and compliance with statutoryrequirements. The Company has mapped a number of business processes on to SAP systemthereby leading to significantly improved controls & transparency. Your Company alsocontinues to invest in Information Technology to support various business processes.


The Company through its aggressive expansion plans is committed to reach out to everypossible natural gas user in its expanded geographical area which now comprises of closeto 22 districts. The stand-alone net profit after tax (Total Comprehensive Income) for thecurrent year 2016-17 increased to Rs 176.83 Crores from Rs. 154.38 Crores in the previousyear. The Company had healthy net cash flows from operations of Rs 701.61 crores duringthe year 2016-17. Investments were made in extension of pipeline network to reach newareas and in reinforcements and upgradation of existing network as required. Investmentswere also made to connect residential customers and augmenting the CNG infrastructure.Investments were also made to upgrade the IT infrastructure and integrate SAP to enhancereliability and enable scalability. Appropriate provisions have been made in the accountswherever necessary for contingencies bad debts and diminution in value of investments. Noamount has been transferred to the General Reserve during the year.


Your Company employed 1113 employees as on 31st March 2017. Your Company has a focus onbuilding capabilities and developing competencies of its employees. The Company believesthat training and development is of vital importance to create a climate where peoplemaximize their technical skills and inner potential which can help the Company incapitalizing the emerging business opportunities through their involvement. During theyear employees were sent for various training programs and seminars to enhance theirskills/knowledge. Your Company has in place an attractive policy of performance linkedincentive to encourage and reward employee performance.

There was no strike or lock-out during the year under review.


Your Company has always believed that appropriate standard of conduct should bemaintained by the employees in their conduct and that there should be a safe indiscriminatory and harassment-free (including free of sexual harassment) work environmentfor every individual working in the Company. The Company has in place a Policy onPrevention of Sexual Harassment at workplace as a part of its Human Resource Policy. Itaims at prevention of harassment of employees and lays down the guidelines for reportingand prevention of sexual harassment. During the year ended 31st March 2017 no complainthas been received pertaining to sexual harassment.


The Company believes that good governance can deliver continuous good businessperformance. The particulars on Corporate Governance as required under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 is incorporated as a part ofthis Board's Report at Annexure - 1.


The details forming part of the extract of the Annual Return in Form MGT - 9 isenclosed herewith as Annexure - 5.


The details about conservation of energy technology absorption foreign exchangeearnings and outgo is attached at Annexure - 6


There are no significant material orders passed by the Regulators / Courts during theyear which would impact the going concern status of your Company.


To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3) (c) of the Companies Act 2013:

a. that in the preparation of the annual accounts financial statements for the yearended 31st March 2017 the applicable accounting standards have been followed and nomaterial departures have been made from the same;

b. that accounting policies have been selected and applied consistently and judgmentand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2017 and of the profit ofthe Company for the year ended on that date;

c. that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d. that the annual financial statements have been prepared on a going concern basis;

e. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.

f. that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.


The Directors place on record their deep appreciation to employees of the Company atall levels for their hard work dedication and commitment. The Directors are extremelygrateful for all the support given by the Government of Gujarat at all levels. TheDirectors place on record their sincere thanks to the Promoters Shareholders and Lendersand Customers for their valuable support trust and confidence reposed in the Company.

For and on behalf of the Board of Directors
Dr. J. N. Singh IAS
Date: 10th August 2017
Place: Gandhinagar