GAIL Q3 net falls 92% to Rs 246 cr on higher prices, Russian gas disruption

Despite the hit to profits, revenue from operations rose to a record Rs. 1.11 trillion in the first nine months of FY23

State-run GAIL on Monday reported a 92.5 per cent drop in net profit during the third quarter (October-December), as higher global gas prices and disruption in supply from Russian energy giant Gazprom hurt business.

Net profit stood at Rs 245.73 crore in the October-December quarter compared to Rs 3,287.99 crore in the same period a year back. The profit was sequentially down 84 per cent from 1,537.07 crore in the July-September quarter.

GAIL's mainstay natural gas marketing business saw gross revenues jump 66 per cent to Rs 40,462 crore. Higher gas prices, resulting from a global surge in energy rates following Russia's invasion of Ukraine hurt margins.

GAIL said it transported 103.7 million mmscmd (Million Standard Cubic Meters of Gas per day) of natural gas in Q3, down from  107.71 mmscmd in the previous quarter. Gas marketing volumes also dropped to 89.89 mmscmd, down from 92.54 mmscmd.

It posted a gross loss of Rs 348.8 crore in the petrochemical business in Q3, compared to a Rs 364 crore loss a year back.

Operational revenue up

Meanwhile, the revenue from operations went up by 37 per cent to Rs 35,380 crore. The company’s Revenue from Operations has crossed Rs 1.1 trillion in the first nine months of the financial year, Sandeep Kumar Gupta, Chairman & Managing Director at GAIL said.

Consolidated revenue from operations for the first three quarters reached Rs 1,11,443 crore, the highest for any financial year so far. It was up 72 per cent from Rs 64,678 crore in the corresponding period of the previous financial year.

The company capital expenditure in the first nine months also hit Rs 6,278 crore or 79 per cent of its annual target.

During the quarter, GAIL acquired 26 per cent equity stake in a new liquified natural gas carrier ship, christened 'GAIL Bhuwan', from a wholly-owned unit of Japan’s Mitsui OSK Lines, Gupta said.  GAIL has contracts for procuring LNG volumes from the US under two long-term Sales and Purchase Agreements signed with US energy majors. The vessel will ship clean LNG fuel from the US Gulf Coast to India.

Diversifying the company’s business with an entry into the specialty chemical segment, the company's board has approved a 50 KTA (Kilo Tonnes per Annum) Isopropanol unit at Usar in Raigad district of Maharashtra, where a plant is already under construction, he added.  

The company also raised Rs 1,575 crore by issuing redeemable non-convertible debentures at a highly competitive rate.

Supply issues

Gazprom Marketing and Trading Singapore (GMTS), now a subsidiary of Gazprom Germania, stopped delivering LNG to GAIL under a long-term contract in late May.

Back in 2012, Gazprom’s former subsidiary, Gazprom Marketing and Trading Singapore (GMTS), had signed a 20-year contract to supply GAIL with 2.85 million tonnes of LNG a year. Supplies under the deal had started in 2018 and the full volume was expected to be reached in 2023.

But earlier this year, GMTS got housed under Gazprom Germania GMBH, after which Gazprom gave up its ownership of the company in April without any explanation, and imposed sanctions. As the diplomatic fallout of the Ukraine war escalated, Germany seized control of Gazprom Germania in April.

GMTS has defaulted on the supply of atleast 17 cargoes so far. To mitigate disruption in the supply of 8.5-9 million standard cubic meters per day or roughly 20 percent of all gas supply, GAIL had to cut supplies to fertiliser plants as well as some industrial consumers.