Gujarat Gas gains 15% in three days on approval for new geographical areas

Gujarat Gas shares rallied 9 per cent to Rs 168 in intra-day trade on the BSE on Monday, surging 15 per cent in the past three trading days, after the company announced that it has received a grant of authorization for city gas distribution networks.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has issued a letter dated March 29, 2019 for laying, building, operating or expanding the City or Local Natural Gas Distribution network (CGD network) in the Geographical Areas of Sirsa, Fatehabad and Mansa (Punjab) Districts; Ujjain (except area already authorized) district, Dewas (except area already authorized) district and Indore (except area already authorized) district; Jhabua, Banswara, Ratlam and Dungarpur districts; Ferozepur, Faridkot and Sri Muktsar Sahib districts; Hoshiarpur and Gurdaspur districts; Jalore and Sirohi districts.

Gujarat Gas said it has accepted the authorization of the PNGRB vide a confirmation letter to the PNGRB on April 3, 2019. 

The company supplies gas to industrial, commercial and domestic customers.

Rating agency India Ratings and Research (Ind-Ra), on March 29, had revised Gujarat Gas’s outlook to ‘Positive’ from ‘Stable’ while affirming its long-term issuer rating at ‘IND AA’.

The positive outlook reflects Ind-Ra’s expectation of a sustained improvement in Gujarat Gas’s credit metrics in FY19-FY20, driven by continuous growth in sales volume resulting from network expansion/diversification and supportive policy actions, along with an improvement in EBITDA margin per unit as gas prices remain range bound.

Ind-Ra expects the cash flow from operations to remain sufficient to fund the majority of the cash outflows in the form capex, debt repayments, and dividend payments, limiting incremental debt and/or refinancing requirements.

Gujarat Gas has an annual capex plan of Rs 450 crore for network expansion with scheduled debt repayments of Rs 100 crore – Rs 120 crore each year (5 per cent-8 per cent of outstanding debt at FYE18) over FY19-FY20. Furthermore, the company has fund-based working capital, with almost negligible utilisation in the last 12 months ended February 2019. The unutilised lines provide sufficient cushion for any liquidity mismatches, it added.

At 10:47 am, Gujarat Gas was trading 7 per cent higher at Rs 164 on the BSE. The stock was 9 per cent away from its 52-week high level of Rs 183 on April 30, 2018. A combined 1.46 million equity shares changed hands on the counter on the BSE and NSE so far.