GAIL (India) Limited has recorded sustained performance in all key physical as well as financial parameters in the Financial Year 2007-08. According to the audited figures, Turnover (excluding internal consumption and net of excise duty) in the year 2007-08 increased by 12 percent to Rs. 18,008 crore from Rs. 16,047 crore in FY 2006-07. The Profit Before Tax during the year 2007-08 increased by 35 percent to Rs. 3,855 crore from Rs. 2,860 crore in the previous year. The Profit After Tax during the year 2007-08 was Rs. 2,601 crore, up 9 percent from Rs. 2,387 crore in the previous year. The Board of Directors has recommended payment of total dividend at the rate of 100 percent on the paid-up share capital of the Company for FY 2007-08.

The Profit Before Tax during Q4 2007-08 increased by 101% to Rs. 1,098 crore from Rs. 546 crore during Q4 of 2006-07. The Net Profit during Q4 of 2007-08 increased by 6 percent to Rs. 722 crore from Rs. 681 crore in the corresponding period last year.

Discussing the highlights of the year’s performance in the strategic core areas, Dr. U D Choubey, Chairman and Managing Director, GAIL informed that apart from the financial performance, all the ongoing projects were progressing well.

Among the natural gas pipeline projects, in the Vijaipur-Dadri-Bawana pipeline at an estimated investment of Rs. 5,492 crore, GAIL is aiming for completion on best effort basis by June 2009 and the compressors commissioning by June 2010. On completion, the capacity of Dahej-Vijaipur-Dadri pipeline would reach 78 MMSCMD. The Chainsa-Jhajjar pipeline at an estimated investment of Rs. 536 crore is also aimed to be completed by September 2009. The capacity of this pipeline is 35 MMSCMD. Further, the KG Basin loopline project and Reliance pipeline connectivity project at KG basin, Gujarat and Maharashtra are about to be completed.

The projects to be taken in phase-II for completion by 2011 for which pre-project activities have been already initiated are Dabhol-Bangalore Pipeline at an estimated investment of Rs. 3,568 crore with a capacity of 16 MMSCMD, Kochi-Kanjirkod-Banglore-Manglore at an estimated investment of Rs.3500 crore with a capacity of 16 MMSCMD and the Jagdishpur-Haldia pipeline at an estimated investment of Rs.6500 crore with a capacity of 32 MMSCMD.

GAIL is setting up a Petrochemical Complex in Assam through JV route along with Numaligarh Refineries Limited, Oil India Limited and the Government of Assam at a project cost of Rs.5460 crore. The complex has a capacity of 220,000 tons per annum (TPA) of Ethylene and 60,000 tons per annum of propylene. The project completion is 60 months from the zero date of September 2007.

GAIL has also signed an MoU with HPCL, TOTAL, LN MITTAL and OIL for setting up an Integrated Refinery and Petrochemical Complex at Visakhapatnam.

On the City Gas front, a wholly owned subsidiary (GAIL Gas Ltd.) is being incorporated to set up city gas projects across country. The initial authorized capital of the subsidiary is Rs. 200 crore. The CEO and COO of the company have already been appointed. Chairman, GAIL shall be the Chairman of the subsidiary company

A JV (GAIL China Gas Global Energy Holding Ltd.) has been floated with China Gas Holding Ltd. to pursue the potential projects such as Beijing Gas CNG, CBM in inner Mongolia and Petrochemical based on coal.

Talking about some of the activities in the Business Development area, he said that India has officially entered into TAPI pipeline project with the signing of Gas Pipeline Framework Agreement recently and a similar positive response has emerged on the progress of Iran-Pakistan-India pipeline. He further added that GAIL is looking for participating aggressively in NELP VII.

In the area of Corporate Governance, he said that GAIL has signed an MoU with Transparency International India Ltd. for implementation of Integrity Pact in GAIL in its procurement system in order to curb the menace of corruption.

In the CSR sphere, GAIL has created a GAIL Charitable and Education Trust with a fund Rs. 20 crore to extend financial support on merit-cum-means to school going children as well as professionals.

Financial Performance details

GAIL is one of the leading public enterprises with a consistently excellent financial track record. Turnover during the last ten years has shown a compounded annual growth rate of 13 percent. Market capitalization of the company as on March 31, 2008 reached around Rs. 35,000 crore as against Rs. 22,372 crore, a year ago.

The PAT of Rs. 2, 601 crore was achieved due to higher price, higher sales quantity of polymers, LPG and Other Liquid Hydrocarbons, increase in gas throughput, increase in LPG transmission quantity and some decrease in subsidy sharing in domestic LPG and PDS kerosene. The subsidy sharing in domestic LPG and PDS kerosene for Rs. 1,314 crore in 2007-08 (against Rs. 1, 488 crore in 2006-07). Without the subsidy element, the PBT would have increased by 19 percent to Rs. 5,169 crore and PAT would have increased by 33 percent to Rs. 3,468 crore.

Top line growth is a cumulative result of the overall increase in the natural gas business, polymer sales and also in LPG transmission. The revenue from petrochemical segment has increased by 17 percent from Rs.2,204 crore to Rs.2,591 crore primarily due to increase in sales quantity and average sale price. The revenue from LPG transmission has increased by 13 percent from Rs. 344 crore to Rs. 389 crore due to increase in the quantity transported. The revenue from Natural Gas trading has also increased by 5 percent from Rs. 12,021 crore to Rs. 12,658 crore due to increase in trading quantity and average sale price. The revenue from Natural Gas Transmission has increased from Rs. 2,214 crore to Rs. 2,286 crore registering a growth of 3 percent.

During the year 2007-08, consolidated financial statements of GAIL, incorporating the accounts of subsidiary, JVs and associated companies have also been prepared. Based on the consolidated financial statements, the total earnings of GAIL were Rs. 19,441 crore. The consolidated Gross Margin was Rs. 4,893 crore, the Profit Before Tax was Rs. 4,102 crore and Profit After Tax was Rs. 2,783 crore.

The Earning Per Share (EPS) increased to Rs. 30.76 per share in the year 2007-08 as against Rs. 28.22 per share in the year 2006-07. The EPS as per consolidated statement was Rs. 32.91 per share, while book value has increased to Rs. 154 from Rs. 134 per share.

During the year 2007-08, fixed assets to the tune of Rs. 2,066 crore were capitalized on account of Dahej – Uran Pipeline, Dahej – Panvel Pipeline, Petrochemical Expansion at Pata, and Jagoti- Dewas – Pitampur Pipeline projects and other regional pipelines.

The Board of Directors has recommended payment of total dividend at the rate of 100 percent on the paid-up share capital of the company for the financial year 2007-08, which includes interim dividend at the rate of 40 percent and proposed final dividend of 60 percent on the paid-up share capital.

Natural Gas

Natural Gas continues to constitute the core business of GAIL. During the year 2007-08, natural gas sales have increased to 69.10 MMSCMD from 67.84 MMSCMD in the previous year. The Gas transmission has increased by 6 percent to 82.10 MMSCMD from 77.29 MMSCMD in the previous year.

LPG and other Liquid Hydrocarbons

In 2007-08, total Liquid Hydrocarbon production including LPG was 1.348 million metric tones as compared to previous year’s production of 1.343 million MT. Production of LPG was 1.043 million MT during the year against a production of 1.026 million MT in the last fiscal. The Propane production was 155,873 MT against the previous year’s production of 178,752 MT. The Pentane production was 73,505 MT during the year 2007-08 as against 72,827 MT produced in the year 2006-07.

The LPG and other Liquid Hydrocarbons sales during FY 2007-08 were 1.343 million MT as against 1.351 million MT in the previous year. The Propane sales were 155,292 MT from 179,164 MT in the previous year, whereas the Pentane sales increased by 3 percent to 73,749 MT from 71,542 MT in the previous year.

LPG Pipeline

LPG transmission through pipelines was 2.754 million MT in the year 2007-08 as against 2.491 million MT in 2006-2007, thus recording an increase of 11 percent.

Petrochemicals

During 2007-2008, the production of polymers has increased by 9 percent to 3.86 lakh MT as against 3.54 lakh MT in the previous year. The polymer sales increased by 13 percent to 3.91 lakh MT from 3.47 lakh MT in the last financial year.

Telecom

During the year 2007-08, Bandwidth Sales quantity increased by 57 percent to 5132 MBPS from 3270 MBPS in the year 2006-07.

Major achievements during FY 2007-08

During the year 2007-08, GAIL completed the 576 km long Dahej – Panvel – Dabhol pipeline

GAIL added additional 1.00 lakh TPA HDPE capacity at its petrochemical plant at Pata expanding the capacity of the Pata Petrochemical plant to 410,000 TPA.

Petrochemicals

GAIL signed an MoU with Reliance Industries Limited (RIL) for Joint Co-operation in Petrochemicals. Under the MoU, GAIL and RIL are exploring opportunities for setting up petrochemical complexes outside of India in feedstock rich countries. Identified opportunities will be examined by a Working Group, consisting of representatives from both the companies. GAIL and RIL will set up a Special Purpose Vehicle (SPV) for setting up petrochemical complexes abroad.

GAIL has also signed an MoU with HPCL, Mittal Group, OIL and Total for exploring opportunities for setting up a petrochemical plant in southern India.

City Gas Distribution

GAIL has set up a subsidiary company for City Gas Distribution (CGD) and CNG corridor business. The subsidiary company will take up Distribution and Marketing of CNG as fuel for vehicles (inter city as well as intra city), Piped Natural Gas for domestic/ commercial/ industrial purposes and Auto LPG as fuel for transport vehicles in the various cities of India and abroad. The subsidiary company will also take up investment in and setting up of infrastructure, in the various cities of India and along the national highways for building CNG corridors which includes, among others, natural gas compressor stations, laying of the pipelines from City Gate Station(s) to the consumption areas and associated facilities, setting up of distribution points / retail outlets for CNG/ Auto LPG and transport gas through mobile cascades/ lorries. The subsidiary will also form alliances with Gas Producers/ Strategic Partners for implementation of the City Gas Projects as per the strategic decisions taken by GAIL.

Gas Sourcing

GAIL and ONGC signed a Memorandum of Understanding (MoU) for formation of a Joint Venture. Under the MoU, the two companies have agreed to come together through Joint Venture approach for monetizing the gas reserves discovered by ONGC in KG and Mahanadi basins. The Joint Venture approach will enable production, processing, transportation, distribution and marketing of gas from new sources to identified markets. The JV will synergise the respective production, transportation and distribution strengths of ONGC and GAIL.

GAIL and Reliance Gas Transportation Infrastructure Limited (RGTIL) signed an Agreement for Transmission of natural gas from the Krishna Godavari (KG) basin. The Transmission Agreement provides for transportation of natural gas from the exploration block located in the Krishna-Godavari (KG) Basin in the east coast of India through GAIL’s network and for booking of capacity by GAIL in RGTIL’s East-West pipeline. The GTA is a framework agreement which provides for booking of capacity through execution of Capacity Tranche agreements (CTA).

Other major developments

Diversification

GAIL and Rashtriya Chemicals and Fertilizers Limited (RCF) entered into an MOU for setting up of a coal gasification project by GAIL and utilization of the coal gas produced for setting up a fertilizer plant by RCF at Talcher, Orissa. As part of MOU, GAIL will undertake the Techno-economic study for setting up a Commercial Coal Gasification Plant for production of Synthesis Gas, and RCF will carry out the techno-economic study for setting up a commercial plant to produce fertilizer by utilizing the synthesis gas from the proposed Coal Gasification Plant.

Related to this, GAIL and Coal India Limited (CIL) have entered into an MOU for setting up of a surface coal gasification project for production of synthesis gas for fertilizer production. As part of MOU, GAIL and CIL will jointly develop a surface Coal Gasification Project for production of synthesis gas to be used as feedstock for fertilizer production. The project would entail an investment of around Rs. 2400 crore for setting up the coal gasification plant. The two companies have formed a joint Working Group to evaluate detailed feasibility report prepared by GAIL to evaluate the viability of the project in terms of techno-economic feasibility for the project.

CDM initiatives

GAIL and Apollo Tyres signed an Agreement for a Steam conversion project based on Waste Heat Recovery system from GAIL’s gas turbines. This rare, multi-benefit project would not only utilize Clean Development Mechanism (CDM) for power generation but would also lead to conservation of gas as well as increased energy efficiency. A first-of-its-kind project, this is being implemented by GAIL at its Vaghodia Compressor Station (near Vadodara) for supply of steam to Apollo Tyres within 24 months at a cost of around Rs. 35 crores. The duration of the Agreement is 15 years and the commercial supply will start from July 2009. The Annual Contracted Quantity is 4,36,800 MT.

Transparency

GAIL signed an MOU with Transparency International India (TII) on ‘Integrity Pact Programme’ as a measure focused at enhancing operational transparency in its contracts and procurements process. GAIL is among the first few Indian corporates to introduce ‘Integrity Pact’ in procurement and contracts. Integrity Pact is a tool devised by TII worldwide to fight corruption in public procurement and thus to assist in improving the credibility of public procedures and administration. Under this MOU, GAIL is committed to implement the Integrity Pact programme in all its major procurement activities.

Future Outlook

As per the performance MoU for the FY 2008-09 signed between GAIL and the Ministry of Petroleum and Natural Gas, to achieve the Excellence in performance, GAIL has targeted for Gas Transmission of around 81.5 MMSCMD of natural gas from domestic sources and through LNG route. It includes the Gas Marketing target of around 70 MMSCMD. The MoU also provides for an ‘Excellent’ production target of 390 TMT of Polymers (HDPE & LLDPE) and 1,260 TMT of Liquid Hydrocarbons.

Capex plans

GAIL plans to invest Rs. 3,413 crore during FY 2008-09. Of these, Rs. 2,565 crore will be invested in pipeline projects, Rs. 500 crore will be invested in E & P projects, Rs. 187 crore will be invested in Petrochemicals, Rs. 115 crore will be invested in business development and the rest will be invested in projects related to City Gas, Telecom etc.

Sourced From: GAIL (India) Limited

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