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GAIL (India) Limited is the country's largest natural gas company, operating across the entire natural gas value chain, including exploration, production, transmission, and marketing. The company is a key player in India's energy sector, focusing on the expansion of its pipeline infrastructure, petrochemical production, and renewable energy initiatives. GAIL's strategic investments in clean energy and its strong market position make it a crucial component of India's energy transition.
Business Metrics
| Metrics | Value | Comment |
|---|---|---|
| Martket Cap | ₹149505 Cr | 1.1x of sales |
| PE | 13.2 | I/PE - 18 |
| Promotor Holding | 51.9% | Increased very little |
| OPM | 12% | |
| Interest Coverage | 20 | Comfortable |
| Sales | ₹135178 Cr | |
| ROCE | 14.7% | |
| PAT | 11293Cr | TTM |
Concall Q1FY25 Highlights
Financial Performance
- Gas turnover increased 4% QoQ to Rs. 33,627 crore in Q1 FY25
- Profit before tax increased 28% QoQ to Rs. 3,642 crore
- Profit after tax increased 25% QoQ to Rs. 2,724 crore
Operational Performance
- Gas marketing volume: 99.47 MMSCMD, flat QoQ
- Gas transmission volume: 131.79 MMSCMD (63% capacity utilization)
- Polymer production: 162 TMT (decreased due to annual turnaround)
Infrastructure and Capacity
- Natural Gas pipeline network: 16,240 km
- Long-term gas portfolio: 15.5 MMTPA
- Petrochemicals: 810 KTA at Pata, 280 KTA at BCPL
- LPG & Liquid Hydrocarbons: 5 processing plants, 1.4 MMTPA + 4.58 MMTPA capacity
- Renewables: 118 MW wind power, 16.72 MW solar power
City Gas Distribution (CGD)
- Present in 72 Geographical Areas (GAs) out of total 307 GAs
- Subsidiary: GAIL Gas Ltd, Bengal Gas TNGCL + CGD JVs
- CGD sector growing at 12% CAGR
- DPNG connections expected to increase from 1.2 Cr in 2024 to 12 Cr by 2030
Growth Prospects and Guidance
- Gas marketing volumes expected to grow 5% in FY25
- Gas marketing margin guidance: Minimum Rs. 4,500 crore for FY25 (Rs. 1,994 crore earned in Q1)
- Gas transmission volume expected to be 130-132 MMSCMD in FY25
- Expect to add 10-12 MMSCMD transmission volume annually over next 2-3 years
- Target of 1GW renewable energy by 2025 and 3GW by 2030 (current capacity 130MW)
Market Insights
- India’s per capita plastic consumption: 14kg (vs. China 83kg, World avg 39kg, US 94kg)
- India’s expenditure on energy imports is 20% of budget
- Fertilizer sector is a major consumer of natural gas in the country
- APM gas allocation of 69% may further decrease as CGD demand increases
Business Strategy
- Advanced Net Zero Carbon Emission target for scope 1&2 emissions to 2035 from 2040
- Acquired JBF Petrochemicals, renamed GAIL Mangalore Petrochemicals
- Maintains a diversified gas sourcing strategy (mix of crude-linked and other contracts)
- Holds ~70% monopoly in gas transmission infrastructure
Projects Update
- Mumbai-Nagpur-Jharsuguda pipeline expected to be completed in FY25
- Jagdishpur-Haldia-Bokara-Dhamra Pipeline to be completed by March 2025
- PDH-PP plant at Usar expected to start commercial production by October 2025
Future Outlook
- Gas Demand Growth: GAIL expects overall gas marketing volumes to grow by 5-7% annually, with 5% growth guided for FY25.
- Transmission Volume: Projected to increase from 131-132 MMSCMD in FY25 to 140-142 MMSCMD in FY26, with further growth expected in FY27.
- CGD Sector: Expected to be a major growth driver, contributing 5-6 MMSCMD to GAIL’s transmission volume growth over the next 2-3 years.
- Power Sector: Anticipates significant increase in gas demand, especially for meeting peak power demand.
- Industrial Customers: New customers, particularly in steel and aluminum sectors, expected to drive growth along newly commissioned pipelines.
- Refinery Sector: Refineries along the eastern pipeline network are expected to contribute 8-10 MMSCMD to transmission volume growth.
- Petrochemicals: GAIL expects “reasonably good profit” from its petrochemicals business in FY25, indicating growth potential in this segment.
- Marketing Margin: Projected to grow from Rs. 3,500 crore in FY24 to a minimum of Rs. 4,500 crore in FY25, with potential for further increase.
- Renewable Energy: Ambitious targets set for renewable capacity expansion, aiming for 1GW by 2025 and 3GW by 2030.
- Infrastructure Expansion: Ongoing pipeline projects expected to unlock new markets and customer segments upon completion.
- Plastic Consumption: Given India’s low per capita plastic consumption compared to global averages, there’s significant growth potential in the petrochemicals sector.
- CGD Penetration: With DPNG connections expected to increase tenfold by 2030, substantial growth is anticipated in the CGD sector.
The management remains optimistic about GAIL’s growth prospects, driven by increasing domestic gas demand, expanding infrastructure, and diversification into petrochemicals and renewable energy. However, challenges such as potential reduction in APM gas allocation and global energy price volatility may impact future performance.