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New Delhi, India

Akshita is an equity research analyst working with a US Research firm and an aspiring CFA charter. With a keen interest in financial modeling and valuation, she prepares exemplary-detailed research reports.

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Contributor since: 2022







Equity Research: GAIL

GAIL, which was founded in August 1984, has commercial interests in petrochemicals, LPG and liquid hydrocarbon production, city gas distribution, and natural gas marketing and transmission (CGD). Over the next three years, Gail Gas sales are anticipated to grow by about 10% annually. In the following three years, it would incur a CAPEX of 4,000 crores. The business plans to install more than 100 CNG stations and 2,50,000 PNG connections over the next two years.



GAIL, which was founded in August 1984, has commercial interests in petrochemicals, LPG and liquid hydrocarbon production, city gas distribution, and natural gas marketing and transmission (CGD). As of the 30th of September 2022, GAIL had a pipeline network spanning over 14,617 kilometers making it the market leader in the nation for the transfer of natural gas. The corporation is working on pipeline projects totaling 7,500 km in several locations. Natural gas demand forecasts in India are excellent, and the corporation has downstream integration into petrochemicals and liquefied petroleum gas (LPG). In terms of petrochemicals, it holds a 15% domestic market share. 


The promoter, the President of India, owns 51.90 percent of the business. FII shareholding dropped to 19.79% in the September quarter from 19.92% in the June quarter. The percentage of DII shares held in the September quarter fell to 21.84% from 23.34% in the June quarter.


A skilled and knowledgeable management team with relevant industry experience oversees running the business. They support the gas-based economy goal of the Indian government. From October 3rd, 2022, Sandeep Kumar Gupta served as Chairman and Managing Director.


  • Natural gas makes up 6.7% of India's energy mix, compared to the global average of 24%. By 2030, the Indian government wants to see a 15% rise in natural gas use. India's energy planning has changed as a result of the country's dependence on imported crude and deteriorating air quality.

  • Until 2024, the government has budgeted USD 60 billion for the construction of gas infrastructure, including pipelines, LNG terminals, and city gas distribution (CGD) networks.

  • Natural gas demand has grown significantly in India over the past few years as a result of increased supply, enhanced transmission and distribution infrastructure, benefits for air quality, cost savings over alternatives, and overall favorable economics of providing gas at competitive prices to end-users.

  • The industrial (fertilizer, power, etc.) and city gas distribution sectors are likely to account for a substantial portion of India's growing gas consumption in the future.

  • The government's plans to develop additional gas pipes will increase India's demand for natural gas. The sale of gas in cities for cooking, fueling vehicles, and as a replacement for furnace oil will be boosted by the extension of the pipeline network.


  • NATURAL GAS MARKETING: Trading in natural gas is still a key component of GAIL's operations. It provides gas to the power and fertilizer industries.
  • GAS TRANSMISSION: (a) Natural gas transmission: GAIL owns and manages a network of natural gas pipelines spanning the entire nation at about 14,600 km. (b) LPG transmission: GAIL owns and runs a 2,033 km LPG pipeline network in Jamnagar-Loni (JLPL) and Vizag Secunderabad for LPG transmission (VSPL).
  • PETROCHEMICALS: At the Pata complex, GAIL can produce 810 KTA of polymers. Its subsidiary, Brahmaputra Cracker & Polymer Limited (BCPL), has a 280 KTA (kilo-tonnes per annum) capacity and a 70% equity holding in the company.
  • LPG AND OTHER LIQUID HYDROCARBON: With a total output capacity of 1.4 million MT, GAIL's five liquid hydrocarbon processing plants are spread out over four different regions throughout the nation.
  • CITY GAS DISTRIBUTION: GAIL (and its affiliated enterprises) are currently permitted to conduct business in 67 different regions of India, including the major cities of Delhi, Mumbai, Hyderabad, Bengaluru, Kolkata, etc. Together, these CGD networks provide over 66% of the 62.05 lakh residential PNG connections in the nation. GAIL's group operates 1,385 CNG stations, or 63%, of the total 2,207 CNG stations in the nation. As of the end of March 2022, GAIL Limited had 6 subsidiaries, 9 joint ventures, and 10 associate firms.



  • The increase in natural gas transmission and marketing volume, as well as sales growth in the petrochemical, LPG & liquid hydrocarbon, and city gas distribution segments, drove the net sales in FY22 to 92,874 crores (vs. 57,428 crores in FY21). Due to a significant rise in natural gas marketing sales as a result of higher gas prices for both domestic and re-gasified liquefied natural gas, H1 FY23 sales increased by 95% YoY to 76,671cr (RLNG). Apart from the petrochemicals division, all business segments achieved YoY sales growth. In H1 FY23, revenues in the petrochemicals segment declined by 23% YoY. It was influenced by the downtime of the plant for annual maintenance in Q1 FY23 and the decreased production in Q2 FY23 caused by a reduction in gas availability as a result of an interruption in supplies from Gazprom Marketing and Trading Singapore.


  • Due to improved gas marketing spread, greater price realization in the petrochemical and liquid hydrocarbon (LHC) segment, and recovery in the city gas distribution segment, the EBITDA for FY22 was ₹15,152cr (vs. ₹7,244cr in FY21). The expansion in the gas marketing segment was the primary factor in the meager 3% YoY increase in EBITDA in the first half of FY23. On the operational front, natural gas transmission, petrochemicals, LPG, and liquid hydrocarbon showed de-growth, whilst the natural gas marketing and city gas distribution segments recorded growth. The EBITDA decreased in Q2 FY23 as a result of reduced petrochemical and liquid hydrocarbon price realization, as well as a fall in gas marketing spread. During the quarter, the segment for petrochemicals reported an operational loss.
  • The company's EBITDA margin increased by 370 bps YoY to 16.3% in FY22. The business's distribution of city gas, LPG, and liquid petroleum gas segments all recorded increases in operating profit. The EBITDA margin decreased to 8.4% in H1 FY23, down 749 bps year over year. The fall in the margins of the gas transmission, marketing, petrochemicals, LPG & liquid hydrocarbon, and city gas distribution segments was the reason for the margin contraction.


  • Due to higher operating profit and lower tax expenses, the PAT in FY22 was 10,541 crores (vs. 4,428 crores in FY21). In comparison to FY21, when the effective tax rate was 26.3%, it was lower this year, at 23.1%. Greater physical performance in the natural gas marketing and transmission segment as well as better price realization across all segments were the main drivers of the performance. Due to higher depreciation costs and tax charges in H1 FY23, PAT decreased by 5% YoY to 3,921 cr. Due to decreased gas deliveries from Gazprom Marketing and Trading Singapore, both the transmission and marketing businesses would have volume impacts in the upcoming quarter.
  • The PAT margin increased to 11.4% in FY22, up 364 bps year over year. Due to reduced operating profit margins, the PAT margin decreased by 535 bps YoY to 5.1% in the first half of FY23.


The CFO grew to ₹9,629 in FY22, up 7% year over year. A cash outflow from investment operations of ₹5,646 crores was caused by the purchase of fixed assets worth ₹6,971 crores. The ₹3,916 crore cash outflow from financing activities was caused by higher dividend payments. Due to GAIL's large market share in the gas transmission sector, the company has enjoyed strong profitability and consistent cash flow.


  • The total capital expenditures for FY22 were ₹7,700cr, with pipelines, petrochemical, and city gas distribution (CGD) projects accounting for most of that amount (E&P). The company spent ₹3,967 million on capital expenditures in the first half of FY23, mostly on pipeline and equity contribution projects, petrochemicals, and city gas distribution projects. The company estimates that it will spend ₹7,500 crores on capital throughout the entire FY23.
  • The management anticipates capex to reach ₹30,000cr over the next three years, with most of that spending going toward pipelines, petrochemical projects, city gas distribution projects, operating capex, equity contributions, exploration & production (E&P), and renewable energy. The company's capital expenditures will stay high in the upcoming years, which will keep free cash flow at a low level.


In FY22, long-term debt rose to ₹5,468cr from ₹5,237cr in FY21, and short-term debt rose to ₹2,362cr from ₹1,967cr. GAIL Ltd. had borrowed money mostly for pipeline capital expenses. The company's capacity to leverage its balance sheet to fund future capital expenditures is shown by the debt-to-equity ratio, which is 0.12x. The company's long-term debt surged to ₹8,108cr in H1 FY23, while its short-term debt rose to ₹4,892cr.



  • Over the next three years, GAIL and its joint venture will build a 7,500 km gas pipeline with a total capex of 30,000 cr, The management anticipates a volume growth in the transmission industry of 8% to 10%. Fertilizer manufacturing facilities, refineries, and city gas distribution (CGD) organizations would be the main drivers of the increase. Gail Gas sales are anticipated to grow by about 10% annually. In the following three years, it would incur a CAPEX of 4,000 crores. The business plans to install more than 100 CNG stations and 2,50,000 PNG connections over the next two years.
  • The management predicts that margins would mostly stay within the same range in FY23.
  • GAIL is also increasing its capacity for producing polypropylene. Usar, Maharashtra's 500-kilo tonnes per year (KTA) Propane Dehydrogenation and Polypropylene (PDH-PP) facility is anticipated to be finished in April 2025. January 2024 is the anticipated completion date for the 60 KTA Polypropylene Project (PP) in Pata, Uttar Pradesh. For a $231 million project, the business is also constructing a 10-megawatt (MW) electrolyzers Vijaipur, Madhya Pradesh, to produce green hydrogen. The project is scheduled to be finished in 18 months after the electrolyzer order has been placed.


  • PE RATIO: The trailing twelve months PE multiple for GAIL Ltd. is currently 5.07x. Increased demand for gas from the power, fertilizer, refinery, and city gas distribution sectors, regulatory pressure to switch from polluting industrial and auto fuels to gas and prompt completion of new pipeline projects would all contribute to higher gas transmission volumes and higher company profits. The corporation recently distributed bonus shares in a 1:2 ratio. As a result, there are now 657.51cr outstanding shares instead of 438.34cr.
  • DIVIDEND YIELD: The business has a history of consistently paying dividends. The company's board of directors paid the first interim dividend for FY22 in the amount of ₹4 per equity share, the second interim dividend in the amount of ₹5 per equity share, and the final dividend in the amount of ₹1 per equity share. This suggested a 36% dividend payout (compared to 37% in FY21).
  • ROCE: From FY17 through FY20 and FY21, the return on capital employed was growing, but in FY20 and FY21 it shrank due to the dip in EBIT caused by a drop in overall sales, an operating loss in the natural gas marketing segment, and a decrease in operating profit in LPG and liquid hydrocarbons. Due to an increase in PBIT in FY22, the ROCE increased to 21%. Natural gas marketing, LPG & liquid hydrocarbons, and the city gas distribution industry were the key drivers of PBIT growth. 

The stock saw a rapid surge in value between August 2015 and August 2018, rising from ₹50 to ₹130, and then a severe drop till March 2020. Following a test of the 43-dollar panic low, the stock experienced substantial buying interest. It has largely been consolidating during the last year between ₹85 and ₹115. Between ₹80 and ₹90, the stock has substantial support. On the plus side, it is anticipated to move in the direction of the ₹130-  ₹145 range.



-Company's website


I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.


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