GAIL - Q2FY14 Result Update.pdf

7/27/2019 GAIL - Q2FY14 Result Update.pdf

1/7Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Cost pressure drags earnings; lower subsidy in FY14 a realityWe maintain our HOLD rating with a revised PT of Rs 370 primarily to factor in

lower subsidy pay-out of Rs 14 bn over FY14-FY16E. GAIL has received approvalon 25-Oct-2013 from MoPNG which caps its subsidy at Rs14bn in FY14E, butuncertainty prevails for FY15/16E. PAT for Q2FY14 was in line but EBITDA wasbelow our and street expectations. Growth in sales was led by a spurt in gastrading at Rs123.8 bn (+28% YoY and +12% QoQ), LPG/LHC at Rs 10.4bn (+35%YoY and +3% QoQ) and Petchem sales at Rs 11.4bn (+29% YoY and +3% QoQ). Asubsidy pay-out at ~Rs7bn (flat QoQ and -11% YoY) coupled with higherfeedstock prices and lower petchem sales volume led to drainage in earnings;however, it was partly off-set by higher other income of Rs 2.4 bn.

Petchem and LPG/LHC business dent earnings despite higher realizations: Increasein LPG/LHC sales was attributed to higher LPG/LHC sales realisation at Rs 0.03/MMT(+45% YoY and +7% QoQ). Increase in Petchem sales was attributed to higher realizationat 0.10 MMT (+21% YoY and +15% QoQ and). Lower availability of domestic gas during

the quarter forced GAIL to procure LNG on spot basis thus denting EBITDA earnings.EBITDA/MMT for LPG/LHC reported a loss of Rs 0.01/MMT; however, for Petchem, it was atRs 0.04/MMT (-12% YoY but +1% QoQ). PBIT loss of LPG/LHC segment at Rs 2.3bn wasmainly due to subsidy pay-out of Rs 7bn and higher feedstock prices. PBIT margin forPetchem was at 34% vs. 40% in Q1FY14 and 48% in Q2FY13. Lower sales volume andhigher feedstock prices dragged PBIT to Rs 3.9bn (-7% YoY and -11% QoQ).

Gas transmission volume dips, but take-or-pay gets triggered: Gas transmissionvolume at 95 MMSCMD (-10% YoY and -4% QoQ) was attributed to decline in volumes atRIL KGD6 gas basin. However, average tariff increased to Rs 1.16/SCM (+22% YoY and+12% QoQ), mainly due to the trigger of take-or-pay clause and no tariff adjustments.However, PBIT for gas transmission dropped 5% YoY but increased 4% QoQ at Rs 5.8bn,contributing 44% to PBIT as against 42% in Q1FY14. EBITDA/scm is reported at Rs0.91/scm (+14% YoY and +9% QoQ). EBITDA/scm for the trading business increased 104%YoY and 68% QoQ due to higher PBIT margin of 4% (+56% YoY and +44% QoQ) to Rs0.69/scm and contributed 37% to PBIT vs. 23% in Q1FY14. Weak rupee led to a spurt inearnings as trading volumes remained lower at 79 mmscmd (-2% YoY and -4% QoQ).

Outlook: We believe GAILs earnings will remain flat over the next 2 years owing to (1)subdued gas transmission business; (2) dent in margins of Petchem and LPG/LHCsegments due to higher gas prices; (3) volatile earnings as the share of EBITDA from gastrading business remains high at 20% in FY15E and (4) lack of clarity from MoPNG onlowering of subsidy burden from FY15E, although management is confident of zerosubsidy from FY15E. We have factored-in subsidy of ~Rs 14 bn in FY15/16E. However, ascenario of zero subsidy from FY15/16E would lead to a target price of Rs 417.

Valuations and key risks: We value the gas transmission business using the DCF methodand the other business segments on EV/EBITDA(x) to arrive at our revised target price ofRs 370 (implied P/Ex of 11.6x at FY15E and EV/EBITDA of 7.7x FY15E). Key risk would be

lower or higher than expected subsidy burden.Y/E Mar Stand. (Rsmn) Q2FY14 Q2FY13 YoY (%) Q1FY14 QoQ (%) Q1FY14E Var (%)

Net sales 1,39,446 1,13,612 23 1,28,556 8 1,28,986 8

EBITDA 14,634 14,120 4 15,084 (3) 16,628 (12)

PAT 9,157 9,854 (7) 8,082 13 9,029 1

Operating Metrics:

Gas trans. (mmscmd) 95 106 (10) 99 (4) 100 (5)

Petchem (MMT) 108 101 7 121 (11) 110 (2)

LPG & LHC (MMT) 337 361 (7) 350 (4) 348 (3)

LPG & LHC EBITDA/MMT (0.01) 0.00 NA 0.00 NA (0.00) N.A

Petchem EBITDA/MMT 0.04 0.05 (12) 0.04 1 0.04 (8)

Source: Company, Centrum Research

Target Price Rs370 Key Data

CMP* Rs344 Bloomberg Code GAIL IN

Upside 7.7% Curr Shares O/S (mn) 1268.5

Previous Target Rs345 Diluted Shares O/S(mn) 1268.5

Previous Rating Hold Mkt Cap (Rsbn/USDbn) 435.8 / 7.1

Price Performance (%)* 52 Wk H / L (Rs) 395.9/272

1M 6M 1Yr 5 Year H / L (Rs) 503/146

GAIL IN 5.2 (2.1) (5.7) Daily Vol. (3M NSE Avg.) 1209297

NIFTY 5.3 4.7 8.3

*as on 25 October2013; Source: Bloomberg, Centrum Research

Shareholding pattern (%)

Sep-13 Jun-13 Mar-13 Dec-12

Promoter 57.3 57.3 57.3 57.3

FIIs 16.7 16.3 15.8 15.6

Dom. Inst. 22.0 22.3 22.9 23.2

Public & Others 4.0 4.1 4.0 3.9

Source: BSEPBIT profile


Earning Revision

FY14E FY15E

Particulars(Rs bn)

New Old Chg (%) New Old Chg (%)

Revenue 563.9 539.3 4.5 618.3 601. 2 2.8

EBITDA 71.5 56.4 26.8 71.3 65.4 9.0

EBITDA Margin(%)

12.7 10.5 220 bps 11.6 10.9 70 bps

PAT 41.9 31.7 32.4 40.5 36.5 10.9

Source: Centrum Research Estimates

Centrum vs. Bloomberg Consensus*

FY14E FY15E

Particulars(Rs bn)

Centrum BBG Chg (%) Centrum BBG Chg (%)

Sales 562.0 511.8 9.8 616.4 611.5 0.8

EBITDA 71.5 68.4 4.4 71.3 72.6 (1.7)

PAT 41.9 40.2 4.4 40.5 41.2 (1.8)

Bloomberg ConsensusCentrum

TargetPrice(Rs)

Variance(%)

BUY SELL HOLDTarget

Price (Rs)

26 8 20 360 370 2.7

*as on 25 October2013;

Source: Bloomberg, Centrum Research Estimates

Sachin Mehta, [email protected]

91 22 4215 9854

Y/E Mar (Rsmn) Revenue YoY (%) EBITDA EBITDA (%) RPAT YoY (%) DEPS Rs. RoE (%) RoCE (%) P/E (x) EV/EBITDA (x)

FY12 4,09,385 25.6 55,988 13.7 36,538 2.6 28.8 17.9 16.5 11.9 8.3FY13 4,76,017 16.3 64,912 13.7 40,222 10.1 31.7 17.5 14.8 10.8 7.5

FY14E 5,63,853 18.5 71,455 12.7 41,942 4.3 33.1 16.4 13.2 10.4 7.0

FY15E 6,18,306 9.7 71,294 11.6 40,492 (3.5) 31.9 14.3 11.4 10.8 7.2

FY16E 6,70,019 8.4 76,776 11.5 44,383 9.6 35.0 14.3 11.4 9.8 6.5

Source: Company, Centrum Research Estimates

(5,000)

-

5,000

10,000

15,000

20,000

Q2FY12

Q3FY12

Q4FY12

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

(Rsmn)

Natural Gas Trading Petrochemicals

LP G & Li qu id Hyd ro ca rbon s Tr an smi ssi on se rv ic es - G as

Transmision services - LPG Unallocated

Others

Oil & Gas Hold

Result Update 26 October 2013

INDIA

GAIL (India)


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2GAIL (India)

Exhibit 1:Sensitivity Analysis to FY15E

Sensitivity to key variables change % impact on EBITDA % impact on EPS

Increase in crude price USD1 0.1 0.2

Increase in transmission volumes 1% 0.2 0.2


Exhibit 2:1 year forward EV/EBITDA chart Exhibit 3: 1 year forward P/E chart

Source: Bloomberg, Company, Centrum Research Estimates Source: Bloomberg, Company, Centrum Research Estimates

Exhibit 4:Comparative Valuations

CompanyMkt Cap(Rs mn)

CAGR FY13-FY15E (%) EBITDA Margin (%) PE (x) EV/EBITDA (x) RoE (%) Div Yield (%)

Rev. EBITDA PAT FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

GAIL India 4,35,850 14.0 4.8 0.3 13.7 12.7 11.6 10.8 10.4 10.8 7.5 7.0 7.2 17.5 16.4 14.3 3.3 3.3 3.3

Petronet LNG 96,488 15.1 2.7 (20.6) 5.9 4.1 4.7 8.4 14.4 13.3 6.0 8.2 7.2 28.2 14.1 13.8 2.3 2.3 2.3

GSPL 32,356 (4.3) (7.3) (13.2) 96.0 91.6 90.7 6.0 7.2 8.0 3.7 4.6 4.9 19.9 14.3 11.6 2.0 2.0 2.0

Source: Companies, Centrum Research Estimates

Valuation and View

We value the annuity-like earnings model of the gas transmission business by discounting free cashflow to firm (FCFF) over the forecast period. We assign a target multiple to EBITDA for the otherbusiness segments. Accordingly, we arrive at our revised SOTP-based target price of Rs 370 (impliedP/E of 11.6x at FY15E and EV/EBITDA of 7.7x FY15E) (Rs 345 earlier). Our price target was primarilyrevised to factor-in lower subsidy burden.

Exhibit 5:Valuation SoTP

SOTP Valuation Rs/share Comments

Gas Transmission 249 DCF, CoE at 15%

Petrochemicals 63 6x Sep-15E EBITDA

LPG Production 51 4.5x Sep15E EBITDA

LPG Transmission 3 4x Sep15E EBITDA

E&P 11Recoverable reserves of 84 mn boe, EV/BOE of US$3.5/bbl for Myanmar and OS/2blocks and US$6/bbl for CB-ONN-2000/1 block

Gas Trading/Marketing 23 2x Sep15E EBITDA

Investments 29 1x FY15E BV. Investments considered as strategic and hence at 1x book value

Sub-total 391

Less: Net Debt 62

Fair Value 370

Source:, Centrum Research Estimates

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

EV/EBITDA Mean Mean + Std Dev Mean - Std Dev

02468

101214161820

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

P/E Mean Mean + Std Dev Mean - Std Dev


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3GAIL (India)

Exhibit 6:Quarterly Financials

articulars (Rs mn) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Net Sales 112,598 104,546 110,886 113,612 124,743 124,086 128,556 1,39,446

Other operating income 344 338 234 317 299 621 442 579

Purchases 77,229 81,522 74,894 84,609 86,557 87,910 96,473 95,140

Raw material consumption 6,574 6,263 5,956 7,017 7,852 8,862 10,495 13,814

Increase / Decrease in stock 1,941 (4,132) 2,349 (1,604) 385 (1,699) (3,779) 3,992

Staff cost 1,983 531 1,636 1,736 1,683 2,371 2,004 2,031

Other operating expenses 7,265 13,023 7,061 8,051 8,545 15,276 8,722 10,414

Total operating expenses 94,993 97,207 91,895 99,809 105,021 112,719 113,915 1,25,391

EBITDA 17,949 7,677 19,225 14,120 20,021 11,988 15,084 14,634

Depreciation 1,975 2,143 2,169 2,491 2,424 2,726 2,808 2,888

Interest 207 523 588 261 552 549 612 1,082

Other Income 214 2,299 378 2,368 1,542 2,696 577 2,219

PBT 15,980 7,309 16,846 13,736 18,587 11,409 12,241 12,883

Tax 5,066 2,476 5,508 3,882 5,738 5,227 4,159 3,726

RPAT 10,914 4,833 11,338 9,854 12,849 6,182 8,082 9,157

YoY Growth (%)

Net Sales 34.6 17.6 25.0 17.1 10.8 18.7 13.2 22.7

EBITDA 34.6 (40.4) 21.9 (15.7) 11.5 56.2 6.8 3.6

PAT 12.8 (38.3) 15.1 (10.0) 17.7 27.9 (18.0) (7.1)

Margins (%)

EBITDA 15.9 7.3 17.3 12.4 16.0 9.7 11.7 10.5

RPAT 9.7 4.6 10.2 8.7 10.3 5.0 6.3 6.6


Key pointers;-

o During the quarter, GAIL received an approval from MoPNG wherein its subsidy was provisionallycapped at Rs 14bn in FY14E, so effectively there would be no subsidy pay-out in H2FY14. Weremain conservative and factor-in a similar subsidy pay-out of ~Rs 14bn over FY15/FY16E sincewe believe that the new government in May-14 would take a re-look at the entire subsidy sharing

formula and hence await tangible developments.

o The spurt in other income at Rs 2.2 bn (-6% YoY and +285% QoQ) was primarily owing todividend income of Rs 1.4bn from IGL and OCGC amongst others.

o In the 2HFY14, we expect profits of the LPG/LHC segment to bounce back owing to zero subsidypay-out and higher sales realizations. Similarly, we expect Petchem to bounce back due to highrealizations and incremental volumes from PATA expansion (0.45 MMT), which getscommissioned in Dec-13. Gas transmission volumes will pick-up in 2HFY14; whereas take-paycharges and higher tariffs of new pipelines will keep earnings buoyant.


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4GAIL (India)

Exhibit 7:Segment Revenue and Key Operating Parameters

Particulars (Rs mn) Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Subsidy burden 5,361 13,980 7,000 7,857 7,000 5,872 7,000 6,987

Segment Revenue:

Natural Gas Trading 91,495 91,213 92,421 96,970 101,180 105,523 110,585 1,23,785

Petrochemicals 8,780 9,629 5,741 8,798 11,070 12,039 11,033 11,336

LPG & Liquid Hydrocarbons 9,654 3,223 10,723 7,695 12,772 13,147 10,037 10,388

Transmission services - Gas 10,872 8,463 9,152 9,845 9,894 4,581 9,994 10,668Transmission services - LPG 1,216 1,086 1,136 (40) 808 1,035 939 955

Others 344 416 560 758 435 423 576 755

Less : Inter Segment Revenues (9,763) (9,483) (8,849) (10,414) (11,415) (12,662) (14,608) (18,441)

Net revenue from operations 112,598 104,546 110,886 113,612 124,743 124,086 128,556 1,39,446

Segment Results (PBIT)

Natural Gas Trading 3,230 1,659 4,956 2,447 2,986 3,469 3,025 4,870

Petrochemicals 3,875 4,309 1,958 4,182 4,395 4,716 4,383 3,909

LPG & Liquid Hydrocarbons 3,055 (3,317) 4,373 665 5,920 4,927 (109) (2,279)

Transmission services - Gas 6,208 3,248 5,673 6,049 6,195 406 5,538 5,762

Transmission services - LPG 775 533 709 (489) 133 620 550 426

Unallocated - - - - - - - -

Others (436) (375) 81 69 (834) (338) (255) 17

Total Segment PBIT 16,707 6,057 17,751 12,922 18,796 13,799 13,132 12,704

Segment Margins % (PBIT)

Natural Gas Trading 4 2 5 3 3 3 3 4

Petrochemicals 44 45 34 48 40 39 40 34

LPG & Liquid Hydrocarbons 32 - 41 9 46 37 (1) (22)

Transmission services - Gas 57 38 62 61 63 9 55 54

Transmission services - LPG 64 49 62 - 16 60 59 45

Sales volume:

Average gas transmission (mmscmd) 119 116 110 106 105 99 99 95

Gas Trading/Marketing (mmscmd) 85 85 83 81 82 80 82 79

LPG and LHC ('000 MT) 361 351 322 361 340 348 350 337

Petrochemical ('000 MT) 113 118 66 101 128 132 121 108

LPG Transmission ('000 MT) 871 879 845 813 733 745 699 729

Unit sales price:

Gas transmission (Rs/scm) 0.93 0.75 0.87 0.96 0.97 0.43 1.04 1.16

Petrochemicals (Rs/MMT) 0.08 0.08 0.09 0.09 0.09 0.09 0.09 0.10

LPG & LHC (Rs/MMT) 0.03 0.01 0.03 0.02 0.04 0.04 0.03 0.03Gross operating profit:

Gas transmission 7,380 4,550 6,910 7,600 7,750 2,420 7,400 7,770

Gas trading/marketing 3,240 1,680 4,990 2,460 3,000 3,490 3,030 4,890

LPG and Liquid hydrocarbons 3,280 (3,040) 4,590 880 6,130 5,150 110 (2,060)

Petrochemicals 4,300 4,760 2,400 4,640 4,830 5,190 4,840 4,370

LPG pipeline/Gailtel/unallocated (30) 2,020 710 910 (150) (1,560) 280 1,880

Unit operating profit:

Gas transmission (Rs/scm) 0.69 0.44 0.70 0.80 0.82 0.27 0.83 0.91

Gas trading/marketing (Rs/scm) 0.42 0.22 0.67 0.34 0.41 0.48 0.41 0.69

LPG and Liquid hydrocarbons (Rs/MMT) 0.01 (0.01) 0.01 0.00 0.02 0.01 0.00 (0.01)

Petrochemicals (Rs/MMT) 0.04 0.04 0.04 0.05 0.04 0.04 0.04 0.04


Exhibit 8:Key Performance Indicators

Assumptions FY12 FY13 FY14E FY15E FY16E

Crude price (USD/bbl) 113 112 105 100 100

Subsidy (Rs mn) 31,827 26,872 14,466 13,640 13,640

Gas transmission (mmscmd) 118 105 101 114 135

LPG Production (MMT) 1.13 1.08 1.13 1.13 1.13

Polymer sales (MMT) 0.45 0.43 0.46 0.54 0.54

LPG Transmission (MMT) 3.4 3.1 3.1 3.2 3.3

Gas Trading (mmscmd) 84 82 87 93 97



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5GAIL (India)

Financials

Exhibit 9:Income Statement

Y/E March (Rsmn) FY12 F Y13 FY14E F Y15E FY16E

Revenues 4,09,385 4,76,017 5,63,853 6,18,306 6,70,019

COGS 3,09,346 3,63,656 4,36,203 4,79,823 5,20,418

% of revenues 75.6 76.4 77.4 77.6 77.7

Operat ing expenses 37,549 39,594 44,956 51,778 56,122

% of revenues 9.2 8.3 8.0 8.4 8.4

Employee Costs 6,503 7 ,854 11,239 15,410 16,703

% of revenues 1.6 1.7 2.0 2.5 2.5

EBITDA 55,988 64,912 71,455 71,294 76,776

EBITDA Margin (%) 13.7 13.7 12.7 11.6 11.5

Depreciat ion & Amort isation 7,907 9,809 10,523 13,178 13,472

EBIT 48,081 55,103 60,933 58,116 63,304

Interest expenses 1,165 1,950 3,716 4,270 4,199

Other Income 6,484 7,425 4,463 5,701 6,164

Exceptional item - - - - -

PBT 53,400 60,578 61,680 59,547 65,269

Provision for tax 16,862 20,356 19,738 19,055 20,886

Effective tax rate (%) 31.6 33.6 32.0 32.0 32.0

Net Profit 36,538 40,222 41,942 40,492 44,383Min. int./ share from asso. - - - - -

Rep. PAT 36,538 40,222 41,942 40,492 44,383

Adj. PAT after excp. 36,538 40,222 41,942 40,492 44,383


Exhibit 10:Key Ratios

Y/E March FY12 FY13 FY14E FY15E FY16E

Growth Ratio (%)

Revenues 25.6 16.3 18.5 9.7 8.4

EBITDA 2.3 15.9 10.1 (0.2) 7.7

Rep. Profit 2.6 10.1 4.3 (3.5) 9.6

Profitability Ratio (%)

EBITDA Margin 13.7 13.7 12.7 11.6 11.5

PBIT Margin 11.8 11.6 10.8 9.4 9.5

PBT Margin 13.1 12.8 11.0 9.7 9.8PAT Margin 9.0 8.5 7.5 6.6 6.6

Return Ratio (%)

ROE 17.9 17.5 16.4 14.3 14.3

ROCE 16.5 14.8 13.2 11.4 11.4

ROIC 15.9 14.9 13.9 11.6 11.7

Turnover Ratio (days)

Inventory period 12.7 11.8 11.0 11.0 11.0

Debtors period 17.0 19.7 21.9 21.9 21.9

Creditors period 57.7 56.3 58.6 58.6 58.5

Net working capital 5.9 1 4.0 18.1 1 8.1 18.1

Solvency Ratio (x)

Debt-equity 0.2 0.3 0.4 0.4 0.3

Net debt-equity 0.1 0.2 0.3 0.3 0.2

Current Ratio 1.1 1.2 1.2 1.2 1.2

Interest coverage 46.9 32.1 17.6 14.9 16.5Dividend

Dividend per share 8.7 9.6 9.7 9.7 9.7

Dividend payout ratio (%) 35.1 35.3 34.3 35.6 32.4

Dividend yield (%) 2.9 3.3 3.3 3.3 3.3

Per share (Rs)

Basic EPS 28.8 31.7 33.1 31.9 35.0

Fully diluted EPS - Adjusted 28.8 31.7 33.1 31.9 35.0

Fully diluted EPS - Reported 28.8 31.7 33.1 31.9 35.0

CEPS 35.0 39.4 41.4 42.3 45.6

Book value 170.5 191.0 212.7 233.3 256.9

Valuation (x)

P/E 11.9 10.8 10.4 10.8 9.8

P/BV 2.0 1.8 1.6 1.5 1.3

EV/EBITDA 8.3 7.5 7.0 7.2 6.5

EV/Sales 1.1 1.0 0.9 0.8 0.7

Mcap/Sales 1.1 0.9 0.8 0.7 0.7


Exhibit 11:Balance Sheet

Y/E March (Rsmn) FY12 FY13 FY14E FY15E FY16E

Equity Share Capital 12,685 12,685 12,685 12,685 12,685

Share Ap. Money Pend. Allot. - - - - -

Reserves 2,03,560 2,29,594 2,57,140 2,83,236 3,13,223

Shareholders' fund 2,16,245 2,42,279 2,69,825 2,95,921 3,25,907

Debt 48,894 83,645 1,07,295 1,19,645 1,04,706

Minority Interest - - - - -

Deferred Tax/non currentLiability

17,686 23,001 23,001 23,001 23,001

Total Capital Employed 2,82,825 3,48,924 4,00,120 4,38,566 4,53,614

Gross fixed assets 2,63,066 3,11,489 3,50,761 4,39,271 4,49,059

Accumulated depreciation (1,04,490) (1,13,453) (1,23,130) (1,35,461) (1,48,087)

CWIP 79,425 88,816 1,00,679 60,218 75,513

Net Fixed Assets 2,38,001 2,86,853 3,28,311 3,64,028 3,76,485

Investments 35,489 37,190 37,190 37 ,190 37,190

Inventor ies 14 ,197 15,353 16,859 18 ,492 20,044

Sundry Debtors 19,045 25,513 33,717 36,984 40,087

Cash & bank balances 9,313 23,579 28,098 30,820 33,406

Loans and advances 72,068 51,474 1,12,391 1,23,281 1,33,624

Other current assets 12 148 56 62 67

Total current assets 1,14,636 1,16,067 1,91,120 2,09,640 2,27,227

Current liabilities & prov. 1,08,022 97,918 1,63,232 1,79,024 1,94,021

Net current assets 6,614 18,149 27,888 30,616 33,207

Deferred Tax Asset/Others 2,721 6,732 6,732 6,732 6,732

Total Assets 2,82,825 3,48,924 4,00,121 4,38,566 4,53,614


Exhibit 12:Cash Flow

Y/E March (Rsmn) FY12 FY13 FY14E FY15E FY16E

PBT 53,400 60,578 61,680 59,547 65,269

Total tax paid (15,508) (15,042) (19,738) (19,055) (20,886)

Depreciation 7,907 9,809 10,523 13,178 13,472

Chg in debtors 14 (6,469) (8 ,204) (3,267) (3,103)

Chg in inventory (5,646) (1,156) (1,505) (1,634) (1,551)Chg in loans & advances (9,566) 20,595 (60,917) (10,891) (10,343)

Change in other currentassets

24 (136) 92 (5) (5)

Chg in creditors 16,883 8,692 17,060 8,712 8,274

Chg in other current liabilities - - - - -

Change in other non-currentliabilities

2,990 (18,796) 48,255 7,079 6,723

Net chg in working capital 4,699 2,730 (5,220) (5) (5)

CF from op. activities (a) 50,499 58,076 47,245 53,664 57,849

Capital expenditure (62,255) (57,815) (51,135) (48,049) (25,083)

Chg in investments (9,664) (1,701) 0 - -

CF from invest. activities (b) (71,919) (59,516) (51,135) (48,049) (25,083)

Debt raised/(repaid) 25,794 34,752 23,650 12,350 (14,939)

Dividend (incl. tax) (12,826) (14,208) (14,396) (14,396) (14,396)

Others (3,547) (4,839) (846) (847) (847)

CF from fin. activities (c) 9,421 15,705 8,408 (2,893) (30,182)

Net chg in cash (a+b+c) (12,000) 14,265 4,518 2,723 2,585



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6GAIL (India)

Appendix A

Disclaimer

Centrum Broking Limited (Centrum) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and NationalStock Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As agroup Centrum has Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered byour Research Group. Our research professionals provide important inputs into the Group's Investment Banking and other business selection

processes.Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or otherbusinesses and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of thismaterial/report. Our Company and Group companies and their officers, directors and employees, including the analysts and others involved inthe preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short"positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates donot own 1% or more in the equity of this company Our sales people, dealers, traders and other professionals may provide oral or written marketcommentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietarytrading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. We mayhave earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or differentthose made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give riseto or potential conflicts of interest. We and our Group may rely on information barriers, such as "Chinese Walls" to control the flow of informationcontained in one or more areas within us, or other areas, units, groups or affiliates of Centrum. Centrum or its affiliates do not make a market inthe security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the subjectcompanys securities at the time that the research report was published.

This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offerto buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be reliedupon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material containedherein. It is for the general information of the clients of Centrum. Though disseminated to clients simultaneously, not all clients may receive thisreport at the same time. Centrum will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personalrecommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Similarly, thisdocument does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specificperson who may receive this document. The securities discussed in this report may not be suitable for all investors. The securities describedherein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in thisreport are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. Theappropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who mayreceive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, ifnecessary, seek professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis ofthe information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject

matter of this document.The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject tosignificant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one ormore of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, andsuch variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors ofthis report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with publishedguidelines or generally accented accounting principles. No independent accountants have expressed an opinion or any other form of assuranceon these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation orwarranty by or on behalf of the Company, Centrum, the authors of this report or any other person that these projections or forecasts or theirunderlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report aftercarefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts.

The price and value of the investments referred to in this document/material and the income from them may go down as well as up, andinvestors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and aloss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not

predictions and may be subject to change without notice. Centrum does not provide tax advice to its clients, and all investors are stronglyadvised to consult regarding any potential investment. Centrum and its affiliates accept no liabilities for any loss or damage of any kind arisingout of the use of this report. Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverseeffect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which areinfluenced by foreign currencies effectively assume currency risk. Certain transactions including those involving futures, options, and otherderivatives as well as non-investment-grade securities give rise to substantial risk and are not suitable for all investors. Please ensure that youhave read and understood the current risk disclosure documents before entering into any derivative transactions.

This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. Norepresentation or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as itincludes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Theopinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions orinformation in this report change.

This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publiclyaccessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the

recipient only. This publication may not be distributed to the public used by the public media without the express written consent of Centrum.This report or any portion hereof may not be printed, sold or distributed without the written consent of Centrum.


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7GAIL (India)

The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comesshould inform themselves about, and observe, any such restrictions. Neither Centrum nor its directors, employees, agents or representativesshall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arisefrom or in connection with the use of the information.

This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document noranything contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is beingfurnished to you solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to

any other person. The distribution of this report in other jurisdictions may be restricted by law and persons into whose possession this reportcomes should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore goinglimitations. No representation is made that this report is accurate or complete.

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of CentrumBroking and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as ofthe date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate orprojection.

This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company orany of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by thecompany or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of thecompany or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents orotherwise arising in connection therewith.

Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months.Centrum and affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve

months from the date of this report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or otheradvisory services in a merger/acquisition or some other sort of specific transaction.

As per the declarations given by them, Mr. Sachin Mehta, research analyst and and/or any of his family members do not serve as an officer,director or any way connected to the company/companies mentioned in this report. Further, as declared by him, he has not received anycompensation from the above companies in the preceding twelve months. He does not hold any shares by him or through his relatives or in caseif holds the shares then will not to do any transactions in the said scrip for 30 days from the date of release such report. Our entire researchprofessionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or memberof which the research analyst knows of has reason to know at the time of publication of the research report or at the time of the publicappearance.

While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors andemployees are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons thatmay prevent Centrum from doing so.

Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance withapplicable regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certainother circumstances.

Rating CriteriaBuy: TP upside of >15% (>25% for stocks with market cap

GAIL - Q2FY14 Result Update.pdf

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Transcript of GAIL - Q2FY14 Result Update.pdf