CMP 302.00

Target Price 332.00

ISIN: INE129A01019

Aug 12th

, 2013

GAIL (INDIA) LIMITED Result Update: Q1 FY14

HOLDHOLDHOLDHOLD

Stock Data

Sector Oil & Gas

BSE Code 532155

Face Value 10.00

52wk. High / Low (Rs.) 396.00/276.30

Volume (2wk. Avg ) 110000

Market Cap ( Rs in mn ) 383080.96

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 475226.90 541758.67 601352.12

EBITDA 72337.30 72556.05 81707.81

Net Profit 40222.00 37856.44 42766.51

EPS 31.71 29.84 33.71

P/E 9.52 10.12 8.96

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX GAIL (INDIA) LTD

SYNOPSIS

GAIL (India) Ltd is India's flagship Natural

Gas Company, engages in the exploration,

production, processing, transmission,

distribution, and marketing of natural gas.

During the quarter, the Company has posted

standalone Net Sales is increased by 16.09%

to Rs. 128998.00 million.

GAIL and the Shipping of Corporation India

Ltd have signed a MOU to cooperate for

transportation of LNG sourced by GAIL from

USA.

GAIL has signed a LNG Sales & Purchase

Agreement with Cheniere Energy Partners,

LP to procure 3.5 MMTPA of LNG from the

latter's Sabine Pass Terminal in Louisiana,

USA for a period of 20 years.

During the quarter, revenue from Natural

Gas Trading increased by 20% to Rs

110584.70 mn as against Rs 92421.40 mn in

Q1 FY13.

GAIL aspires to become an integrated

hydrocarbon major with significant

upstream & downstream interests by 2020.

GAIL has also signed a Terminal Service

Agreement with Dominion for booking 2.3

MMTPA liquefaction capacities in the Cove

Point LNG liquefaction terminal project.

Net Sales and PAT of the company are

expected to grow at a CAGR of 14% and 5%

over 2012 to 2015E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Gail (India) Ltd 302.00 383080.96 31.71 9.52 1.58 96.00

Petronet LNG Ltd 118.00 88500.00 14.72 8.02 1.99 25.00

Gujarat Gas Co.Ltd 224.60 28292.00 21.87 10.09 3.00 350.00

Indraprastha Gas Ltd 264.00 37688.00 25.29 10.64 2.38 55.00

Recommendation & Analysis - ‘HOLD’

For Q1 FY14 GAIL (India) Ltd posted a 16.09% qoq growth in net sales to Rs. 128998.00 millions. During the

quarter, revenue from Natural Gas Trading increased by 20% to Rs 110584.70 mn as against Rs 92421.40 mn in

the corresponding quarter of the previous year. The revenue from Petrochemicals business during the first

quarter of the current financial year increased by 92% to Rs 11033.40 mn as against Rs 5741.40 mn in the

corresponding quarter of the previous year while the revenue from Natural Gas Transmission increased by 9% to

Rs 9994.20 mn from Rs 9152.40 mn. The net revenue from LPG and other Liquid Hydrocarbons business during

the first quarter of the current financial year stood at Rs 10037.40 mn as against Rs 10723.10 mn in the

corresponding quarter of previous year while the revenue from LPG transmission business was Rs 939.20 mn as

against Rs 1136.10 mn in the corresponding period. GAIL has signed a LNG Sales & Purchase Agreement with

Cheniere Energy Partners, LP (Cheniere) to procure 3.5 MMTPA of LNG from the latter's Sabine Pass Terminal in

Louisiana, USA for a period of 20 years.

The Gas Transmission Agreement between GAIL and KPCL provides for supply of 2.1 MMSCMD of natural gas

from GAIL’s Dabhol-Bengaluru pipeline to feed KPCL’s power plant for 700 MW of power generation at Bidadi.

The supplies shall begin within the next 30 months. GAIL aspires to become an integrated hydrocarbon major

with significant upstream and downstream interests by 2020. GAIL (India) targets a turnover of over Rs. 130,000

crore for the year by 2020. GAIL has planned a Capex of around Rs. 40,000 crore in the next 3-4 years. The

petrochemical expansion project at Pata is progressing as per schedule and the production is expected to

commence in early 2014. The petrochem portfolio of GAIL which is presently 0.45 Million Tons per annum is

expected to increase to 1.6 Million Tons per annum by 2015. Over FY2012-15E, we expect the company to post a

CAGR of 14% and 5% in its top-line and bottom-line respectively. Hence, we recommend ‘HOLD’ for ‘GAIL

(India) Ltd’ with a target price of Rs. 332.00 on the stock.

Investment Highlights STANDALONE

Results updates- Q1 FY14,

GAIL (India) Ltd, a natural gas company is into

exploration, production, processing, transmission,

distribution and marketing of natural gas in India,

reported its financial results for the quarter ended

30th June, 2013. During the quarter, the increase in

revenue is mainly due to higher sale of Spot LNG

volume, increase in production and sale of

Petrochemicals.

Months Jun-13 Jun-12 % Change

Net Sales 128998.00 111120.00 16.09

PAT 8081.70 11337.80 (28.72)

EPS 6.37 8.94 (28.72)

EBITDA 15660.30 19602.90 (20.11)

The company’s net profit declines to Rs.8081.70 million against Rs.11337.80 million in the corresponding

quarter ending of previous year, a decrease of 28.72%. Revenue for the quarter rose 16.09% to Rs.128998.00

million from Rs.111120.00 million, when compared with the prior year period. Reported earnings per share of

the company are at Rs.6.37 a share during the quarter, 28.72% decrease over previous year period. Profit before

interest, depreciation and tax is Rs.15660.30 millions as against Rs.19602.90 millions in the corresponding

period of the previous year.

Expenditure :

Break up of

Expenditure

Rs. in Millions

Q1 FY14 Q1 FY13

Consumption of Raw Materials

10495.40 5955.80

Other Expenditure 8721.80 7151.10

Employee Benefit Expenses

2004.20 1739.80

Depreciation & Amortization Expense

2808.10 2169.20

Purchase of Stock in Trade

96472.50 74892.50

Total Expenditure 116722.60 94258.00

Segment Revenue

Latest Updates

• GAIL (India) Limited and the Shipping of Corporation India Limited (SCI) have signed a Memorandum of

Understanding (MOU) to cooperate for transportation of LNG sourced by GAIL from USA. Under the MoU,

both GAIL & SCI shall cooperate for transportation of 5.8 MTPA of LNG being sourced by GAIL from Sabine

Pass and Cove Point terminals in USA.

• GAIL has signed a LNG Sales & Purchase Agreement with Cheniere Energy Partners, LP (Cheniere) to procure

3.5 MMTPA of LNG from the latter's Sabine Pass Terminal in Louisiana, USA for a period of 20 years.

• GAIL has also signed a Terminal Service Agreement with Dominion through GAIL Global (USA) LNG LLC for

booking 2.3 MMTPA liquefaction capacities in the Cove Point LNG liquefaction terminal project located at

Lusby in the state of Maryland. As the agreements are on FOB basis, GAIL is required to make its own

arrangements for transportation of LNG from these terminals. The transportation of LNG is expected to begin

from mid-2017.

• GAIL (India) Limited has set a target of marketing 84.05 MMSCMD and transmitting 110.00 MMSCMD of

Natural gas from domestic sources and through LNG route during FY 2013-14.

• GAIL has recently signed long term agreements for 3.5 MMTPA with US based Sabine Pass Liquefaction

Company in USA. This deal will facilitate import of LNG from the US at affordable prices.

• GAIL has signed a 2.5 MMTPA long term LNG deal with Gazprom for import of LNG from its Shtokman project

being set up in the Arctic region.

• The Gas Transmission Agreement between GAIL and KPCL provides for supply of 2.1 MMSCMD of natural gas

from GAIL’s Dabhol-Bengaluru pipeline to feed KPCL’s power plant for 700 MW of power generation at

Bidadi. The supplies shall begin within the next 30 months.

• GAIL (India) Limited has signed a legally binding 20-year liquefied natural gas (LNG) sales and purchase

agreement (SPA) with Gazprom Marketing and Trading Singapore (GM&TS), a 100% wholly-owned

subsidiary of Gazprom Marketing & Trading. Under the terms of the agreement, GAIL will receive 2.5 million

tonnes of LNG per annum over a period of 20 years expected to start from year 2018-19.

• GAIL (India) and GDF SUEZ have a medium term LNG supply agreement for supply of 12 cargoes from 2013

to 2014, representing a total of 0.8 million tons.

Company Profile

GAIL (India), a natural gas company is into exploration, production, processing, transmission, distribution and

marketing of natural gas. It was incorporated in August 1984 and now has a turnover of Rs.18,008 crore. The

state-owned gas major has a market share of 78% in natural gas transmission and 70% in marketing with plans

to double up the existing transportation capacity in the next two to three years. It has 27 oil and gas exploration

blocks and 3 coal bed methane blocks.

GAIL (India) Limited, is India's flagship Natural Gas company, integrating all aspects of the Natural Gas value

chain (including Exploration & Production, Processing, Transmission, Distribution and Marketing) and its related

services. In a rapidly changing scenario, the company spearheading the move to a new era of clean fuel

industrialization, creating a quadrilateral of green energy corridors that connect major consumption centres in

India with major gas fields, LNG terminals and other cross border gas sourcing points. GAIL is also expanding its

business to become a player in the International Market.

Business Areas

• LPG and other liquid hydrocarbons

It produces million tonnes of LPG .Its 1,922 km LPG transmission pipeline connects the western, northern,

and southern part of India and has capacity to transport 3.8 million metric tonnes per annum (MMTPA) of

LPG. It also produces propane, pentane and naphtha.

• Power

It has a joint venture with Gujarat State Petroleum Corporation -- Gujarat State Energy Generation -- where it

has an installed capacity of 156 MW. GAIL also has a joint venture with NTPC, Indian financial institutions

(IFIs) and MSEB Holding Company Ratnagiri Gas and Power (RGPPL), which has power generation capacity

of 2150 MW.

• GAILTEL

It has optic fibre network extending over 13,000 km across 200 cities. It leases SCADA, ERP and ISP services

to telecom operators including Hutch, Tata Communications, Airtel, Idea Cellular, Tata Teleservices, Reliance

Communications and, among others.

• Exploration and Production

GAIL has a total of 31 exploration blocks in basins such as Mahanadi, Mumbai, Cambay,Assam-Akaran,

Tripura Fold Belt and Cauvery. In these blocks it has partnered with companies like ONGC, GSPC, OIL, Hardy

Exploration & Production, Petrogas, JOGPL, Daewoo, OVL, IOC, Korea Gas Corporation, Hallworthy, BPCL,

HPCL and Silverwave.

Today, GAIL's Business Portfolio includes:

• 9500 km of Natural Gas high pressure trunk pipeline with a capacity to carry 172 MMSCMD of natural gas

across the country

• Two LPG Pipelines covering 2040 Km with a capacity of 3.3 MMTPA of LPG

• 7 LPG Gas Processing Units to produce 1.4 MMTPA of LPG and other liquid hydrocarbons

• North India's only gas based integrated Petrochemical plant of 410,000 TPA polymer capacities which is

further being expanded to a capacity of 900,000 TPA.

• The Company also has 70% equity share in Brahmaputra Cracker and Polymer Limited (BCPL) which is

setting up a 280,000 TPA polymer plant in Assam.

• GAIL is a co-promoter with 17% equity stake in ONGC Petro-additions Limited (OPaL) which is

implementing a green field petrochemical complex of 1.1 MMTPA Ethylene capacities at Dahej in the

State of Gujarat.

• GAIL has 31.52% stake along with NTPC as equal partner in JV Company, RGPPL at Dabhol which

operates largest gas based power generation facility in the country and is also setting up 5 MMTPA LNG

terminal.

• 1,922 km of LPG Transmission pipeline network with a capacity to transport 3.8 MMTPA of LPG

• Exploration & Production and currently has stakes in 31 E&P blocks including 2 blocks overseas (in

Myanmar).

• 13,000 km of OFC network offering highly dependable bandwith for telecom service providers

• Joint venture companies in Delhi, Mumbai, Hyderabad, Kanpur, Agra, Lucknow, Bhopal, Agartala and

Pune, for supplying Piped Natural Gas (PNG) to households and commercial users, and Compressed

Natural Gas (CNG) to the transport sector

• Participating stake in the Dahej LNG Terminal and the upcoming Kochi LNG Terminal in Kerala

• GAIL Gas Limited, a wholly owned subsidiary of GAIL (India) Limited, was incorporated on May 27, 2008

for the smooth implementation of City Gas Distribution (CGD) projects. GAIL Gas Limited is a limited

company under the Companies Act, 1956.

• Established presence in the CNG and City Gas sectors in Egypt through equity participation in three

Egyptian companies: Fayum Gas Company SAE, Shell CNG SAE and National Gas Company SAE.

• Stake in China Gas Holding to explore opportunities in the CNG sector in mainland China

• A wholly-owned subsidiary company GAIL Global (Singapore) Pte Ltd in Singapore.

GAIL has formed Subsidiaries and Joint Venture companies for City Gas Distribution and Petrochemicals. GAIL is

one of the pioneers to introduce City Gas Projects in India for gas supplies to households, commercial users and

for the transport sector by forming Subsidiaries/ Joint Venture Companies.

Global Presence

• GAIL has formed a wholly-owned subsidiary company, GAIL Global (Singapore) Pte Ltd. in Singapore for

pursuing overseas business opportunities including LNG & petrochemical trading.

• GAIL has also established a wholly owned subsidiary, GAIL Global (USA) Inc. in Texas, USA. The US subsidiary

has acquired 20% working interest in an unincorporated joint venture with Carrizo Oil & Gas Inc in the Eagle

Ford shale acreage in the state of Texas.

• GAIL has a representative office in Cairo, Egypt to pursue business opportunities in Africa and Middle East.

• GAIL is also an equity partner in two retail gas companies in Egypt, namely Fayum Gas Company (FGC) and

National Gas Company (Natgas). Besides, GAIL is an equity partner in a retail gas company involved in city

gas and CNG business in China – China Gas Holdings Limited (China Gas). Further, GAIL and China Gas have

formed an equally owned joint venture company – GAIL China Gas Global Energy Holdings Limited for

pursuing gas sector opportunities primarily in China.

Joint Ventures

• Aavantika Gas Limited (AGL)

• Central U.P. Gas Limited (CUGL)

• Green Gas Limited (GGL)

• Indraprastha Gas Limited (IGL)

• Mahanagar Gas Limited (MGL)

• Maharashtra Natural Gas Limited (MNGL)

• ONGC Petro-additions Limited (OPaL)

• Petronet LNG Limited (PLL)

• Ratnagiri Gas and Power Private Limited

(RGPPL)

• Tripura Natural Gas Company Limited

(TNGCL)

• GAIL China Gas Global Energy Holdings

Limited

Subsidiaries

• Brahmaputra Cracker and Polymer Limited (BCPL)

• GAIL Gas Limited

• GAIL Global (Singapore) Pte Limited

Financial Highlight STANDALONE

Balance sheet as at March31st, 2012-2015E

(A*- Accruals, E* -Estimations & Rs. In Millions)

Particulars March (Rs.in.mn) FY12A FY13A FY14E FY15E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 12684.80 12684.80 12684.80 12684.80

Reserves and Surplus 203573.50 229593.20 267449.64 310216.15

1. Sub Total - Net worth 216258.30 242278.00 280134.44 322900.95

Non Current Liabilities

Long Term Borrowing 48893.50 81407.80 99317.52 112228.79

Deferred Tax Liability (Net) 17686.40 23000.60 19550.51 17986.47

Other Long Term Liabilities 2766.30 6850.70 8220.84 9371.76

Long Term Provisions 3377.70 3595.80 3739.63 3851.82

2. Sub Total - Non Current Liabilities 72723.90 114854.90 130828.50 143438.84

Current Liabilities

Short Term Borrowings 0.00 2237.40 2371.64 2490.23

Trade Payables 25099.30 31037.60 35382.86 38213.49

Other Current Liabilities 36547.90 42081.20 45868.51 48620.62

Short Term Provisions 10882.40 14352.80 17223.36 19462.40

3. Sub Total - Current Liabilities 72529.60 89709.00 100846.38 108786.73

Total Liabilities (1+2+3) 361511.80 446841.90 511809.32 575126.53

APPLICATION OF FUNDS

Non-Current Assets

a) Fixed Assets 238000.70 286852.70 321275.02 353402.53

b) Non Current Investments 26719.00 36800.50 44160.60 51226.30

c) Long Term loans and advances 31745.10 25914.90 27210.65 28843.28

d) Other non-current assets 2721.10 6731.90 8751.47 10676.79

1. Sub Total - Non Current Assets 299185.90 356300.00 401397.74 444148.90

Current Assets

Current Investment 95.90 389.50 475.19 546.47

Inventories 14197.4 15353.30 16120.97 16765.80

Trade receivables 19044.80 25513.40 31323.02 36193.07

Cash and Bank Balances 9313.30 23579.40 31124.81 40462.25

Short-terms loans & advances 19662.30 25558.60 31181.49 36794.16

Other current assets 12.20 147.70 186.10 215.88

2. Sub Total - Current Assets 62325.90 90541.90 110411.58 130977.63

Total Assets (1+2) 361511.80 446841.90 511809.32 575126.53

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value(Rs.in.mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 403979.50 475226.90 541758.67 601352.12

Other Income 4318.80 7645.10 3210.94 3532.04

Total Income 408298.30 482872.00 544969.61 604884.16

Expenditure -345826.50 -410534.70 -472413.56 -523176.34

Operating Profit 62471.80 72337.30 72556.05 81707.81

Interest -1164.60 -1950.20 -2320.74 -2692.06

Gross profit 61307.20 70387.10 70235.31 79015.76

Depreciation -7907.10 -9809.40 -11084.62 -12193.08

Profit Before Tax 53400.10 60577.70 59150.69 66822.67

Tax -16861.70 -20355.70 -21294.25 -24056.16

Net Profit 36538.40 40222.00 37856.44 42766.51

Equity capital 12684.80 12684.80 12684.80 12684.80

Reserves 203573.50 229593.20 267449.64 310216.15

Face value 10.00 10.00 10.00 10.00

EPS 28.80 31.71 29.84 33.71

Quarterly Profit & Loss Statement for the period of 31st Dec, 2012 to 30th Sep, 2013E

Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E

Description 3m 3m 3m 3m

Net sales 125041.90 124707.00 128998.00 132867.94

Other income 1541.80 2695.90 576.80 778.68

Total Income 126583.70 127402.90 129574.80 133646.62

Expenditure -105021.00 -112719.30 -113914.50 -116339.17

Operating profit 21562.70 14683.60 15660.30 17307.45

Interest -551.80 -549.40 -611.70 -526.06

Gross profit 21010.90 14134.20 15048.60 16781.39

Depreciation -2423.90 -2725.60 -2808.10 -3116.99

Profit Before Tax 18587.00 11408.60 12240.50 13664.40

Tax -5738.40 -5226.80 -4158.80 -4741.55

Net Profit 12848.60 6181.80 8081.70 8922.85

Equity capital 12684.80 12684.80 12684.80 12684.80

Face value 10.00 10.00 10.00 10.00

EPS 10.13 4.87 6.37 7.03

Ratio Analysis

Particulars FY12A FY13A FY14E FY15E

EPS (Rs.) 28.80 31.71 29.84 33.71

EBITDA Margin (%) 15.46% 15.22% 13.39% 13.59%

PBT Margin (%) 13.22% 12.75% 10.92% 11.11%

PAT Margin (%) 9.04% 8.46% 6.99% 7.11%

P/E Ratio (x) 10.48 9.52 10.12 8.96

ROE (%) 16.90% 16.60% 13.51% 13.24%

ROCE (%) 26.54% 25.20% 22.73% 22.62%

Debt Equity Ratio 0.23 0.35 0.31 0.29

EV/EBITDA (x) 6.77 6.13 6.06 5.32

Book Value (Rs.) 170.49 191.00 220.84 254.56

P/BV 1.77 1.58 1.37 1.19

Charts

Outlook and Conclusion

� At the current market price of Rs.302.00, the stock P/E ratio is at 10.12 x FY14E and 8.96 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.29.84 and

Rs.33.71 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 5% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 6.06 x for FY14E and 5.32 x for FY15E.

� Price to Book Value of the stock is expected to be at 1.37 x and 1.19 x respectively for FY14E and FY15E.

GAIL aspires to become an integrated hydrocarbon major with significant upstream and downstream interests

by 2020. GAIL (India) targets a turnover of over Rs. 130,000 crore for the year 2020. GAIL plans to bring more

than 30 LNG cargoes in the year 2013-14. GAIL has planned a Capex of around Rs. 40,000 crore in the next 3-4

years. The petrochemical expansion project at Pata is progressing as per schedule and the production is expected

to commence in early 2014. The petrochem portfolio of GAIL which is presently 0.45 Million Tons per annum is

expected to increase to 1.6 Million Tons per annum by 2015. We recommend ‘HOLD’ in this particular scrip with

a target price of Rs.332.00 for Medium to Long term investment.

Industry Overview

The Indian Oil and Gas (O&G) sector is one of the six core industries of India and contributes over 15 per cent to

the Gross Domestic Product (GDP). The country is the sixth largest consumer of oil in the world and the ninth

largest crude oil importer.

The sector is of immense importance to the economy owing to its significant forward integration with many

other sectors. India is committed to boosting its growth in the years to come and this progress would translate

into the country’s energy needs growing many times. The need of the hour, therefore, is to channelise all efforts

on exploration of new blocks effectively as well as efficiently.

The growing demand for crude oil and gas in the country coupled with policy initiatives of the Government of

India towards increased E&P activity has given a great impetus to the growth of this sector.

Key Statistics

• Oil continued to remain the top item in India's export basket during 2012-13. Crude oil as well as other

petroleum products accounted for about one-fifth of India's outbound shipments, giving the much-

needed boost to the country’s exports. Petroleum product exports rose 7.7 per cent at US$ 60.3 billion in

2012-13 from US$ 56.04 billion in 2011-12.

• Indian refiners processed 6.8 per cent more oil in April 2013 than a year earlier at 3.62 million barrels

per day (mbpd), according to recent Government data, reflecting expanded capacity.

• Natural gas output stood at 3 billion cubic metres (BCM) in April 2013.

• India’s refining capacity was enhanced by 400, 000 bpd in 2012. Another 400, 000 bpd of capacity could

be added in 2013 if Indian Oil Corporation's 300,000 bpd Paradip and Nagarjuna's 120,000 bpd

Cuddalore refineries are completed by the end of this year.

Diesel & Petrol

Crude oil production, as indicated by the core sector index, accounts for over 5 per cent of India's index of

industrial production (IIP).

Diesel consumption increased by 4.2 per cent year-on-year (y-o-y) in April 2013 to 6.2 million tonnes (MT),

according to data compiled by the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum and

Natural Gas. The growth in diesel consumption was faster than other petroleum products.

The overall consumption of petroleum products increased 3.1 per cent y-o-y in April 2013, PPAC data indicated.

Gas

Natural Gas has emerged as one of the most preferred fuel owing to its environment-friendly properties, greater

efficiency and cost effectiveness.

India's shale gas reserves are at about 290 trillion cubic feet (TCF), of which 63 TCF could be recovered,

according to a study by US Energy International Agency. Shale gas is natural gas formed from being trapped

within shale formations.

Natural gas sector constitutes about 9.8 per cent of primary energy consumption which is projected to grow up

to 20 per cent by 2025 as per Indian Hydrocarbon vision. About 65 per cent of natural gas consumption is

accounted by power and fertiliser sectors. Petroleum and Natural Gas Regulatory Board chairman S. Krishnan

emphasises on the need to develop a strategy to meet substantial share of energy needs from natural gas and

take its contribution in the country’s energy basket from 9.8 per cent to 25 per cent in the medium term.

• The demand for natural gas in India has been growing, and is expected to increase by 280 per cent from

the current levels to 220 BCM by 2020.

Oil & Gas - Key Developments and Investments

• State-owned Petronet LNG intends to establish a mini-liquefied natural gas (LNG) terminal in the

Andaman and Nicobar Islands at an outlay of about Rs 600 crore (US$ 105.2 million). The company is also

set to commission its second terminal in Kochi in July 2013. The mini-LNG terminal would be Petronet

LNG’s first venture outside mainland India.

Petronet is also in the process of enhancing the capacity at its Dahej terminal from 10 MT to 15 MT. The

company is also bidding for a 25 per cent stake in Gujarat State Petroleum Corporation (GSPC)’s 5 MT-

LNG-terminal at Mundra. If it acquires stake in the project, it would form an alliance with GSPC and the

Adani group.

• Punj Lloyd has bagged Rs 730 crore (US$ 128 million) B-127 cluster pipeline project in Mumbai from Oil

and Natural Gas Corporation (ONGC).

The selection was made through a bidding process. The B-127 cluster comprising three marginal fields:

B-127, B-157 and B-59: has an estimated cumulative production of 1.836 MT of oil and 2.093 BCM of gas

over a ten-year tenure and the additional development of B-55 poses a production of 0.155 MT oil and

2.583 BCM gas over 13 years.

• ONGC Videsh Ltd (OVL), the foreign investment arm of state-run ONGC has announced its intentions to

invest in power, petrochemical and fertiliser plants in Bangladesh after securing two shallow water gas

blocks in the South Asian nation. The firm would be getting into exploration business in a neighbouring

country for the first time. OVL, along with Oil India Ltd (OIL), will develop the blocks in Bangladesh. A

production-sharing contract (PSC) for the same would be signed by August 2013.

• Cairn India, a Vedanta Group Company, plans to invest US$ 2 billion over 2013-15 to develop its Barmer

block in Rajasthan. The company intends to drill at least 500 wells a year by 2018 and reports that the

resource base allows production of 300,000 bpd.

Cairn India, promoted by London-based billionaire Anil Agarwal, holds 70 per cent stake in the block

while public sector explorer ONGC holds the remaining 30 per cent.

Oil & Gas - Government Initiatives

Decisions made in the E&P sector influences decisions in every sphere of the economy and the Indian

Government keeps a meticulous track of policies implemented, global happenings and future reforms.

• The Cabinet Committee on Investment (CCI) has recently cleared 25 E&P blocks, releasing Rs 24, 900

crore (US$ 4.36 billion) of investments.

• Meanwhile, India and Finland have decided to join efforts in the area of sustainable development for

mutual benefits in the O&G sector, which includes specific projects in solar energy applications for O&G

Projects, bio-fuels & algae based bio-fuels research and water and waste water management.

• The Reserve Bank of India (RBI) has also announced that Navratna Public Sector Undertakings — OVL

and OIL — will be allowed to make overseas investments in the incorporated Joint Ventures (JVs)/Wholly

Owned Subsidiaries (WoS) in the oil sector.

These investments for exploration and drilling for oil and natural gas by the Navratna PSUs, already

approved by the Government of India, will be without any limits under the automatic route, said the RBI

notification.

So far, OVL and OIL were allowed to invest in overseas unincorporated entities in oil sector (for

exploration and drilling for oil and natural gas), which are duly approved by the Government of India,

without any limits under the automatic route.

Oil & Gas - Road Ahead

Oil Ministry's PPAC forecasts fuel consumption at 155.63 MT. Demand for diesel, which accounts for 45 per cent

of the fuel consumption in India, is projected to grow by 8.3 per cent to 70.1 MT (It was previously projected to

grow by 5.9 per cent). PPAC projects a 5.5 per cent growth in petrol demand (at 15.82 MT).

Furthermore, India's natural gas demand is likely to more than double to 473 million standard cubic meters per

day by 2016-17 with most of the additional demand coming from power plants, according to Oil Ministry’s

projections for the 12th Five Year Plan (2012-13 to 2016-17).

Moreover, Business Monitor International (BMI) forecasts that India will account for 12.4 per cent of Asia Pacific

regional oil demand by 2015, while satisfying 11.2 per cent of the supply.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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