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Gujarat Gas Company Limited (GGCL)

About GGCL

GGCL holds the distinction of being Indias largest private sector player in the

natural gas transmission and distribution business.

Incorporated in 1980 with the primary objective to procure, distribute and utilize

natural gas and allied technology GGCL pioneered the concept of compressed

natural gas distribution to the industrial, commercial and domestic customers.

Today it supplies gas to more than 349296 domestic, industrial and commercial

customers and serves over 175757 compressed natural gas users.

The corporate office of GGCL is in Ahmedabad and its area of operations is spread

in the districts of Surat and Bharuch.

In 1989 company began its operations in the industrial hotspot of Ankaleshwar.

In 1991, GGCL expanded its operations to surat. The first CNG station was setup in

Surat.

The company has been a part of BG group portfolio since 1997. BG group has a

66% controlling stake in GGCL. FIs, FIIs and public hold the remaining 34% stake.

Profitability Ratios of GGCL:

2007 2008 2009 2010 2011Operating Profit Margin (%) 21.38 19.17 20.26 22.83 16.25

Gross Profit Margin (%) 23.04 16.05 17.01 19.95 14.37Net Profit Margin (%) 13.10 12.01 12.11 13.86 11.15

Return On Capital Employed (%)

42.68

33.25

34.63

46.46

49.47

Return On Net Worth (%) 28.25 25.08 23.58 31.54 35.88Operating profit margin is a ratio of EBIT to sales revenue, from above table it can

be observed that in 2008 and 2011 it has been decreased. This is because the

operating profit is decreased in those years. In 2011 it decreased sharply because

of a decrease in the operating profit, and the net sales hardly increased from

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30.22% to 30.87%.This might be because of the increase in operating expenses

(15%) especially cost of raw material in 2011.

Gross profit margin is also observed to be decreased as the variable cost for

producing a product is observed to be increased(13% ) in 2011 and (7%) in 08.

Net profit margin ratio has also observed to be followed the same trend, but

though here both the net profit and net sales are increasing the later is increasing

in more proportion to the former.

ROCE initially observed to be deceased and then increased showing the capital

structure that they have employed to increase their operating profit and Return

on net worth decreased in first 3 years because of the increase in capital inflow

through equity share capital as compared to the increase in PAT.

Liquidity and solvency ratios:

2007 2008 2009 2010 2011

Current Ratio 0.649 0.71 0.66 0.64 0.64Quick Ratio 0.66 0.68 0.63 0.62 0.63Debt Equity

Ratio 0.03 0.02 0.02 0.02 0.02Long Term Debt

Equity Ratio 0.03 0.02 0.02 0.02 0.02

The current ratio observed to be decreased from 08 because of the 15% increase

in current liabilities than that of 10% increase in current assets in 09 and its also

less than the standard current ratio (1:1) showing company is less capable of

paying its short term obligations.

Quick ratio is also observed to follow the same trend wherein even after reducing

the inventory which showed a sizeable increase, the liability side is more

indicating company is relying on other means than profit to meet its current

financial obligations and facing problems in paying bills on time.

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Debt to equity ratio and long term debt ratio are very miniscule because the

company is hardly making the use of long term debt for financing their

operations.

Debt coverage ratios:

2007 2008 2009 2010 2011Interest

Coverage 1297.93 2088.84 1921.42 839.75 2588.36Total Debt to

Owners Fund 0.03 0.02 0.02 0.02 0.02Interest coverage ratio is observed to be decreased sharply in 10 because the

interest payable is increased in proportion to its EBIT. In 11 however it is

increased because of increase in operating profit showing a good position. Debt

to owners fund ratio is decreasing showing company is relying more on equity for

its financing purpose.

Cash flow indicators:

2007 2008 2009 2010 2011Dividend Pay-

out Ratio 14.67

14.38

68.84

69.49

120.26

Earning

Retention

Ratio 85.55 85.51 31.34 30.49 25.61Earnings Per

Share 24.64 24.60 13.57 20.09 21.27Dividend payout ratio is increasing showing the Company is increasing the

percentage of the dividend paid to their shareholders out of total net income over

the years. In 11 it is suddenly increased showing the industry is matured and

there is a little room for growth of the industry and paying higher dividends is the

best use of their profits. EPS is less in 2009 because at that point in time % of

number of shares issued was much higher (nearly double from the previous year)

than the % increase in their profit after tax (hardly 13%).