GAIL's going in for a makeover

India's largest transporter and marketer of gas, the Rs 16,047 crore GAIL, is in for a makeover. Not satisfied with simply moving gas across the country, it wants to make the pipes that will move the gas and also lay the pipelines. Says UD Choubey, CMD,GAIL, "We're looking to set up two new firms, the first to make pipes and another to lay pipelines."

That's not all. In early December, GAIL announced a deal with Reliance Industries (RIL)""the two are planning a petrochemicals plant overseas. And it's also teaming up with Reliance Gas Transportation Infrastructure to move gas from RIL's fields in the Krishna-Godavari basin.

The company's motto now appears to be to 'co-operate, collaborate and then compete' as GAIL's CMD recently put it. GAIL's targeting a three-fold growth in its turnover in just four years. "We should be a Rs 50,000 crore firm by 2011 and the target is realistic," says Choubey.

Analysts say that with a crop of new ventures, GAIL's topline should surge to around Rs 24,000 crore in the next couple of years. And, if all goes well, profits could nudge Rs 3,000 crore by FY09. Not surprisingly, the firm's stock price, which was languishing because the company's core business wasn't going anywhere, thanks to the shortage of gas, hit a high of Rs 541 in the second week of December.

Much depends on whether GAIL wants to share the spoils. Choubey says GAIL may not want a partner for either of the new ventures but if it does decide to rope in someone it will ensure it holds at least a 50 per cent stake.

Meanwhile, things are looking up for the company's core business. Says Choubey, "Gas transmission and marketing contributes more than half of our profits and will continue to be a major revenue earner."

"We expect better supplies of more gas from next year. RIL has asked us to transport and market the huge volumes of gas from the K-G basin," says a company spokesperson. Besides, GAIL's transmission tariffs for most of its networks have been reduced over the years and are unlikely to be reduced further.The partnership with Reliance will allow GAIL to access gas for better utilisation of its networks.

GAIL's strength lies in its presence across the value chain "" from exploration and production to transportation and marketing to petrochemicals.Now it will look to build on these strengths. For instance, it proposes to add 5,500 km, at a cost of Rs 18,000 crore, of pipelines by 2012 to the 6,500 km that it currently has. It transports 140 million cubic metres per day(mcmd) of gas. "Once the pipelines are completed our transmission volumes will more than double to 300 mcmd," observes Choubey.

Choubey says petrochemicals, which contributes 35 per cent to turnover, will be a key focus area. Apart from RIL, GAIL is working with Hindustan Petroleum, Total, LN Mittal's Mittal Investment and Oil India to study the feasibility of a 15 million tpa refinery at Vishakapatnam and an integrated petrochemical complex. That will make GAIL a major player in the petrochemical space. It already operates a plant at Pata in Uttar Pradesh. Besides that, another Rs 5,000 crore plant is under construction in Assam.