GAIL Q4 profit falls 77.5% to Rs 603 cr as Ukraine war weighs on gas supply

State-run gas supplier GAIL on Thursday reported a net profit of Rs 603 crore in the fourth quarter of financial year 2022-23 (Q4, FY23), a 77.5 per cent decline compared to Rs 2,683 crore in the same period a year back.

Higher gas prices due to a global surge in energy rates following Russia’s invasion of Ukraine continued to hurt GAIL’s margins in Q4. 

But India’s largest natural gas major managed a sequential recovery in net profit, which increased nearly 1.5 times from the Rs 245 crore registered in the previous October-December quarter. This was due to global gas prices declining early 2023 to aid business, analysts have said.

Marketing of natural gas, which contributes 96 per cent of overall revenue saw a 37 per cent rise in quarterly revenue. On a quarterly basis, revenue from operations stood at Rs 33,264 crore in Q4, as against Rs 35,940 crore in Q3. 

In Q4, the natural gas transmission volume stood at 108.23 MMSCMD (million standard cubic meters of gas per day) in Q4, FY23, as against 103.74 MMSCMD in Q3 FY23. 

Gas marketing volume stood at 96.46 MMSCMD as against 89.89 MMSCMD in previous quarter. LHC sales stood at 230 TMT as against 248 TMT & polymer sales stood at 118 TMT as against 65 TMT compared to the previous quarter.

High costs

For the full FY23, the company’s net profit fell 48.5 per cent to Rs 5,301 crore in FY23, down from Rs 10,363 crore in FY22. This was despite consolidated revenue from operations for FY23 reaching Rs 144,302 crore, highest for any financial year so far.

GAIL’s mainstay natural gas marketing business, saw gross revenue at Rs 135,290 crore in FY23, up 75 per cent from Rs 77,325 crore in FY22. However, profit from the same segment stood at Rs 3,078 crore in FY23, down from Rs 4,932 crore in the previous year. The company has blamed high operational expenses for the decline in profit.

The company has incurred its highest ever capital expenditure of Rs 9,100 crore during FY23 mainly on pipelines, petrochemicals and equity to joint ventures, Sandeep Kumar Gupta, chairman & managing director at GAIL, said.

Total annual capex in the latest year was therefore 15 per cent higher than the annual target of Rs 7,918 crore, he said. 

From April 1, 2023, GAIL has implemented a unified tariff for the gas it carries for its customers, with an aim to achieve the One Nation One Grid One tariff model, and boost the gas consumption in distant areas.

Supply issues

The company is also trying to make up for the shortage in gas supplies. The disruption in supply from Russian energy giant Gazprom has continued, senior officials said. Gazprom Marketing and Trading Singapore (GMTS), a subsidiary of Gazprom Germania, stopped delivering LNG to GAIL under a long-term contract in late May.

In 2012, GMTS had signed a 20-year contract to supply GAIL with 2.85 million tonnes of LNG a year. Supplies under the deal had started in 2018 and the full volume was expected to be reached in 2023.

But last year, GMTS was housed under Gazprom Germania GMBH, after which Gazprom gave up its ownership of the company in April without any explanation, and imposed sanctions. As the diplomatic fallout of the Ukraine war escalated, Germany seized control of Gazprom Germania in April, 2022.

GMTS has defaulted on the supply of upwards of 20 cargoes till now. To mitigate disruption in the supply of 8.5-9 million standard cubic meters per day or roughly 20 per cent of all gas supply, GAIL had to cut supplies to fertiliser plants as well as some industrial consumers.

Last month, GAIL had said it will get four cargoes of liquefied natural gas (LNG) from Germany's Sefe in May, the same monty volume that GMTS would have sent.