|
(Rs crore) |
FY05 |
FY04 |
% change |
|
Net sales |
203 |
140.16 |
45.16 |
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Other income |
2.01 |
1.92 |
4.69 |
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Total Exp |
74.17 |
60.05 |
23.51 |
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Operating profit |
129.28 |
80.11 |
61.38 |
|
OPM (%) |
63.54 |
57.16 |
639bps |
|
Net profit |
16.09 |
12.22 |
31.67 |
|
NPM (%) |
7.91 |
8.72 |
-81bps |
|
EPS (Rs) |
0.57 |
0.62 |
- |
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| Analysts say that GSPL may striggle a bit when it is on an expansionary mode but growth is guaranteed in the medium to long term. GSPL transports 13 million metric standard cubic metres a day of natural gas of the 34.8 mmscmd of natural gas transported for consumption in Gujarat.
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| The company has the first mover advantage in the state. Owing to its strategic location and oceanic access to the Middle East and other Asian countries, it serves as a primary entry point for domestic natural gas and imported liquefied natural gas for western and northern India.
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| Further, the company can also transport gas on an open access basis. That is, the transmission capacity is available to any shipper on a non-discriminatory basis.
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| This allows the company to connect itself to major natural gas suppliers such as Cairn Energy, Bharat Petroleum Corporation, Indian Oil besides its own parent Gujarat State Petroleum.
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| Also, the company's key customers in the power and fertiliser sectors such as Gujarat Paguthan Energy corporation, Gujarat Narmada Valley Fertiliser Company, and Arvind Mills among others are based in the state.
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| Engaged in the gas transportation business, GSPL is a vital link between gas suppliers and end users. Gas explorers or producers such as ONGC, Reliance and GSPC or marketers BPCL and IOC and, further, LNG terminals such as Petronet LNG that import and supply re-gasified liquefied natural gas are the key suppliers.
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| Either the user or the supplier has to enter into a gas transmission agreement to transport gas from to the point of delivery and, herein, GSPL comes into play. The transmission agreement provides for terms such as tariffs, tenure and capacity reserved.
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| Tariffs comprise capacity charges, a fixed charge for reservation that typically constitute 90 per cent of the tariff commitment. The agreement entered into by the company requires the customer to pay the charge for the capacity reserved regardless of the quantity of gas transported.
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| The tariffs are based on various factors and are determined on a case-to-case basis, depending on the distance, tenure and capacity reserved. Gujarat State Petronet is a natural gas transporter and, hence, is immune to any natural gas price risks.
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| The company has strong parentage in Gujarat State Petroleum Corporation, which owns 52.52 per cent stake in GSPL, which will come down to 39.15 per cent post-issue.
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| GSPC is dominant in exploration and production of oil and gas in Gujarat. Its current portfolio comprises 12 discovered oil and gas fields, 10 exploration blocks and one coal bed methane block.
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| The outlook of natural gas industry is promising. Natural gas is used as fuel in home or industrial space heating and finds applications in various industries such as steel, textile, power generation and other industrial products.
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| According to a Crisil infrastructure advisory report (September 2005) on Gujarat gas market, the power and fertiliser segments contributes to nearly 71 per cent of the entire natural gas demand in India.
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| Though as a natural fuel it competes with coal and petroleum products, natural gas has its own advantages in certain applications. Natural gas-powered generation can offer advantages in terms of environment impact when compared with coal-fired power generation as its combustion produces fewer harmful emissions besides being economical.
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| According to a BP statistical review of world energy in June 2005, approximately 0.5 per cent of the world's natural gas reserves at the end of 2004, 0.92 trillion cubic meters of proved reserves were located in India.
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| India's natural gas reserves remain relatively undeveloped, with an estimated reserve to production ratio of approximately 31.3 years at current production levels.
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| According to EIA international energy outlook 2005, world consumption of natural gas is expected to increase at an average of 2.3 per cent annually from 2002 to 2005. India's natural gas consumption is projected to grow at an average annual rate of 5.1 per cent from 0.9 trillion cubic feet in 2002 to 2.8 trillion cubic feet in 2025.
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| Further in India, natural gas is a minor fuel in the overall energy mix, representing only 7.7 per cent of the total primary energy consumption in 2004.
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| Though the company management claims availability of natural gas on a sustained basis is a key concern, there are few others as well. Currently, the company is only present in Gujarat.
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| This is likely to prove a deterrent as natural gas is explored on the east coast as well in the Krishna-Godavari basin near Andhra Pradesh. Though the company is not wary of tapping new geographies this will add to its costs.
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| Further, the company caters to just 18 companies. The top five contribute nearly 70 per cent to GSPL's revenues. This may add to the woes of the company going forward even as it taps new users such as ceramic, textiles, pharmaceuticals, power generation and fertiliser industries.
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| The company's net profit was Rs 16.05 crore for FY05 and Rs 25.98 crore for the half-year ended September 2005.
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| On an annualised earning and post-equity basis, the price to earnings ratio at the higher band is 28.18x and at the lower end it is 22.97x. Though the valuations are stretched compared with its peers such as GAIL India and Gujarat Gas, the business visibility is bright making the IPO attractive. |
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