Sector 2: Oil & Gas Company 2: Gujarat Gas Ltd

General Overview
Gujarat Gas Limited (GGL), is India's largest City Gas Distribution player with its existence spread across
23 Districts in the State of Gujarat, Union Territory of Dadra & Nagar Haveli and Thane Geographical
Area (GA) (excluding already authorized areas) which comprises Palghar District of Maharashtra. In 10th
CGD bidding round announced by PNGRB the company has won 6 GAs comprising 17 cities in Punjab,
Haryana, Madhya Pradesh, and Rajasthan, making GGL a pan India Company. The company has India's
largest customer base in Residential, Commercial and Industrial segments. The company has more than
24,000 kms. of gas pipeline network. It has more than 400 CNG stations and distributes natural gas to
over 14,50,000 households and approximately 2 lakh CNG vehicles are fueled per day to more than 3700
industrial customers. The company has consistent financial performance, quality management, and strong
technical momentum indicating good investor enthusiasm.

Shareholding pattern of the company

Source: Money Control

Source: Money Control
 • Promoters holding remains unchanged at 60.89% in Dec 2020 qtr
• Mutual Funds have increased holdings from 7.14% to 7.23% in Dec 2020 qtr.
• FII/FPI have decreased holdings from 9.07% to 9.01% in Dec 2020 qtr
• Institutional Investors have decreased holdings from 16.38% to 16.33% in Dec 2020 qtr
• The controlling stake is with Gujrat State Petronet Ltd.
• Other investors are state run public sector companies like Gujrat State fertilizers etc.

Management of the company

Shri Anil Mukim, IAS, Chairman of the Board of Director. He held several important portfolios
including Collector & District Magistrate, Vadodara, Bhavnagar & Kutch-Bhuj, Addl. Principal
Secretary to Honourable Chief Minister; Municipal Commissioner, Ahmedabad etc. He has vast
corporate experience and held Directorship on the Board of various eminent Companies. In addition to
his charge as Chief Secretary of the State, he is also Chairman of Gujarat State Petroleum Corporation
Limited, Gujarat Alkalies & Chemicals Limited, Gujarat Narmada Valley Fertilisers & Chemicals
Limited and Gujarat Maritime Board.

Smt. Sunaina Tomar, IAS ,Director

Smt. Sunaina Tomar, IAS is the Additional Chief Secretary to Energy & Petrochemicals Department,
Government of Gujarat. She has broad experience in the public administration. She has also worked
with the Union Government as Joint Secretary, Ministry of Textiles. She also holds Directorship of
various Government Companies.

Shri Jal Patel, Independent Director

Shri Jal Patel, an Associate Member of the Institute of Chartered Accountants of India and the Institute
of Company Secretaries of India, has a professional experience of more than 45 years.He was associated
with Bearing companies' German FAG group since 1962 where he handled various managerial
functions. In 1977, he took over as the Managing Director of the company. Subsequently, he was
promoted as the Vice Chairman and Managing Director before retiring in 2000. His areas of expertise
include Finance, Accounts and Administration.

Shri Sanjeev Kumar, IAS, Managing Director

He has done B. Tech (Hons.) from I.I.T. Kharagpur and Masters in Public Affairs from Humphrey
School of Public Affairs, University of Minnesota, USA. He has in-depth knowledge and vast
experience of working in various Government Departments and Public Sector Undertaking.

The Management of PSUs are selected after due diligence as per government norms by state government.
Hence, PSUs are under the able leaders who have rich experience in the industry.
SWOT of Company
Strengths
• Present in one of the most industrialized states of India.
• Has won six areas recently which are yet to be operationalized-Amreli, Ahmedabad rural, Dahej,
Dahod,Panchmahal and Anand
• Immense untapped potential of ~71,000 buses in Gujarat
• Extensive network of~17,000km of pipeline
• Promoters holding remains unchanged at 60.89% in Dec 2020 qtr
• Mutual Funds have increased holdings from 7.14% to 7.23% in Dec 2020 qtr.
• GUJGA has ~250 CNG retail outlets and plans to add ~100 more in the next three years.
Increase in the number of stations would also encourage conversion.

Weakness
• The CGD sector is still in the development stage, hence, many challenges are being faced by all
the stakeholders of the CGD sector.
• The company needs Continuous availability of economic gas supplies for efficient operations.
• Needs to invest in pipeline connectivity for expansion in unconnected areas,
• Abundant availability of economical alternate fuels pose a challenge
• No pricing power in industrial segment and dependence on LNG
• Low number of CNG stations across the state
• Lack of high rise buildings increases cost of residential connections and decreases the speed of
conversions

Opportunities
• The Government is encouraging the usages of clean and green fuel, i.e. Piped Natural Gas
(“PNG”) and Compressed Natural Gas (“CNG”)
• The Government of India (GoI) wants to make India a gas-based economy by boosting domestic
production and buying cheap LNG. India has set a target to raise gas share in its primary energy
mix to 15% by 2030.
• GoI has adopted a systematic approach to focus on all aspects of the gas sector viz upstream,
midstream and downstream including CGD network development
• Depletion of oil-based fuels and environmental constraints have created a necessity for alternate
energy resources which are cleaner and environment friendly. Natural gas is being considered the
fuel for today and is being looked as transportation and domestic fuel.
• Against an estimated 8.8m households, PNG penetration across Gujarat is~18%. Hence, massive
potential for growth.
• With government push on increasing PNG-residential penetration, it is expected to add annual
~80,000 households in the next 3-4 years.
Threat
• Stiff competition from other conventional fossil fuels due to accessibility and availability.
• The fuel also faces threat in the form of disparity in the tax structure compared to alternate
fuels as PNG and CNG are still out of GST ambit.
• The industrial segment constitutes 68% of GUJGA’s total sales volume. Gas competes with
fuel oil, coal/petcoke and other dirty fuels like rice husk and brickets. In the absence of
regulatory push, consumers are driven only by economics and switch pretty quickly from one
fuel to another.
• Global economic downturn
• Crude market volatility
• Delay in permissions from various statutory bodies for laying the infrastructure etc.

Competitive Analysis
NAME P/E P/B ROE ROC ROA REV OP NPM BASI CURRE TOTAL TOTAL
(X) (X) % E% % CAG M C NT DEBT/ DEBT/
R EPS RATIO EQUIT CFO
[3YR Y (X) (X)
Gujarat 26.18 7.75 36.13 22.93 15.12 26.29 13.59 11.63 17.41 0.79 0.55 1.29
Gas
GAIL 6.76 1.17 19.12 13.59 12.57 14.17 11.71 10.02 20.89 0.96 0.13 0.76
Adani Gas 101.92 28.43 29.66 31.21 17.61 16.66 31.39 23.27 3.97 0.94 0.24 0.79
IGL 37.22 6.97 23.31 24.53 16.55 19.53 21.75 16.88 17.84 1.39 0.00 0.00
GSPL 7.76 1.72 35.40 27.45 12.95 26.87 22.97 18.66 30.66 0.60 0.49 0.86
Mahanagar 19.01 3.49 26.87 31.12 19.22 13.60 33.31 26.69 80.33 1.59 0.00 0.00
Gas

• The Company recorded a robust growth in (PAT) by 186.15 % to Rs 1193.32 crores in financial
year 2019-20 from Rs 417.03 crores during financial year 2018-19.
• The Company noted earnings per share (EPS) of Rs17.33 per share having Face Value of Rs 2
each in financial year 2019-20 compared to Rs 6.06 per share having Face Value of Rs 2 each in
financial year 2018-19.
• Operating Profit Margin (%) is improved mainly because of increased turnover and reduced
procurement cost.
• Net Profit Margin (%) is improved due mainly to the increase in turnover and the reduction in
procurement cost.
• Debt Equity ratio has enhanced due to increase in retained earnings & repayment of Debt.
• The revenue growth rate has been highest among the peer group.
• Operation profit margin is second lowest among the competitors, however D/E and D/CFO is
highest among peer group, signaling highly debt ridden organization.
• Slightly overvalued in comparison to Gail. But, undervalued in comparison to adani gas.
Conclusion and way forward for the company
Natural Gas is the purest and most effective of the fossil fuels. It share of the primary energy mix is
expected to grow, due to its potential to play an vital role in the world’s transition to a cleaner, more
affordable and secure energy future.
Traditionally the Natural Gas usage in India has seen a slowdown with power segment shifting back to
coal from Natural Gas due to poorer accessibility of cheap domestic gas and increased reliance on costly
R-LNG. However, with R-LNG prices projected to be low, some power producers may shift back to
Natural Gas.
The position for natural gas in India hangs on the growth in demand, the advancement of the pricing
method, and the pace of gas structure development.
The company has already adopted digitization of its critical processes and due to that these processes
were least impacted during the Covid-19 lockdown period. In the future also, the company shall
leverage its endeavors for more digitization and aims to set benchmark in the CGD industry for
complete E-Office, benefiting all the stakeholders viz. consumers, vendors, suppliers, and employees.

References
• Money Control
• Economic Times
• Gujrat Gas Annual Report
• https://www.capitalmarket.com/Company-Information/Information/About-Company/Gujarat-
Gas-Ltd/43934
• https://www.motilaloswal.com/site/rreports/HTML/636282759219172158/index.htm
• https://www.jmfinancialservices.in/company-information/directors-reports/gujarat-gas-ltd
• https://www.indiainfoline.com/company/k-e-c-international-ltd/management-discussions/27273
• https://www.gujaratgas.com
• https://www.business-standard.com/company/gujarat-gas-43934/annual-report/director-report