Session – 2014-15

INTRODUCTION

GAIL is a pioneer in City Gas Distribution (CGD) business in India, with

Indraprastha Gas Limited (IGL) in Delhi and Mahanagar Gas Limited (MGL)
in Mumbai being its biggest success stories. Besides IGL and MGL, GAIL has
set up several JVs for CGD to supply gas to households, transport sector &
commercial consumers in various cities including Hyderabad, Agartala,
Kanpur, Indore, Vadodara, Lucknow, Agra and Pune. In 2008, GAIL
incorporated a wholly owned subsidiary, GAIL Gas Ltd (GGL) to exclusively
focus on city gas distribution business. GGL has been authorized for
implementation of CGD projects in four cities namely Kota, Dewas, Sonepat
& Meerut in the 1st round of bidding by Petroleum & Natural Gas
Regulatory Board (PNGRB).

Financial Statement Analysis (Meaning)

Financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. Understanding the past
is a prerequisite for anticipating the future. Financial analysis is the process
of identifying the financial strength and weakness of the firm by properly
establishing relationship between the items of the balance sheet and the
profit and loss account. Financial analysis can be undertaken by
management of the firm, or by parties outside the firm, viz. owners,
creditors, investors and others. The nature of analysis will differ depending
on the purpose of the analyst.

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OBJECTIVES TO THE STUDY

The objectives of the study are to evaluate the financial position and
performance of the “GAIL (INDIA) Ltd.”. The purpose of the study aims at a
critical analysis of the financial statements of the Company. And makes
attempt to get better insight about the financial strength and weakness of the
organisation by analyzing and interpreting the data for a period of 2 years i.e.
2013 and 2014.

 To study the financial performance of “GAIL (INDIA) Ltd.”.

 To determine the profitability or earning capacity of the concern

 To analyze the strength and weakness of the organisation on the basis of its
financial position.

 To suggest solution, if any, to the unfavorable financial conditions and

financial performance.

 To act of analysis may also reveal areas where control is deficit and
desirable for the efficient operating of the organisation which in turn
help to achieve organizational goals.

 To know the solvency of the company.

 To make comparative study with other year performance.
 To know the capability of payment of dividend and interest.

 To know the profitability of the company in the form of ratios

METHODOLOGY

Sources of data can be classified into two groups they are:

 Primary data and

 Secondary data

In this project all the data are analyzed on the basis of secondary data.

Secondary Sources:

The investigation relied on books, documents, annual report, financial

assessments, literature, files and personal observation to have an idea about
the organizational set up, functions of financial department and other groups.

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COMPANY PROFILE
Introduction

GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector
Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG).
The company was initially given the responsibility of construction, operation
& maintenance of the Hazira – Vijaypur – Jagdishpur (HVJ) pipeline Project. It
was one of the largest cross-country natural gas pipeline projects in the world.
Originally this 1800 Km long pipeline was built at a cost of Rs 1700 Crores and
it laid the foundation for development of market for natural Gas in India.

Current Businesses – Domestic

GAIL, after having started as a natural gas transmission company during the
late eighties, has grown organically by building large network of Natural Gas
Pipelines covering over 9500 Km with a capacity of around 172 MMSCMD;
two LPG Pipelines covering 2040 Km with a capacity of 3.3 MMTPA of LPG;
seven gas processing plants for production of LPG and other Liquid
Hydrocarbons, with a production capacity of 1.4 MMTPA; and a gas based
integrated Petrochemical plant of 410,000 TPA polymer capacity which is
further being expanded to a capacity of 900,000 TPA. The Company also has
70% equity share in Brahmaputra Cracker and Polymer Limited (BCPL) which
is setting up a 280,000 TPA polymer plant in Assam. Further, GAIL is a co-
promoter with 17% equity stake in ONGC Petro-additions Limited (OPaL)
which is implementing a green field petrochemical complex of 1.1 MMTPA
Ethylene capacity at Dahej in the State of Gujarat. GAIL has 31.52% stake
along with NTPC as equal partner in JV company, RGPPL at Dabhol which
operates largest gas based power generation facility in the country and is also
setting up 5 MMTPA LNG terminal.

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Keeping in mind the requirement of growth and consolidation as well as
opportunities arising out of New Exploration Licensing Policy (NELP) of
Government of India, the company has moved into upstream of gas value
chain i.e. Exploration & Production and currently has stakes in 31 E&P blocks
including 2 blocks overseas (in Myanmar). 

Leveraging on its pipeline network, GAIL has built a strong Optic Fibre Cable
(OFC) network of approximately 13,000 km for its own internal use and
leasing of bandwidth as a carriers' carrier.

As a part of its initiative towards reducing carbon footprint and creating a

path of sustainable growth, GAIL is building a portfolio of renewable
businesses. The company has successfully commissioned wind energy power
projects of 118 MW across states of Gujarat, Tamil Nadu and Karnataka. 

Global Presence

As a strategy of going global and further expanding global footprint, GAIL has
formed a wholly-owned subsidiary company, GAIL Global (Singapore) Pte Ltd.
in Singapore for pursuing overseas business opportunities including LNG &
petrochemical trading. GAIL has also established a wholly owned subsidiary,
GAIL Global (USA) Inc. in Texas, USA. The US subsidiary has acquired 20%
working interest in an unincorporated joint venture with Carrizo Oil & Gas Inc
in the Eagle Ford shale acreage in the state of Texas. In addition to having two
wholly owned subsidiaries in Singapore & USA, GAIL has a representative
office in Cairo, Egypt to pursue business opportunities in Africa and Middle
East. 

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GAIL is also an equity partner in two retail gas companies in Egypt, namely
Fayum Gas Company (FGC) and National Gas Company (Natgas). Besides, GAIL
is an equity partner in a retail gas company involved in city gas and CNG
business in China – China Gas Holdings Limited (China Gas). Further, GAIL and
China Gas have formed an equally owned joint venture company – GAIL China
Gas Global Energy Holdings Limited for pursuing gas sector opportunities
primarily in China. 

GAIL is a part of consortium in two offshore E&P blocks in Myanmar and also
holds participating interest in the joint venture company – South East Asia Gas
Pipeline Company Limited incorporated for transportation of gas to be
produced from two blocks in Myanmar to China. 

Consistent Track Record

GAIL has been a leading public enterprise with a consistently excellent

financial track record. The Turnover and PAT have shown remarkable
accomplishment with CAGR of 16% and 12% respectively in the last decade.

GAIL has recently developed corporate growth strategy for the period 2011-
20 and the same has been approved by the Board of Directors. GAIL aspires to
become an integrated hydrocarbon major with significant upstream and
downstream interests by 2020. 

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Financial Performance Analysis
It is evident that the turnover of the company has been increased by Rs 7954.03
lac which is 24.11 % over the previous year. Although The other incomes have
decreased by 2 %,the same in absolute terms donot have any bearing on the overall
revenue. As the total revenue has increased by 23.81 % over previous year. the PBT of
the company has increased by 100.02 Crores which is 1.91 % over previous year. The
increase in turnover has not been able to inflate the profit as the expenses of the
company has been increased by27.95% over previous year. The finance costs have been
increased by 40.55 % and Other expenses have been increased by 33.04%. Only
employee cost has been decreased during the year as compared to The previous Year.
Increase in assets has uncreased the depreciation expenses by 21.60 % over previous
year. The Earning per share does not show any sea change though the same is increased
by 2.6 % over previous Year. Therefore it can be said that the company has been able to
sustain the profitablity of the previous year.
It is evident that the company has raised funds from outside in the shape of
Loans to the tune of Rs. 2916.35Crores which is 147.81 % more than the previous year
figure. The current liabilities has also increased by 15.13 % over previous Year. The
trade payables have increased by 420.12 Crores which proves that the credibility of the
company has increased during the current year. The current assets of the company has
also increased by 7073.23 Crores over previous year which is 22.10% in upward trend.
The Idle cash of previous year has been utilised in the current year as the same shows a
decrease of 1200.02 Crores or 56.30 % over previous year. Major increase was
observed under inventories by 66.03% and short term loans and advances by 13.39 %
over previous Year.
It is evident that the company has almost faired in the same way as in the
previous year. The operating expenses in relation to sales has increased by 2.02%
which has resulted the decrease in operating profit by 2.02% in relation to sales of
previous year. The net PBDT has decreased by 2.93% in relation to sales over the
previous year. PBT has also decreased in relation to sales by 2.89% . The decrease is due
to the increase in turnover of the company as discussed earlier.
It is evident that the capital employed of the company has increased by by 5734.35
Crores over previous year. The non-current assets(Fixed assets) have increased by 3.57
% in relation to capital employed over previous year. borrowed funds have increased
by 8.29 % in relation to capital employed as compared to previous year figures.
Reserves have decreased in relation to capital employed by 7.20 % over previous year.
Current assets though increased in absolute terms have increased , the same as % of
capital employed has decreased by7.90 % over previous year. Current Liabilities have
also shown similar trend . The same increased in absolute terms but decreased as a %
Capital employed by 2.95%. The financial position of the company can be therefore said
to be almost the same as previous year. No major changes have been noticed except that
the borrowed funds increase would attract more interest cost in future years.

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SUGGESTIONS

On summing up of the analysis at the previous pages it can be said that

the company has fared almost in the same way as in the previous year. The rise
in turnover has been compensated by rise in expenses of the company. There was
no sea change in profitability. The company needs to employ cost cutting
measured to increase the profitability. The company has also taken an
additional loan of 3000 Crores which has inflated the finance costs of the
company. The company is going for expansion of fixed assets and an amount of
7942 Crores is under capital work in progress. The expansion needs to be
completed soon and put to use to enhance that the cash flow. The current ratio is
also under the industry margin and hence needs to be strengthened, the short
term solvency and ability to repay liabilities is now under question. Over all the
coming years are very important for the company.

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CONCLUSION

On the basis of the study of the financial results of the company and its
comparison to the previous year figures it is evident that the volume of
operations of the company has increased in the current period, however the
profitability in relation to sales has decreased when compared to previous year.
The shortage of funds has been the main crunch for the company, with
expansion of fixed assets in the strategy. The Increase in Loan funds and the fall
in the current ratio all point towards degradation of the financial conditions of
the company. However the company is still in profits hence there is no danger to
the going concern concept of the company. Its only after the expansion of assets
is completed and put to use the yield from the same could be compared with the
out flow on account of loan repayment to give an opinion on the expansions.

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