9 February 2016
3QFY16 Results Update | Sector: Oil & Gas
GAIL India
Neutral
BSE SENSEX
24,021
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,298
GAIL IN
1,268.5
442.2 / 6.5
429 / 260
-3/16/2
528
43.9
CMP: INR349
TP: INR373(+7%)
Financials & Valuations (INR b)
Y/E Mar
2015 2016E 2017E
Net Sales
565.7 506.8 582.6
EBITDA
45.2
40.9
57.0
PAT
29.9
22.0
32.2
EPS (INR)
23.6
17.4
25.4
Gr. (%)
-27.5 -26.4
46.4
BV/Sh (INR)
230.3 242.5 260.3
RoE (%)
10.8
7.3
10.1
RoCE (%)
11.1
8.9
12.4
P/E (x)
14.8
20.1
13.7
P/BV (x)
1.5
1.4
1.3
Estimate change
TP change
Rating change
Above-estimate results led by gas trading, higher OI and lower tax rate
GAIL reported 3QFY16 EBITDA of INR10.8b (est. of INR8.3b; +14% YoY, +41%
QoQ)—led by higher profitability in gas trading and LPG & Liq. Hydrocarbon
segments. PAT was above estimates at INR6.6b (est INR4.2b; +10% YoY, +51%
QoQ) led by higher other income at INR3.3b (+87% YoY, -13% QoQ) due to interest
on income tax refunds of INR400m and dividends of INR900m from ONGC.
Segmental Analysis: LPG/trading above estimate, Petchem EBIT stays negative
Gas transmission EBIT was largely in-line at INR4.3b (-16% YoY, -26% QoQ)
with volumes at 97mmscmd (+3% YoY, +8% QoQ) aided by ~8mmscmd from
power pooling. Adjusted tariff stood at INR1,096/mscm (+5% YoY, -14% QoQ).
Volatility in gas trading segment continued with EBIT at INR4.8b (est. INR2.3b;
9.5x YoY, 2.5x QoQ) boosted by better margins realized due to drop in crude
prices that were retained by the company.
In petchem despite QoQ decline in opex, EBIT stayed negative at INR-1.6b, as
realization continued to be lower than opex due to higher gas cost and startup
issues in new capacity. Realization stood at INR87/kg (-22% YoY, -9% QoQ).
Mgmt expects petchem segment to become profitable in 1QFY17.
LPG and liq. HC EBIT (before subsidy) stood at INR2.3b (-69% YoY,+223% QoQ)
helped by lower domestic gas cost and better than expected realization at
USD427/MT.
Ras Gas renegotiated; expect volume uptick and positive impact on petchem
With the renegotiation of Ras-Gas contract, the contracted LNG prices have
been reduced to USD7.5/mmbtu from the prevailing price of USD12.5/mmbtu.
We expect a two-fold positive impact with (a) increased transmission volumes
in the medium-term – though liquid fuels competitive at current crude prices
and (b) lower feedstock costs for petchem.
Valuation and view
Likely increase in the transmission tariff in the near term is an upside risk.
The stock trades at 13.7x/11.4x FY17E/FY18E EPS of INR25.4/INR30.7 and
adjusted for investments of INR70/sh at 10.9x/9.1x. Our SOTP-based target
price stands at INR373/sh (v/s INR366/sh earlier). Maintain Neutral.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Harshad Borawake
(HarshadBorawake@MotilalOswal.com); +91 22 3982 5432
Rajat Agarwal
(Rajat.Agarwal@MotilalOswal.com); +91 22 3982 5558

GAIL India
Exhibit 1: GAIL: Segment-wise performance details (INRm)
Source: Company, MOSL
9 February 2016
2

GAIL India
Key takeaways from concall
Gas Transmission:
In 3QFY16, gas volumes increased due to increased power
pooling volumes (by ~8mmsmcd, can go to ~12mmscmd in the near term).
Spot LNG volumes increased from ~4.7mmscmd in 3QFY15 to ~9.4mmscmd in
3QFY16.
Likely increase in the transmission tariff:
Transmission segment profitability will
benefit with the awaited increase in pipelines tariffs. Tariff revision for KG basin
network was expected in December 15 (now delayed); tariffs for others are
expected to be revised by end of the current fiscal year.
Petchem:
Profitability for the petchem segment was impacted by higher
depreciation and higher interest costs due to new plants commissioning. Also,
stabilization issues at the plant resulted in lower than expected production
increase. Expect petchem to turn profitable in 1QFY17. By 1QFY17, total pechem
production can be expected to reach 140-150,000MT.
Others:
Other income was higher due to (a) INR400m of interest on income tax
refunds, (b) ~INR900m of dividends received from ONGC and (c) foreign
exchange gains or ~INR250m.
Debt/Equity stands at 0.9 and cash as of 3QFY16 stands at INR8-9b.
Capex guidance
for FY16/FY17 stands at ~INR17b/INR15b. In FY18 and FY19,
total capex guidance stands at INR40b. The increase in FY18 and FY19 is due to
new pipeline projects.
Update on Kochi-Mangalore-Bangalore pipeline:
Management indicated that
on the Mangalore leg, with all the RoW is in place, they are yet to get full
consent on the two districts and some breakthrough is expected soon. Also on
the Bangalore phase the entire RoW was also in place, but even after the
favourable Supreme Court decision, clarity will only emerge after the Tamilnadu
government’s final stand on this project. (Media reports indicate that Tamilnadu
government wants to modify the pipeline route).
9 February 2016
3

GAIL India
Exhibit 2: Gail India Financial Summary: Higher other income boosts PAT
INRm
Net sales
Inc/dec in stock
Purchases
% of Net Sales
Raw material cons
% of Net Sales
Staff cost
% of Net Sales
Other expenditure
% of Net Sales
Total Expenditure
EBITDA
% of Net Sales
Depreciation
EBIT
Interest
Other income
Extraordinary
Profit before tax
Total tax
Tax rate (%)
Net profit
EPS (INR)
1QFY15
133,371
(6,041)
106,646
80%
10,555
8%
2,274
2%
9,840
7%
(123,274)
10,097
8%
(2,337)
7,761
(932)
2,076
0
8,904
(2,690)
30%
6,214
5
2QFY15
140,632
1,158
93,819
67%
13,056
9%
2,326
2%
10,716
8%
(121,075)
19,557
14%
(2,368)
17,189
(916)
3,554
0
19,827
(6,798)
34%
13,029
10
3QFY15
149,338
(1,176)
113,964
76%
13,245
9%
2,442
2%
11,362
8%
(139,837)
9,501
6%
(2,510)
6,990
(851)
1,760
629
8,528
(2,487)
29%
6,041
5
4QFY15
142,354
8,382
89,054
63%
11,275
8%
2,022
1%
25,539
18%
(136,272)
6,082
4%
(2,528)
3,554
(914)
2,945
0
5,585
(477)
9%
5,107
4
1QFY16
125,191
(3,833)
99,500
79%
7,512
6%
2,482
2%
9,553
8%
(115,214)
9,976
8%
(3,077)
6,899
(1,636)
1,248
0
6,511
(2,270)
35%
4,241
3
2QFY16
140,880
7,012
102,487
73%
8,250
6%
2,578
2%
12,879
9%
(133,205)
7,675
5%
(3,227)
4,448
(1,635)
3,787
0
6,599
(2,194)
33%
4,405
3
3QFY16
133,801
222
99,470
74%
9,001
7%
2,630
2%
11,632
9%
(122,953)
10,847
8%
(3,330)
7,517
(1,583)
3,284
0
9,218
(2,576)
28%
6,643
5
YoY (%) QoQ (%)
-10%
-5%
-13%
-32%
8%
2%
-12%
14%
33%
8%
86%
87%
8%
4%
10%
10%
-3%
9%
2%
-10%
-8%
41%
3%
69%
-3%
-13%
40%
17%
51%
51%
Source: Company, MOSL
Exhibit 3: Segmental EBITDA break-up (INRm)
INRm
Reported EBITDA
Other operating income
Segmental EBITDA
Gas transmission
LPG transmission
Gas Trading
Petrochemicals
LPG & Liquid HC (pre-subsidy)
Unallocated
Sub-total
Less: Subsidy
Total
1QFY15
10,097
2,076
12,173
4,810
800
(260)
1,470
10,090
260
17,170
(5,000)
12,170
2QFY15
19,557
3,554
23,110
4,930
580
4,620
1,770
9,140
2,070
23,110
0
23,110
3QFY15
9,501
1,760
11,260
6,820
690
530
280
7,560
1,010
16,890
(5,000)
11,890
4QFY15
6,082
2,945
9,027
4,870
860
1,960
(1,300)
2,970
(330)
9,030
0
9,030
1QFY16
9,976
1,248
11,225
5,760
940
3,460
(2,100)
2,890
270
11,220
0
11,220
2QFY16
7,675
3,787
11,462
7,690
710
1,960
(1,430)
870
1,660
11,460
0
11,460
3QFY16 YoY (%) QoQ (%)
10,847
3,284
14,132
6,290
680
4,870
(660)
2,460
(500)
13,140
0
13,140
14.2% 41.3%
86.7% -13.3%
25.5% 23.3%
-7.8% -18.2%
-1.4%
-4.2%
818.9% 148.5%
-335.7% -53.8%
-67.5% 182.8%
-149.5% -130.1%
-22.2% 14.7%
10.5%
14.7%
Source: Company, MOSL
Exhibit 4: Operational highlights – Gas transmission volume increases QoQ due to power pooling gas supplies
('000MT)
A. Gas transmission (mmscmd)
B. LPG transmission
C. Natural Gas - Trading (mmscmd)
D. Petrochemicals
E. LPG & Liq. HC (pre-subsidy)
1Q
99
699
82
121
350
FY14
FY15
FY16
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
95 96 95 97 91 94 86 87 90 97
729 855 863 832 701 773 788 689 687 692
79 80 76 77 69 74 69 69 74 77
108 109 107 87 110 112 132 50 84 84
337 332 289 324 322 330 303 278 255 294
3QFY16 (%)
YoY
QoQ
3%
8%
-10%
1%
4%
4%
-25%
0%
-11%
15%
Source: Company, MOSL
9 February 2016
4

GAIL India
Exhibit 5: Segment-wise revenue break-up (INRb)
1Q
10.0
0.9
110.6
11.0
17.0
0.6
150.2
7.0
143.2
14.6
128.6
FY14
2Q
3Q
10.7
11.9
1.0
1.1
123.8 132.9
11.3
11.6
17.4
19.3
0.8
1.1
164.9 178.0
7.0
0.0
157.9 178.0
18.4
18.2
139.4 159.8
4Q
8.5
1.1
122.0
11.8
19.9
1.5
164.7
5.0
159.7
15.1
144.6
1Q
6.6
1.1
116.7
9.9
17.6
1.6
153.6
5.0
148.6
15.2
133.4
FY15
2Q
3Q
7.7
10.0
1.0
1.1
118.2 131.7
12.8
12.5
17.0
15.5
2.0
2.0
158.7 172.7
0.0
5.0
158.7 167.7
18.1
18.4
140.6 149.3
4Q
9.3
1.2
125.2
12.0
10.4
2.0
160.0
0.0
160.0
17.7
142.4
FY16
1Q
2Q
9.2
10.6
1.4
1.1
105.8 122.2
5.2
8.0
9.3
7.5
1.9
2.3
132.8 151.7
0.0
0.0
132.8 151.7
7.6
10.8
125.2 140.9
3Q
9.8
1.1
116.9
7.3
8.3
2.1
145.5
0.0
145.5
11.7
133.8
3QFY16 (%)
YoY QoQ
-2%
-8%
5%
0%
-11%
-4%
-42%
-9%
-47% 11%
4% -10%
-16%
-4%
nm
nm
-13%
-4%
-37%
8%
-10%
-5%
A. Gas Transmission
B. LPG Transmission
C. Natural Gas Trading
D. Petrochemicals
E. LPG & Liq. HC (pre-subsidy)
F. GAILTEL & unallocated
Sub-total
Less: Subsidy
Segmental total
Less: Intersegment
Net Sales
Source: Company, MOSL
Exhibit 6: Segment-wise EBIT break-up (INRb)
INRb
A. Natural Gas
B. LPG
C. Natural Gas Trading
D. Petrochemicals
E. LPG & Liq. HC (pre-subsidy)
F. GAILTEL & unallocated
Total
G. Less: Subsidy
Reported EBIT
1Q
5.5
0.6
3.0
4.4
6.9
-0.3
20.1
-7.0
13.1
FY14
2Q
5.8
0.4
4.9
3.9
4.7
0.0
19.7
-7.0
12.7
3Q
4.1
0.6
5.1
3.4
7.6
0.3
21.0
0.0
21.0
4Q
2.6
0.6
2.9
2.0
10.0
0.3
18.2
-5.0
13.2
1Q
2.2
0.7
-0.4
1.2
10.0
0.6
14.4
-5.0
9.4
FY15
2Q
2.6
0.5
4.5
1.6
9.0
1.0
19.2
0.0
19.2
3Q 4Q
5.1 3.2
0.5 0.7
0.5 0.9
0.0 -1.5
7.4 2.8
-0.1
13.5
-5.0
8.5
0.7
6.9
0.0
6.9
FY16
1Q 2Q
3.9 5.8
0.8 0.6
3.4 1.9
-3.0 -2.4
2.8 0.7
0.7
8.6
0.0
8.6
1.1
7.7
0.0
7.7
3Q
4.3
0.5
4.8
-1.6
2.3
-0.1
10.3
0.0
10.3
3QFY16 (%)
YoY
QoQ
-16%
-26%
0%
-6%
845%
151%
-3466%
-32%
-69%
223%
28%
-24%
20%
-111%
33%
33%
Source: Company, MOSL
Exhibit 7: Transmission volumes up QoQ to 97mmscmd led
by gas pooling scheme for power plants
Gas trans EBIT (INRb)
Gas - Transmission (mmscmd)
117119119116110
106105 99 99
95 96 95 97 91 94 86 87 90 97
Exhibit 8: Ad-hocism in trading profitability continues,
profitability up QoQ due to higher trading volumes
N. Gas trading EBIT (INRb)
Gas trading (mmscmd)
83 84 8585 83 81 82 80 82 79 80
77
76 77
69 74 69 69 74
6.5 5.6 6.2 3.2 5.7 6.0 6.2 0.4 5.5 5.8 4.1 2.6 2.2 2.6 5.1 3.2 3.9 5.8 4.3
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
FY12
FY13
FY14
FY15
FY16
3.1 2.9 3.2 1.7 5.0 2.4 3.0 3.5 3.0 4.9 5.1 2.9
4.5 0.5 0.9 3.4 1.9 4.8
(0.4)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
FY12
FY13
FY14
FY15
FY16
Source: MOSL, Company
Source: MOSL, Company
9 February 2016
5

GAIL India
Exhibit 9: Petchem profitability due to
depreciation and interest from plant expansion
additional
Exhibit 10: Pre-subsidy realizations down QoQ
Pre subsidy LPG & Liq HC EBIT (INR b)
LPG realization (USD/MT)
1,027
1,108
1,016
1,009
958899 977
940 909875
871825
816
785
776
569
525451427
9.1 9.2 8.410.7 8.512.1 6.9 4.7 7.610.0 9.0 7.4 2.8 2.8 0.7 2.3
11.4
10.8
10.0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
FY12
FY13
FY14
FY15
FY16
Petchem EBIT (INR b)
Petchem volumes (KT)
132
132
129 113118
128 121 109
110112
108 107
101
88
87
84 84
66
50
2.4 4.0 3.9 4.3 2.0 4.2 4.4 4.7 4.4 3.9 3.4 2.0 1.2 1.6 0.0
(1.5) (2.4)
(3.0) (1.6)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
FY12
FY13
FY14
FY15
FY16
Source: MOSL, Company
Source: MOSL, Company
Valuation and view
With the renegotiation of Ras-Gas contract, the contracted LNG prices have
been reduced to ~USD7/mmbtu from the prevailing price of USD12.5/mmbtu.
We expect a two-fold positive impact with (a) increased transmission volumes
and (b) lower feedstock costs for petchem.
Key events to watch out for: 1) Likelihood of transmission volume increase and 2)
increase in pipeline tariffs by PNGRB.
While GAIL India’s businesses form part of a gas value chain, each business’
profitability depends on different factors, thereby making quarterly results
volatile. (a) Gas transmission growth is a function of higher gas availability, (b)
Petchem profits depends on global polymer demand-supply situation, (c) LPG
business is driven by global LPG prices and (d) gas trading profitability is a
function of management ability to manage marketing margins on LNG portfolio
without taking an inventory hit.
The stock trades at 13.7x/11.4x FY17E/FY18E EPS of INR25.4/INR30.7 and
adjusted for investments of INR70/sh at 10.9x/9.1x. Our SOTP-based target price
stands at INR373/sh (v/s INR366/sh earlier). Maintain Neutral.
9 February 2016
6

GAIL India
Exhibit 11: GAIL India: Key Assumptions
Brent crude (USD/bbl)
Exchange Rate (INR/USD)
Subsidy (INRb)
Avg. Gas Price (USD/mmbtu)
Natural Gas Transmission
Total (mmscmd)
Average Tariff (INR/mscm)
LPG Transmission
Volume ('000 MT)
Average Tariff (INR/MT)
Petrochemicals
Capacity ('000 MT)
Utilization (%)
Sales ('000 MT)
Realization (USD/MT)
LPG & liq. HC
Sales ('000 MT)
LPG realization (USD/MT)
FY09
84.7
46.1
17.8
3.7
84
840
2,744
1,392
410
103%
423
1,488
1,401
739
FY10
69.8
47.5
13.3
3.6
107
829
3,160
1,415
410
100%
409
1,472
1,442
607
FY11
86.7
46.0
21.1
5.0
119
888
3,337
1,422
420
100%
420
1,546
1,368
778
FY12
114.5
47.9
31.8
6.1
119
895
3,362
1,351
450
100%
448
1,589
1,439
910
FY13
110.0
54.5
26.9
6.7
105
879
3,200
937
450
95%
427
1,614
1,371
957
FY14
107.8
60.6
19.0
7.6
97
1,169
3,030
1,329
450
100%
445
1,703
1,308
936
FY15
86.0
61.1
10.0
7.0
92
960
3,094
1,424
450
98%
441
1,801
1,279
784
FY16E
47.8
65.4
-
5.9
94
1,166
2,785
1,725
900
35%
318
1,420
1,127
455
FY17E
45.0
67.0
(0.1)
5.7
99
1,251
2,868
1,625
900
67%
603
1,450
1,200
442
FY18E
50.0
69.0
(0.1)
6.4
114
1,227
2,868
1,625
900
95%
855
1,426
1,200
457
Source: Company, MOSL
Exhibit 12: Segmental EBITDA breakdown (INRb)
Segmental EBITDA (INRb)
NG transmission
Gas trading
LPG transmission
Petrochemicals
LPG (pre-subsidy)
Others
Sub-total
Subsidy
Total
FY09
14.8
2.8
2.3
11.5
26.9
0.1
58.4
(17.8)
40.5
FY10
22.4
3.3
3.1
13.3
19.6
-1.8
59.9
(13.3)
46.7
FY11
26.5
7.3
3.3
12.5
26.4
-0.3
75.7
(21.1)
54.5
FY12
23.9
10.0
2.9
14.5
38.6
-1.1
88.8
(31.8)
57.0
FY13
22.0
12.3
1.3
14.6
41.6
-1.2
90.8
(26.9)
63.9
FY14
23.7
13.7
2.24
13.4
28.3
2.2
83.4
(19.0)
64.4
FY15
17.3
5.5
2.3
2.1
26.1
2.0
55.2
(10.0)
45.2
FY16E
22.0
10.2
2.5
-2.9
6.9
2.1
40.9
0.0
40.9
FY17E
27.1
11.0
2.1
9.0
5.5
2.1
56.9
0.1
57.0
FY18E
30.6
12.4
2.0
9.8
7.1
2.1
64.1
0.1
64.2
Source: Company, MOSL
Exhibit 13: SOTP based target price stands at INR373/share
Business
PE Multiple (x)
FY18 adj. EPS
Core Business
E&P
Listed Investments
Unlisted investments
Target price
INR/sh
9.0
9x
29.5
266
7
51
19
343
Base
Case
INR/sh
10.0
10x
29.5
295
7
51
19
373
INR/sh
11.0
11x
29.5
325
7
51
19
402
INR/sh
12.0
12x
29.5
354
7
51
19
432
Remarks
10.0x FY18E adj. EPS
4 blocks valued on in-place/contingent resources
25% discount to CMP/target price
25% discount to book value
Source: MOSL
9 February 2016
7

GAIL India
Story in charts
Exhibit 14: EBITDA Break-up: Transmission contributes 57%
NG transmission %
Petrochemicals %
32
22
5
5
36
35
16
4
10
35
43
16
3
11
27
NG trading %
LPG (pre-subsidy) %
45
16
1
13
24
35
16
3
17
29
49
4
4
10
32
LPG transmission %
18
6
26
57
-7
10
16
4
20
50
11
16
3
20
49
12
20
23
19
16
16
9
14
19
22
Exhibit 15: Expect back-ended growth in gas transmission
volumes
Gas trans EBIT
107
84
119
119
105
97
Gas trans vol. (mmscmd)
92
94
99
114
Source: Company, MOSL
Source: Company, MOSL
Exhibit 16: LPG transmission EBIT has declined even if
volumes remained largely flat led by tariff cuts by PNGRB
LPG trans EBIT
2.7
3.2
3.3
3.4
3.2
3.0
LPG trans vol. (mmt)
3.1
2.8
2.9
2.9
Exhibit 17: Petchem EBIT will not increase in-line with
volume due to LNG dependence
Petchem EBIT
Petchem vol. ('000 MT)
855
603
423
409
420
448
427
445
441
318
12
1
(7)
5
6
2
3
3
3
1
2
2
2
1
1
10
12
11
13
13
Source: Company, MOSL
Source: Company, MOSL
Exhibit 18: Higher LNG share has led to sharp increase in gas
trading volumes and EBIT
Gas trading EBIT
78
81
83
84
81
Gas trading vol. (mmscmd)
94
79
78 79
72
Exhibit 19: Despite higher realization, LPG & Liq. HC EBIT
impacted by higher subsidy historically
LPG & Liq. HC EBIT
739
778
607
455
442
457
910
957
LPG Realization (USD/mmt)
936
784
3
3
7
10
12
13
5
8
11
12
26
19
26
38
41
29
26
6
5
7
Source: Company, MOSL
Source: Company, MOSL
9 February 2016
8

GAIL India
Story in charts
Exhibit 20: PAT addition has lagged gross block addition due
to pipeline under utilization
Gross block (INRb)
41
40
37
36
30
22
20
176
210
221
263
311
341
421
438
467
476
20
20
PAT (INRb)
39
32
Exhibit 21: Profitability has declined led by underutilization
of its gas pipelines
26
25
RoE (%)
25
21
19
17
11
8
18
18
17
11
11
13
RoCE (%)
28
31
6
9
11
Source: Company, MOSL
Source: Company, MOSL
Exhibit 22: Subsidy sharing ad-hoc; model nil in
FY16/FY17/FY18
32
21
18
13
Subsidy (INRb)
27
19
10
0
0
0
Exhibit 23: D/E ratio has sharply increased over the last 6 yrs
Net Debt (INRb)
0.37 0.38
0.25
0.08 0.09
-23
0.12
2
44 67
76
Gross D/E Ratio
0.34
64
53
29
-5
0.28
0.21
0.15
-27
Source: Company, MOSL
Source: Company, MOSL
Exhibit 24: Current 1 Yr forward P/E (x) chart
30
25
20
15
10
5
0
13.5
11.0
P/E (x)
5 Yrs Avg(x)
15 Yrs Avg(x)
10 Yrs Avg(x)
14.9
14.8
Exhibit 25: Current 1 Yr forward P/B (x) chart
4.6
3.5
2.4
1.3
0.2
2.0
1.8
Rs
P/B (x)
5 Yrs Avg(x)
ROE (%)
15 Yrs Avg(x)
10 Yrs Avg(x)
36.0
31.0
26.0
21.0
16.0
1.4
11.0
6.0
1.8
Source: Company, MOSL
Source: Company, MOSL
9 February 2016
9

GAIL India
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2011
324,586
30.2
54,544
16.8
6,503
48,041
829
5,186
0
52,398
16,788
32.0
0
35,610
36,399
15.9
2011
12,685
179,849
192,533
23,100
16,332
231,966
221,444
97,408
124,036
58,792
25,825
111,462
8,551
19,059
21,314
62,538
88,149
47,544
40,605
23,313
231,966
2012
402,807
24.1
56,981
14.1
7,907
49,074
1,165
5,491
0
53,400
16,862
31.6
0
36,538
36,538
0.4
2012
12,685
203,560
216,245
53,469
17,686
287,400
263,066
104,490
158,576
79,425
35,489
117,357
14,197
21,766
9,313
72,080
103,447
59,852
43,595
13,910
287,400
2013
473,327
17.5
62,792
13.3
9,809
52,983
1,950
9,545
0
60,578
20,356
33.6
0
40,222
40,222
10.1
2013
12,685
229,593
242,278
90,635
23,001
355,914
311,490
114,415
197,075
89,778
37,190
122,799
15,353
25,513
23,579
58,353
90,928
72,980
17,949
31,871
355,914
2014
572,451
20.9
67,012
11.7
11,762
55,250
3,662
8,985
3,450
64,023
20,271
31.7
0
43,753
41,310
2.7
2014
12,685
258,039
270,723
102,973
25,664
399,360
340,563
125,797
214,766
97,279
41,030
145,039
22,548
28,120
26,510
67,861
98,754
80,224
18,530
46,285
399,360
2015
565,694
-1.2
45,237
8.0
9,743
35,494
3,613
10,334
629
42,844
12,452
29.1
0
30,392
29,947
-27.5
2015
12,685
279,478
292,163
99,973
33,537
425,673
421,124
135,540
285,585
50,029
41,030
154,109
14,789
26,500
35,630
77,189
105,079
84,752
20,328
49,030
425,673
2016E
506,796
-10.4
40,851
8.1
12,937
27,915
6,408
9,965
0
31,472
9,442
30.0
0
22,030
22,030
-26.4
2016E
12,685
294,923
307,608
84,973
36,370
428,951
437,624
148,476
289,148
49,029
41,030
148,760
14,791
23,741
31,602
78,626
99,017
83,121
15,895
49,744
428,951
2017E
582,554
14.9
56,960
9.8
13,458
43,501
5,648
10,268
0
48,121
15,880
33.0
0
32,241
32,241
46.4
2017E
12,685
317,527
330,212
69,973
41,182
441,367
466,877
161,934
304,943
36,029
41,030
164,334
16,018
27,290
40,846
80,181
104,969
90,692
14,277
59,365
441,366
(INR Million)
2018E
734,694
26.1
64,210
8.7
13,505
50,705
4,554
11,943
0
58,094
19,171
33.0
0
38,923
38,923
20.7
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
(INR Million)
2018E
12,685
344,815
357,500
54,973
46,991
459,464
475,546
175,439
300,106
46,029
41,030
195,652
18,899
34,417
60,473
81,864
123,353
106,989
16,364
72,299
459,464
9 February 2016
10

GAIL India
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Adj. P/E (for investments)
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Debtors (No. of Days)
Fixed Asset Turnover (x)
Leverage Ratios (%)
Net Debt/Equity (x)
2011
28.7
33.2
151.8
8.0
31.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2012
28.8
35.0
170.5
8.7
35.1
12.1
0.0
9.9
2.0
1.3
8.1
2.5
2013
31.7
39.4
191.0
9.6
35.3
11.0
8.8
8.8
1.8
1.1
7.4
2.8
2014
32.6
43.8
213.4
10.4
35.3
10.7
8.5
8.0
1.6
1.0
7.2
3.0
2015
23.6
31.6
230.3
6.0
29.5
14.8
11.8
11.0
1.5
1.0
9.7
1.7
2016E
17.4
27.6
242.5
4.0
29.9
20.1
16.0
12.6
1.4
1.0
10.5
1.1
2017E
25.4
36.0
260.3
6.0
29.9
13.7
10.9
9.7
1.3
0.9
7.6
1.7
2018E
30.7
41.3
281.8
8.0
29.9
11.4
9.1
8.4
1.2
0.7
6.4
2.3
19.8
24.8
21
1.4
0.0
2011
54,544
4,359
-12,420
-14,839
-873
30,773
-46,290
-15,517
-5,095
4,090
-47,295
0
7,215
-11,094
-3,879
-20,402
41,715
21,314
17.9
21.0
20
1.4
0.2
2012
56,981
4,339
-5,081
-14,253
2,892
44,877
-66,182
-21,305
-9,653
4,420
-71,416
0
27,069
-12,531
14,538
-12,000
21,314
9,314
17.5
19.4
20
1.3
0.3
2013
62,792
7,988
-6,384
-15,129
1,067
50,334
-54,968
-4,634
-4,062
4,309
-54,722
0
32,953
-14,299
18,654
14,266
9,314
23,580
17.1
17.0
18
1.4
0.3
2014
67,012
8,812
-8,171
-18,738
-4,186
44,729
-38,364
6,365
114
5,933
-32,317
0
5,510
-14,991
-9,481
2,930
23,580
26,510
10.8
11.1
17
1.3
0.2
2015
45,237
7,349
6,376
-4,578
0
54,383
-33,311
21,072
0
0
-33,311
0
-3,000
-8,952
-11,952
9,120
26,510
35,630
7.3
8.9
17
1.2
0.2
2016E
40,851
3,557
-4,742
-6,609
0
33,057
-15,500
17,557
0
0
-15,500
0
-15,000
-6,585
-21,585
-4,029
35,630
31,602
10.1
12.4
17
1.3
0.1
2017E
56,960
4,620
-378
-11,068
0
50,134
-16,252
33,882
0
0
-16,252
0
-15,000
-9,638
-24,638
9,244
31,602
40,846
11.3
13.9
17
1.6
0.0
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
2018E
64,210
7,389
6,693
-13,362
0
64,930
-18,669
46,262
0
0
-18,669
0
-15,000
-11,635
-26,635
19,627
40,846
60,473
9 February 2016
11

GAIL India
Corporate profile
Company description
GAIL is a major gas transmission, processing, distribution
and marketing company in India, with interests in gas
distribution, petrochemicals, LPG, and telecom. It owns
~8,500km of natural gas pipelines, two LPG transmission
pipelines of 1,900km, 500KTA petchem capacity, ~1.4mt
LPG/other hydrocarbons capacity and over 13,000km of
optical fiber cable network. GAIL is also involved in city gas
distribution, E&P and power businesses through its joint
ventures.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-15
56.1
23.9
17.5
2.5
Jun-15
56.1
21.8
19.9
2.2
Sep-14
56.1
20.9
20.7
2.3
Exhibit 3: Top holders
Holder Name
LIC of India
ONGC
Indian Oil Corporation Ltd
Life Insurance Corporation of India P & GS
Fund
Matthews Pacific Tiger Fund
% Holding
10.6
4.8
2.4
2.2
1.8
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
B C Tripathi
P K Jain
Subir Purkayastha
M Ravindran
Prabhat Singh
N K Nagpal
Designation
Chairman
&
Managing
Director
Director (Finance)
Director (Finance)
Director (Human Resources)
Director (Marketing)
Company Secretary
Exhibit 5: Directors
Name
ASHUTOSH JINDAL
Anant Kumar Singh
D J Pandian
Sanjay Tandon
Name
ASHUTOSH KARNATAK
Anupam Kulshrestha
S K Srivastava
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Chandra Wadhwa & Co
DGM & Associates
Dhananjay V Joshi & Associates
G S Mathur & Co
M Goyal & Co
Type
Cost Auditor
Cost Auditor
Cost Auditor
Statutory
Cost Auditor
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
17.4
25.4
30.7
Consensus
forecast
18.7
27.0
32.9
Variation (%)
-6.8
-5.9
-6.7
Source: Bloomberg
9 February 2016
12

GAIL India
NOTES
9 February 2016
13

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GAIL India
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Analyst ownership of the stock
Served as an officer, director or employee
GAIL INDIA
No
No
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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Kadambari Balachandran
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9 February 2016
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