Sector Update |
6
August 2020
Oil & Gas
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A deep-dive into the draft regulation for unified tariff
The Petroleum and Natural Gas Regulatory Board (PNGRB) is in the process of
formulating a single tariff across integrated pipeline network, in line with the aim to
reduce transportation cost for natural gas for longer distances.
The announced open house for the determination of a unified tariff, in respect of
Integrated Natural Gas Pipeline System, attracted various comments from
stakeholders. Amid this, we garner the comments to highlight the various bottlenecks
that remain to be answered by the regulator.
Public Consultation Document
Looking into the past for unsolved puzzles…
The regulator had attempted to announce a unified tariff in 2018 as well, when
many of the prime stakeholders had raised concerns about the idea despite
agreeing to its implementation for the greater good.
Most of the stakeholders have raised a similar concern that selective unification
would lead to inefficiencies and pancaking would still pose an issue. Also, there
are concerns regarding an increase in input cost for consumers (as in 2018):
IOCL mentioned that refinery input cost would increase by INR1b.
Torrent power commented that an increase in tariff would increase the
power cost and make power production unviable.
The issues/concerns in 2018 still persist and are the main choke point for
unified tariff in 2020 as well
(refer exhibit 5):
Joining the debate, in the recent open house, the Fertilizers Association of
India highlighted that a unified tariff would lead to an increase in tariffs and
may prove disadvantageous for urea manufacturers.
Some new upcoming LNG terminals (in Gujarat) and newly awarded CGD
players stated the end consumer would have to pay an increased unified
tariff.
A major point of debate is the depreciation of very old pipelines (such as HVJ by
GAIL, the cost of which is being fully depreciated). While, GAIL has raised
concerns over discrimination in capacities between the central government-
authorized pipeline and other pipelines.
PNGRB, in its draft document (on 29
th
Jun’20), has once again invited
suggestions/comments from various stakeholders.
However, the proposed
amendments of a differentiated zonal tariff (initial 300km as zone I and the
rest of it as zone II, with the tariff not lower than that of zone I) and the non-
inclusion of bid-out pipelines in the integrated list remain as they were.
The integrated natural gas pipeline system (refer
exhibit 7 and 8
- comprising
~266mmscmd, i.e., ~80% of the total pipeline network in India) does not include
the onshore pipelines of IOCL (~10mmscmd) and RIL (~71mmscmd).
RIL, in its comments during the open house, stated this would discourage the
use of domestic gas production (40–45mmscmd expected from the KG D6 basin
over the next two to three years) as the tariff would continue on an additive
basis v/s the unified tariff applicable on LNG imports.
Diving into the comments offered by the legal entities and Advocates of the
Supreme Court of India
(refer exhibit 6):
Priming a new way to look at CGDs
…and comparing them with the future for probable answers…
Swarnendu Bhushan- Research Analyst
(Swarnendu.Bhushan@MotilalOswal.com)
Sarfraz Bhimani - Research Analyst
(Sarfraz.Bhimani@MotilalOswal.com)
6 August 2020
1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
Oil & Gas
The unification of bid-out pipelines, along with cost-plus pipelines, would not
be legally possible (and would undermine the sanctity of the bidding routes).
Also, tariff is to be paid by the consumer to the Authorized Entity only, and
the unification of the bid-out pipelines with any of its parent companies may
pose a legal challenge.
PNGRB has invited various suggestions to include bid-out/new pipelines to the
integrated network list or determine tariff while connecting them to the list.
Although, the revision of a unified tariff in three years v/s the revision of an
individual pipeline tariff every five years presents a major disparity in the
formulation.
…however, some guidelines are a must for building an efficient gas
economy
COVID-19-led lockdown has resulted in some delay in the implementation of
various directives announced by the NGT last year. However, recently, a bench
of the NGT sought an Action Taken Report (ATR) within four months to ensure a
ban on the usage of pet coke and furnace oil by all states and UTs. The date for a
further hearing has been set as 15
th
Jan’21
(article).
We believe stringent directives by the NGT, along with the government’s
aggressive push to increase gas in the total energy mix to 15% by 2030, would
lead to various avenues for growth for gas in the country, as follows:
Industrial pollution is the potential driver of gas consumption in India
– Our
calculations suggest incremental demand of ~100mmscmd for NatGas could
come from the replacement of dirtier fuels.
Upcoming fertilizer plants and refinery expansions to create potential gas
demand of 17–18mmscmd
over the next three to four years.
Small-scale LNG (ssLNG) could see potential volumes of 30–35mmscmd
PLNG has signed an MoU with GUJGA and IGL to set up ssLNG stations, and
plans to add a total of ~1,000 CNG stations over the next decade.
The proliferation of the national gas pipeline across the country remains key
to achieving the aforementioned objectives. The recently launched gas
exchange also requires gas swapping to facilitate cheaper/economical gas
access to the end consumer. Thus, it becomes all the more crucial to make gas
accessible to the various corners of the country.
However, companies have been reluctant about building the trunk pipeline
infrastructure without incentives as the projects are capex-intensive with long
gestation periods.
GAIL did not start executing the Jagdishpur–Haldia–Bokaro–Dharma (JHBDPL)
pipeline until it received approval for Viability Gap Funding (VGF) for ~40% of
the estimated INR129.4b project cost. Similarly, Indradhanush Gas Grid Limited
(IGGL) recently acquired VGF approval for~60% of the estimated INR92.7b
pipeline cost.
Owing to lower IRRs, GAIL was awarded six GAs for the development of city gas
on the JHDBPL pipeline to render the project feasible.
EPS (INR)
FY21E FY22E
12.9 15.4
11.4 16.4
16.7 19.9
10.4 17.9
50.5 75.0
19.2 21.3
P/E (x)
FY21E
7.4
26.7
11.9
37.2
19.5
12.9
EV/EBITDA (x)
FY22E FY20 FY21E FY22E
6.2
6.0
5.9
5.1
18.5 13.7 14.8 10.8
10.0 4.5
4.0
2.8
21.7 16.7 23.4 13.8
13.1 8.0 11.5
7.6
11.6 8.1
6.7
5.9
ROE (%)
FY21E FY22E
12.7 13.9
21.7 25.9
13.3 14.0
13.7 20.4
16.3 22.0
25.2 26.0
Exhibit 1: Gas sector valuation matrix
Company
GAIL (India)
Gujarat Gas
Guj.St.Petronet
Indraprastha Gas
Mahanagar Gas
Petronet LNG
Reco
Buy
Buy
Buy
Neutral
Buy
Buy
TP (INR)
150
360
300
485
1,200
336
(%)
Upside
57
19
51
25
22
36
FY20
16.5
17.3
19.7
16.2
80.3
18.5
FY20
5.8
17.5
10.1
23.9
12.2
13.3
FY20
15.0
43.6
17.8
28.3
29.7
26.4
Source: Company, MOFSL
6 August 2020
2
 Motilal Oswal Financial Services
Oil & Gas
What a unified tariff means for transporters (GSPL and GAIL)
With ever-increasing gas demand in the country, transmission pipelines would
play a critical role in connecting both imported and domestically produced gas
with consumers.
In various instances, PNGRB has reiterated that it is working toward
streamlining the tariff regulation for trunk pipelines in the country.
The
regulator recently proposed an amendment (on 29
th
Apr’20) to increase the
volume divisor to 10 years (from five years currently) and also rebase the no. of
working days for tariff calculation to 350 (from 355 days currently).
We believe that, unified tariff, if implemented the right way, would help
achieve higher gas penetration through reduced cost to connect consumers
with producers/importers.
This would thereby encourage the development of
new pipeline infrastructure in the country.
As per our model assumptions, for every 10% change in tariff, the sensitivity to
change in EBITDA/EPS of GAIL is 5/6% and for GSPL is 12/15% respectively.
Maintain Buy on GAIL (TP: INR150) –
We had highlighted in
our earlier note
how concerns about US LNG would subside with the start of operations at new
fertilizer plants. Also, most potential users in the KG Basin are power plants,
which may not be able to take high-cost KG Basin gas. Thus, even 70% routing of
the KG Basin gas to the west coast could boost GAIL’s transmission volumes by
29%. We continue to believe the above guidance would help GAIL clock a strong
performance, and reiterate our Buy, with TP of INR150/share. Also, the stock is
trading at 6.2x FY22 EPS of INR15.4 and 4.8x FY22 EV/EBITDA, a ~50% discount
to its last five-year EPS average, offering an excellent investment opportunity.
Maintain Buy on GSPL (TP: INR300) –
There are concerns over tariff reduction
for the company, in line with the revised new tax rate and overutilization of the
pipeline. However, the company currently has a pipeline capacity of
~42mmscmd (v/s ~38mmscmd of volumes in FY20) and considering additional
volumes (of ~13.5mmtpa i.e. ~49mmscmd) from expansions/additions of LNG
terminals, capex is inevitable, which should ensure a lower impact on tariff. The
company has already received approval from PNGRB to develop connectivity for
an upcoming RLNG terminal at Chhara. It is also working on trunk pipeline
projects such as Mehsana–Bhatinda and Mallawaram–Bhilwada. The stock
trades at 10.1x FY22 EPS of INR19.9 and 5.3x FY22 EV/EBITDA, at a ~50%
discount to its last five-year EPS average. GSPL’s investment in GUJGA and
Sabarmati Gas constitutes ~70% of its CMP, implying 3x FY22E P/E for the
standalone. Our forecast does not build-in tariff reduction due to the tax impact.
Unified tariff would eventually encourage new pipeline developments in the
country, thereby increasing the access of gas to a larger pool of consumers.
This would boost demand in the longer run.
India imports ~55% of its total LNG consumption, and building on the huge
demand boost in the country, along with lower domestic production, the need
for LNG imports is set to increase.
Currently, India has 42.5mmtpa (operating at ~64% -
refer exhibit 11)
of existing
LNG import capacity, with ~19mmtpa of proposed new capacity. Assuming gas
demand growth at a mere 7% (in line with the last decade), total imports are
expected to reach ~63% of the total ~300mmscmd demand by 2030, assuming
~42mmscmd of gas from ONGC and RIL over the same period.
A unified tariff may also put new LNG terminals at risk.
For example, consider a
consumer that is more than 300km away from both Terminal A (old with lower
regas tariff) and Terminal B (new with relatively higher regas tariff). Since
3
What a unified tariff means for importers (PLNG)
6 August 2020
 Motilal Oswal Financial Services
Oil & Gas
transmission cost would be the same, the consumer would always prefer
Terminal A, putting the establishment of newer LNG terminals at risk.
PLNG, which enjoys strong JV affiliations, is likely to gain the most out of it with
the expansion at Dahej and ramp-up at Kochi. The company is set to announce
another terminal on the eastern coast, aiding the benefit of gas swapping, as the
CGD network expands in the country. Strategic presence on the western-
southern-eastern coasts would further aid the supply of gas to participants
(consumers) on the recently launched gas exchange through gas deliveries in
various proximities.
We reiterate PLNG as our top buy (TP: INR336) –
With concerns related to
Tellurian broadly resolved and answers provided on long-term growth, the stock
trades at a very appealing valuation of 11.6x FY22E EPS of INR21.3 and 6.6x
FY22E EV/EBITDA, with an EBITDA CAGR of ~15% expected over FY20–22E.
Exhibit 2: PLNG – One-year forward PE
PLNG trades at 5% discount to its one-year
forward long-term PE average of 12.9x
GSPL trades at 7% discount to its one-year
forward long-term PE average of 11.8x
P/E (x)
21.0
18.0
15.0
12.0
9.0
6.0
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
18.4
15.2
12.9
8.1
10.7
GAIL trades around its one-year forward
long-term PE trough at 6.7x (~50% discount
to its LT average of 13.2x)
12.3
Source: MOFSL
Exhibit 3: GSPL – One-year forward PE
18.0
13.0
8.0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 4: GAIL – One-year forward PE
28.0
20.0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
14.5
11.8
9.1
6.8
3.0
16.7
26.1
13.2
12.0
4.0
17.0
11.0
9.4
5.9
6.7
Source: MOFSL
Source: MOFSL
6 August 2020
4
 Motilal Oswal Financial Services
Oil & Gas
Comments by various stakeholders / legal entities on unified tariff
Exhibit 5: Comments by various stakeholders during the open house of 2020
Co. Name
Present Objections
BP Exploration (Alpha) Ltd
Enabling framework whereby gas can be traded independently of its location in the system
BPCL
Higher tariff may lead to increase in the price of CNG & PNG and may impact growth in the Gas market
ONGC and ONGC Petro
Total Adani
Escalation in levelized tariff every year is not justified
FIPI
GRM Hospitality and Consultants Tariff applicability period of three years and five years for integrated and non-integrated pipelines,
Pvt Ltd
respectively, is discriminatory
Indradhanush Gas Grid Ltd
Non-inclusion of BGPL as integrated part of JHBDPL for determination of the proposed unified tariff would
defeat the purpose of tariff optimization and make gas unaffordable to most of the consumers located in the
northeastern states
India Gas Solutions Pvt Ltd
Indian Gas Exchange
PIL
Integration should be at pan-India level; undue advantage to integrated entity; the issue of pancaking would
persist
Shell Energy India Pvt Ltd
Omission of regional networks could distort the competitiveness of few gas consumers in a common GA
H Energy Gas Marketing Pvt Ltd Do not support unrestricted freedom to the pipeline entity to decide zone-wise tariff
GSFC Ltd
Consider both cost-plus pipelines and bid-out pipelines for the unified tariff
NTPC Ltd
Adani Gas
Increase in landed cost of gas sourced by AGL for its GAs
GAIL (I)
Discrimination in capacities between central govt.-authorized pipeline and other pipelines
GSPL
Several pipelines developed by private players have been left out; would render the bid-out pipeline
uncompetitive
HPCL
Gas market would be dominated by limited players; all pipelines should be integrated
IOCL
Selective unification would not favor consumers and seriously hamper competition; tariff should be
integrated for all
RIL
Two-zone tariff would discourage the use of domestic gas from KG Basin
Torrent Gas
May act as a deterrent to increase efficiencies and strive for controlled capex by the transporter
Enertech Fuel Solutions
Would encourage monopolistic players to become more dominant, which would deter new entrants to
venture into this business
Fertiliser Association of India
Large increase in tariff for existing customers; urea manufacturers could be at a disadvantage
HPCL Shapoorji Energy Pvt Ltd It would leave other pipeline operators serving the same geography out of competitive markets; would
result in higher cost of gas to the end consumer
RCF Ltd
Even if tariff of one network is unified, end users would still pay different tariffs; even if an entity is able to
sell cheaper gas, it would be expensive for the end user due to increased transmission tariffs
Torrent Power
It would increase inefficiency and uncontrolled capital expenditure by the transporter; would also increase
transportation cost for existing customers
GSPC LNG Ltd
Competition would increase only in pan-India gas grid networks and not just at entity-level integration;
customers outside Gujarat who would like to offtake R-LNG from Mundra LNG terminal would be at a
disadvantage
Source: PNGRB, MOFSL
Exhibit 6: Comments by various legal entities during the open house of 2020
Legal Entity Name
Claurus Law Associates
Objections/Suggestions/Views
No basis for discriminating between cost-plus pipelines or bid out pipelines; such an integrated system has to be
applicable to all common carrier pipelines; an enabling statutory framework with required amendments to the
PNGRB Act is required to implement the concept
Unification of bid-out pipelines, along with the cost-plus pipelines, will not be legally possible
The tariff has to be paid by the consumer to the Authorised Entity only and no other entity or affiliate. any such
unification of the bid-out pipeline with any of its parent company may face a legal challenge.
Imposing a unified tariff regime on such Bid Out Entities will be hit and undermine the sanctity of bidding route
and thus unsustainable under the extant law including PNGRB Act and regulations framed therein.
Source: PNGRB, MOFSL
DSK Legal
Jayant Bhatt
(Advocate SCI)
Tishampati Sen
(Advocate SCI)
6 August 2020
5
 Motilal Oswal Financial Services
Oil & Gas
Integarted natgas pipeline system / total natgas pipelines in India
Exhibit 7: List of Integrated Natural gas pipeline system for unified tariff regulation
S.No.
Pipeline
Capacity (MMSCMD)
A. Integrated Natural Gas Pipeline System of GAIL India Limited
Jagdishpur-Haldia- Bokaro-Dhamra Natural Gas
1.
23.00
Pipeline network
2.
Dadri-Bawana- Nangal Natural Gas Pipeline
31.00
Dahej-Vijaipur (DVPL)-Vijaipur- Dadri (GREP) capacity
3.
54.00
augmentation
4.
Hazira-Vijaipur- Jagdishpur-GREP- Dahej-Vijaipur
57.30
5.
Dabhol-Bangalore Natural Gas Pipeline
16.00
6.
Dahej-Uran-Dabhol- Panvel Natural Gas Pipeline
19.90
7.
Chainsa-Jhajjar- Hissar Natural Gas Pipeline
35.00
B. Integrated Natural Gas Pipeline System of Gujarat State Petronet Limited
1.
GSPL’s Low Pressure Gujarat Gas Grid
12.00
2.
GSPL’s High Pressure Gujarat Gas Grid
30.46
Total
266.22
Source: PNGRB, MOFSL
Exhibit 8: List of total natural gas pipeline in India
Capacity
(mmscmd)
2019
194
53
54
5
31
20
6
16
9
2
9
16
0
2
7
10
9
1
43
1
2
71
67
4
321
Utilisation (%)
2018-19
54.2
53.3
71.6
20.6
20.6
70.6
28.5
7.8
45.4
48.1
38.9
32.4
0
56.1
90.6
54.4
54.4
0
80.4
64.2
47.2
27.3
27.4
25.6
51.5
Type of pipeline/ owner/ name of pipeline
GAIL
HVJ-GREP-DVPL
DVPL-GREP Upgradation
Chhainsa-Jhajjar-Hissar P/L
Dadri Bawana Nangal
Dahej-Panvel-Dhabo
Kochi-Koottanad-Bangalore- Mangalore (Phase-1)
Dhabol Bangalore
Gujarat
Rajasthan Regional (Jaisalmer)
Cauvery Basin
K G Basin
Assam (Lakwa)
Tripura (Agartala)
Mumbai Regional
IOCL
Dadri Panipat R LNG Pipeline
ETBPNMT R LNG Pipeline
GSPL Network
DNPL: Duliajan to Numaligarh
AGCL: Duliajan to Numaligarh
RIL
East-West Pipeline
Shahdol-Phulpur Pipeline
Total Onshore Gas Pipeline
Offshore
ONGC
20" Uran Trombay Gas Line
Total Gas Pipeline
6
6
327
63.2
63.2
51.7
Source: PNGRB, MOFSL
6 August 2020
6
 Motilal Oswal Financial Services
Oil & Gas
Pipelines partly commissioned / under construction
Exhibit 9: Natural gas pipelines partly commissioned
Name of Pipeline
1
2
3
4
5
6
7
8
Mehsana-Bhatinda
Bhatinda-Jammu-Srinagar
Ennore-Tuticorin
Name of Entity
Length (km)
GSPL India Gasnet
2,052.0
Limited
GSPL India Gasnet
725.0
Limited
Indian Oil
1,385.0
Corporation Limited
3,306.0
455.0
886.0
1,104.0
1,414.0
11,327.0
Capacity
(mmscmd) States through which it passes
Gujarat, Rajasthan, Haryana,
77.1
Punjab
42.4
84.7
16.0
35.0
31.0
16.0
16.0
318.2
Punjab, Jammu & Kashmir
Tamil Nadu, Karnataka
Uttar Pradesh, Bihar, Jharkhand,
West Bengal, Odisha, Assam
Haryana, Rajasthan, Punjab
Punjab, Haryana, Uttar Pradesh,
Uttarakhand, Delhi
Kerala, Tamil Nadu, Karnataka, UT of
Puducherry
Maharashtra, Karnataka, Goa
…as on 30
th
Sep’19… Source: PPAC, MOFSL
Jagdishpur Haldia Bokaro Dhamra-
GAIL (India) Limited
Barauni-Guwahati Natural GasPipeline
Chhainsa-Jhajjar-Hissar
GAIL (India) Limited
Dadri-Bawana-Nangal
Kochi-Koottanad-Bangalore-
Mangalore
Dabhol-Bangalore
GAIL (India) Limited
GAIL (India) Limited
GAIL (India) Limited
Total
Exhibit 10: Natural gas pipelines under construction
Name of Pipeline
Name of Entity
Mallavaram-Bhopal -Bhilwara via Vijaipur GSPL India Transco
Limited
Kakinada-Vizag-Srikakulam
Andhra Pradesh Gas
Distribution Corporation
Ltd
Ennore-Nellore
Gas Transmission India
Pvt. Ltd.
Jaigarh-Mangalore
H-Energy Pvt. Ltd.
Kakinada-Vijaywada-Nellore
IMC Limited
North-East Natural Gas Pipeline Grid
Indradhanush Gas Grid
Limited
Kanai Chhata-Shrirampur
Length
(km)
2,042.0
391.0
430.0
749.0
667.0
1,656.0
Capacity
(mmscmd) States through which it passes
76.3
Andhra Pradesh, Telangana, Madhya
Pradesh, Rajasthan
90.0
Andhra Pradesh
36.0
17.0
22.5
9.0
19.2
Andhra Pradesh and Tamilnadu
Maharashtra, Goa, Karnataka
Andhra Pradesh
Assam, Mizoram, Manipur, Arunachal
Pradesh, Tripura, Nagaland,
Meghalaya & Sikkim
West Bengal
1
2
3
4
5
6
7
8
Srikakulam Angul
Consortium of H-Energy 317.0
East Coast Private
Limited and H-Energy
Private Limited
GAIL (India) Limited
690.0
Total
6,942.0
6.7
276.6
Andhra Pradesh & Odisha
…as on 30
th
Sep’19… Source: PPAC, MOFSL
6 August 2020
7
 Motilal Oswal Financial Services
Oil & Gas
LNG import terminals and demand snapshot
Exhibit 11: LNG terminal India – total utilization at existing terminals stand ~63.5% at the end of March’20
Existing terminals
Dahej
Kochi
Hazira
Dabhol
Ennore
Mundra
Total existing capacity
Gujarat total
Under construction
Jaigarh (FSRU)
Dhamra
Jafrabad (FSRU)
Charra
Total under construction capacity
Gujarat total
Proposed terminals
East Coast
Kukrahati
Total proposed capacity
Total potential LNG capacity
Nameplate
capacity State
(mmt)
17.5
5
5
5
5
5
42.5
27.5
4
5
5
5
19
10
5
3
69.5
Source: PPAC, PLNG, MOFSL
Odisha
PLNG
West Bengal H Energy
Gujarat
Kerala
Gujarat
Maharashtra
Tamil Nadu
Gujarat
Company
PLNG
PLNG
Shell
GAIL, NTPC
IOCL
Adani,GSPC
Throughput (mmtpa)
FY19
16.0
0.2
4.0
1.2
3MFY20 6MFY20 9MFY20
16.3
17.8
17.2
0.2
0.7
0.8
4.8
5.0
4.7
0.1
0.2
0.9
0.4
21.4
21.1
23.8
22.8
23.9
22.0
FY20
18.0
0.5
4.9
1.6
0.5
1.5
27.0
24.4
Utilisation
(%)
FY20
103
9
98
33
9
30
63.5
21.3
20.0
Maharashtra H Energy
Odisha
Adani
Gujarat
Swan
HPCL, Shapoorji
Gujarat
Pallonji
Exhibit 12: LNG imports in India touched ~60% of total consumption at start of the current year
LNG imports as a %
Total gas consumption (mmscmd)
Source: PPAC, MOFSL
6 August 2020
8
 Motilal Oswal Financial Services
Oil & Gas
Global peers valuation heat map
Exhibit 13: GAIL is most cheapest on FY21 PE; GSPL is cheapest based on FY21/FY22 EV/EBIDTA
Company Name
Binhai Investment Co
China Gas Holdings Ltd
HK & China Gas Co Ltd
Towngas China Co Ltd
China Resources Gas
ENN Energy Holdings
Tokyo Gas Co Ltd
Osaka Gas Co Ltd
Toho Gas Co Ltd
Korea Gas Corp
Southwest Gas Holdings Inc
Sempra Energy
New Jersey Resources
Northwest Natural
Atmos Energy Corp
South Jersey Industries
Duke Energy Corp
CMS Energy Corp
CenterPoint Energy Inc
National Grid PLC
Enagas SA
Snam SpA
Gujarat Gas Ltd
Mahanagar Gas Ltd
Indraprastha Gas Ltd
Gujarat State Petronet
GAIL India Ltd
Petronet LNG Ltd
Global average
Global max
Global min
Country
HK
HK
HK
HK
HK
CH
JN
JN
JN
SK
US
US
US
US
US
US
US
US
US
GB
SP
IT
IN
IN
IN
IN
IN
IN
ROE (%)
FY20 FY21E FY22E
9
13
14
26
25
24
11
11
12
8
7
8
20
18
18
24
21
21
7
4
7
3
4
7
5
5
6
0
4
5
9
8
9
13
12
12
11
11
11
8
8
8
10
9
9
6
10
10
8
8
8
14
14
14
10
10
10
8
6
9
15
14
14
18
17
17
21
43
23
24
30
22
21
26
22
35
42
25
15
20
10
22
25
24
13.6 15.2
13.6
34.9 43.4
25.2
0.4
3.8
4.9
FY20
21.2
16.9
36.9
11.7
18.4
15.1
16.0
27.0
35.7
95.8
19.7
27.0
23.2
30.6
26.2
29.6
18.0
25.3
16.0
19.2
12.9
14.2
24.4
19.1
25.4
10.8
12.0
16.9
23.8
95.8
10.8
PE (x)
PB (x)
EV/EBITDA (x)
FY21E FY22E FY20 FY21E FY22E FY20 FY21E FY22E
7.6
6.0
1.8
0.9
0.8
10.3 10.3
10.3
15.3
11.3
4.1
4.1
2.5
14.7 14.7
9.7
27.0
24.5
4.0
3.0
2.9
26.1 20.9
19.3
7.3
6.7
0.8
0.5
0.5
10.6
8.6
7.9
15.9
14.4
3.6
2.7
2.4
10.1
9.1
8.2
15.4
13.5
3.3
3.0
2.6
9.9
10.1
8.8
26.1
13.3
1.2
1.2
1.0
8.2
8.2
6.5
20.3
11.8
0.9
0.9
0.9
8.8
8.8
7.8
31.9
26.7
1.6
1.6
1.6
11.8 11.8
9.7
8.0
5.4
0.4
0.3
0.3
9.7
9.6
9.6
18.8
16.3
1.7
1.4
1.3
10.1
9.0
8.1
16.7
15.8
2.5
1.8
1.8
17.3 14.4
13.1
15.1
13.8
2.6
2.6
2.6
22.0 15.0
12.8
23.0
21.0
2.6
1.8
1.7
13.9 10.5
9.6
22.0
20.5
2.4
1.9
1.8
15.3 13.3
11.9
15.6
14.1
2.1
1.5
1.3
19.0 12.5
11.0
16.3
15.6
1.5
1.3
1.3
11.9 11.8
11.2
24.0
22.3
3.6
3.3
3.1
13.8 12.9
12.1
15.1
14.6
2.1
1.3
1.3
11.9 10.7
9.9
25.7
16.5
1.6
1.6
1.6
13.0 13.0
11.7
12.8
12.7
1.9
1.8
1.9
12.0
9.5
9.7
14.3
13.4
2.5
2.4
2.3
12.6 12.8
12.3
13.3
24.7
4.6
5.1
5.1
12.3 17.1
14.0
10.2
14.7
4.3
3.1
3.0
10.7 12.1
8.6
21.7
24.5
5.0
5.0
4.6
15.5 24.3
14.2
5.6
8.5
3.3
1.6
1.9
6.3
4.4
4.9
3.7
8.8
1.7
0.9
0.9
8.3
7.1
7.2
11.1
11.1
3.7
3.0
2.8
10.3
6.5
7.8
16.4
15.1
2.5
2.1
2.0
12.7 11.7
10.3
31.9
26.7
5.0
5.1
5.1
26.1 24.3
19.3
3.7
5.4
0.4
0.3
0.3
6.3
4.4
4.9
Source: Bloomberg, MOFSL
6 August 2020
9
 Motilal Oswal Financial Services
Oil & Gas
NOTES
6 August 2020
10
 Motilal Oswal Financial Services
Oil & Gas
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
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available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
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https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
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This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
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Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
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to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
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Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
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Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
6 August 2020
11
 Motilal Oswal Financial Services
Oil & Gas
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
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nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
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instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
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in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
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the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
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The person accessing this information specifically agrees to exempt MOFSL or any of its
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expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
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no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
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Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
6 August 2020
12