Annual Report - 2005-06 - GAIL (India)

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DYNAMICS OF GAIL’S BUSINESS The funds of the Company have been utilized mainly for the purpose of creating fixed assets which have led to generation of revenue, profitability and ultimately the value creation for the shareholder. In the course of business there have also been investments made by your Company as a part of strategic business initiative or as a part of effective utilization of funds. However this investment is a very small part of the total investments which signifies the thrust of your Company on its core business. CITY GAS DISTRIBUTION Natural Gas is being pushed as the new age domestic fuel as Piped Natural Gas (PNG). The opportunities available as an automotive fuel through Compressed Natural Gas (CNG) and as domestic fuel (PNG), which is in operation successfully in Mumbai and Delhi, are also substantial. Your Company has been instrumental in identifying this opportunity and has already formed joint ventures with other oil marketing Companies for city gas distribution. Your Company has plans to go ahead with the City Gas Distribution System in other cities also. Beyond the Indian sub-continent, GAIL is planning to set up Joint Venture partnerships with Chinese Companies for CNG and city gas distribution projects in mainland China through China Gas Holdings. Kandla Jamnagar Rajkot Hazira Mumbai Jodhpur Amhedabad Kolapur Mangalore Ernakullam/Kochi Baroda Nasik Pune Jaipur Udaipur Khera Chandigarh Dehradun Haridwar Delhi Hassan Indore Coimbatore Auraiya Vijaypur Bhopal Hyderabad Banglore Maudurai Meerut Aligarh GAILTEL GAILTEL Network Kanpur Pata Chittore Chennai Lucknow Vizag Vijayawada GAIL’s telecommunications service arm, GAILTEL, provides both internal telecommunication services and commercial bandwidth services to customers. Your Company has created 13000 kms. Optical fiber cable network that connects over 100 cities, including 7 of the 8 metros and is spread over 12 states including Union Territories in northwest, central and southern regions of the country. Existing OFC route : 13,000 km. Cities covered : 100+ * Map not to scale in Rs. Crores 17000 16000 15000 14000 13000 12000 11000 10000 9000 8000 7000 6000 5000 4000 Equity Inflow Distribution to Shareholder 4493 Loans taken 5675 Total Funds including reserves Resource generation Main Growth Loop 10 Year CAGR 14% 6574 Dynamics of Business Investments Creation of Fixed assets Withdrawal for Working Capital OVERALL FINANCIALS INCOME Other Income Generaton Profitability Internal Financial Management Loop Total Operating Income 8247 9826 Revenue Generation Production Sales The total operating income (including internal consumption and net of excise duty) of the Company for the FY 2006 was Rs.16351 Crores which represents a 20% growth as compared to the previous year. Your Company’s total operating income has grown over the past ten years at a CAGR of 14%. 10309 11343 11943 13591 16351 in Rs. Crores 100% 95% 90% 85% 451 4493 662 5675 Operating Income & Other Income 251 6574 149 8247 142 9826 210 10309 319 11343 244 11943 349 13591 456 16351 Your Company plans to expand the network from 13,000 kms. to 20,000 kms. as part of the proposed Inter-State Gas Grid project and city gas JVs in the country. 3000 2000 1000 0 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 80% FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 GAILTEL has four access partners in Maharashtra, Delhi and Gujarat and currently serves 24 customers which include the leading telecommunication companies in India. Operating Income Other Recurring Income 54 Winning Momentum 55
The other income represents a very small amount of the total earnings of your Company. This is limited to around 2 to 3% of the total earnings, which implies that the earnings of your Company are more sensitive towards the ability to maximize the production and marketing of products. COST OF SALES 14000 13000 10 Year CAGR 13% Cost of Sales 13530 The major cost of the Company is variable in nature (nearly 90%) which comprises of Gas cost and cost of raw material consumed. The administrative cost of your Company has gone up by 49% over the previous year mainly due to increase in Survey Expenses, Repairs and Maintenance, restatement of trading profits by way of Prior Period expenditure and Other Expenses. PROFITABILITY AND RETURNS in Rs. Crores 4000 3500 3000 2500 2000 Profitability in Rs. Crores 12000 11000 10000 9000 8000 7000 6000 5000 4946 5590 7365 8415 8717 9144 9372 11069 The interest cost of your Company has reduced by 13% due to effective fund management. The depreciation has reduced by 40% as compared to the previous year due to decrease in the rate of depreciation on natural gas pipelines from 10.34% to 3.17% per annum. 1500 1000 500 0 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 4000 4115 PAT Tax Charges Interest Depreciation & Amortization 3000 2000 1000 0 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 The cost of sales (including Depreciation, Interest and extraordinary items) of your Company for the FY 2006 is Rs.13530 Crores which is 22% more than the previous year figure of Rs.11069 Crores. The increase in cost has been primarily due to increase in Gas Cost vide the pricing order which came into effect from the 1st July, 2005. A very small portion of 3% of Earnings before Interest, Depreciation and Tax (EBIDTA) goes towards interest payments. With an effective tax rate of 29.5%, 24% of EBIDTA goes towards the tax payments. The contribution of depreciation in EBIDTA is 14% which has reduced due to reduction in depreciation rate on natural gas pipeline. The Profit After Tax (PAT) represents a majority portion of 59% of your Company’s EBIDTA. Break-up of Cost of Sales Returns 100% 95% 90% 85% 235 61 5 76 41 94 251 65 5 74 56 116 381 92 4 87 79 238 492 167 18 158 127 348 587 197 29 183 146 395 613 227 42 183 148 389 643 186 47 348 158 432 664 138 51 215 174 486 947 134 54 285 206 520 559 117 55 424 222 632 35.00% 30.00% 25.00% 20.00% 15.00% 21.21% 18.27% 18.91% 25.36% 20.59% 19.63% 30.53% 22.24% 21.04% 33.27% 25.87% 20.26% 32.02% 25.22% 19.17% 27.87% 22.83% 19.75% 30.49% 23.39% 17.13% 80% 10.00% 75% 70% 3,639 4,445 4,937 6,103 6,932 7,133 7,348 7,660 8,925 11,521 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 5.00% Material Consumed Manufacturing Expenses Personnel Expenses Administrative Expenses 0.00% FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 Financial Expenses Depreciation Selling Expenses Return of Net Worth (RONW) Return on Capital Employed (ROCE) Return Capital Invested (ROIC) 56 Winning Momentum 57
Page 3 and 4: CONTENTS Chairman’s Message 4 Hig
Page 5 and 6: “ Winning takes talent but it tak
Page 7 and 8: “A Winning Combination” Shri S.
Page 9 and 10: Statutory Auditors M/s S. Mann & Co
Page 11 and 12: LPG MARKETING PIPELINE INTEGRITY MA
Page 13 and 14: GREEN GAS LIMITED (GGL): MAHANAGAR
Page 15 and 16: SAFE PERFORMANCE OF THE COMPANY Dur
Page 17 and 18: • GREENTECH Safety Gold Award for
Page 19 and 20: ANNEXURE TO THE DIRECTORS’ REPORT
Page 21 and 22: HDPE Production (MT) 111305 109158
Page 23 and 24: INDIAN GAS SECTOR - PERSPECTIVE OF
Page 25 and 26: Polyethylene market in India is dom
Page 27 and 28: GAIL has borne a subsidy of Rs.428
Page 29: LPG TRANSMISSION Your Company owns
Page 33 and 34: SUNDRY DEBTORS The debtors (net of
Page 35 and 36: ii. Attendance of each Director at
Page 37 and 38: The payment made to Whole-time Dire
Page 39 and 40: GAIL Stock place at BSE (Rs./Share)
Page 41 and 42: Economic Approach Model The Economi
Page 43 and 44: Five Year Profile (B) GAS THROUGHPU
Page 45 and 46: (b) As per the information given to
Page 47 and 48: Profit & Loss Account for the Year
Page 49 and 50: Schedule 3 - Loan Funds (Rs.in Cror
Page 51 and 52: Schedule 5 - Capital Work-in-Progre
Page 53 and 54: Schedule 7 - Current Assets, Loans
Page 55 and 56: Schedule 10 - Manufacturing, Transm
Page 57 and 58: Cash Flow Statement for the Financi
Page 59 and 60: 20. Contingent Liabilities and Capi
Page 61 and 62: and the Income and the expenditure
Page 63 and 64: Sl. Segments Natural LPG No. Gas 1.
Page 65 and 66: Disclosure as required by Clause 32
Page 67 and 68: Schedule of Fixed Assets (Township)
Page 69 and 70: Review of the Accounts of GAIL (Ind
Page 71 and 72: Annual Report for the year ended 31
Page 73 and 74: Nexia Tan & Sitoh Certified Public
Page 75 and 76: Cash Flow Statement for the year en
Page 77 and 78: Quoted shares as at 31st March, 200
Page 79 and 80: Holding Company GAIL (India) Limite
Page 81 and 82:
Auditor’s Report To The Board Of
Page 83 and 84:
Schedule 1 - Share Capital Schedule
Page 85 and 86:
Schedule 5 - Capital Work-in-Progre
Page 87 and 88:
Schedule 7 - Current Assets, Loans
Page 89 and 90:
(Rs.in Crores) Year Ended Year Ende
Page 91 and 92:
III. Investment other than in Subsi
Page 93 and 94:
) During the year, the Company has
Page 95 and 96:
Information About Business Segments
Page 97 and 98:
Share of GAIL in assets, liabilitie
Page 99:
Gas Industry specific terminologies
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Annual Report - 2005-06 - GAIL (India)

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