INDIA Oil & Gas

GAIL (India)
Result Update
26 October 2013
Target Price CMP* Upside Previous Target Previous Rating Price Performance (%)* 1M GAIL IN NIFTY 5.2 5.3 6M (2.1) 4.7 1Yr (5.7) 8.3 Rs370 Rs344 7.7% Rs345 Hold Key Data Bloomberg Code Curr Shares O/S (mn)

Hold

Cost pressure drags earnings; lower subsidy in FY14 a reality

We maintain our HOLD rating with a revised PT of Rs 370 primarily to factor in lower subsidy pay-out of Rs 14 bn over FY14-FY16E. GAIL has received approval on 25-Oct-2013 from MoPNG which caps its subsidy at Rs14bn in FY14E, but uncertainty prevails for FY15/16E. PAT for Q2FY14 was in line but EBITDA was below our and street expectations. Growth in sales was led by a spurt in gas trading at Rs123.8 bn (+28% YoY and +12% QoQ), LPG/LHC at Rs 10.4bn (+35% YoY and +3% QoQ) and Petchem sales at Rs 11.4bn (+29% YoY and +3% QoQ). A subsidy pay-out at ~Rs7bn (flat QoQ and -11% YoY) coupled with higher feedstock prices and lower petchem sales volume led to drainage in earnings; however, it was partly off-set by higher other income of Rs 2.4 bn. Petchem and LPG/LHC business dent earnings despite higher realizations: Increase
in LPG/LHC sales was attributed to higher LPG/LHC sales realisation at Rs 0.03/MMT (+45% YoY and +7% QoQ). Increase in Petchem sales was attributed to higher realization at 0.10 MMT (+21% YoY and +15% QoQ and). Lower availability of domestic gas during the quarter forced GAIL to procure LNG on spot basis thus denting EBITDA earnings. EBITDA/MMT for LPG/LHC reported a loss of Rs 0.01/MMT; however, for Petchem, it was at Rs 0.04/MMT (-12% YoY but +1% QoQ). PBIT loss of LPG/LHC segment at Rs 2.3bn was mainly due to subsidy pay-out of Rs 7bn and higher feedstock prices. PBIT margin for Petchem was at 34% vs. 40% in Q1FY14 and 48% in Q2FY13. Lower sales volume and higher feedstock prices dragged PBIT to Rs 3.9bn (-7% YoY and -11% QoQ).

GAIL IN 1268.5 1268.5 435.8 / 7.1 395.9/272 503/146 1209297

Diluted Shares O/S(mn) Mkt Cap (Rsbn/USDbn) 52 Wk H / L (Rs) 5 Year H / L (Rs) Daily Vol. (3M NSE Avg.)

*as on 25 October2013; Source: Bloomberg, Centrum Research

Shareholding pattern (%)

Sep-13 Promoter FIIs Dom. Inst. Public & Others Source: BSE 57.3 16.7 22.0 4.0 Jun-13 57.3 16.3 22.3 4.1 Mar-13 57.3 15.8 22.9 4.0 Dec-12 57.3 15.6 23.2 3.9

PBIT profile
20,000 15,000
(Rs mn)

10,000 5,000 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14

Gas transmission volume dips, but take-or-pay gets triggered: Gas transmission
volume at 95 MMSCMD (-10% YoY and -4% QoQ) was attributed to decline in volumes at RIL KGD6 gas basin. However, average tariff increased to Rs 1.16/SCM (+22% YoY and +12% QoQ), mainly due to the trigger of take-or-pay clause and no tariff adjustments. However, PBIT for gas transmission dropped 5% YoY but increased 4% QoQ at Rs 5.8bn, contributing 44% to PBIT as against 42% in Q1FY14. EBITDA/scm is reported at Rs 0.91/scm (+14% YoY and +9% QoQ). EBITDA/scm for the trading business increased 104% YoY and 68% QoQ due to higher PBIT margin of 4% (+56% YoY and +44% QoQ) to Rs 0.69/scm and contributed 37% to PBIT vs. 23% in Q1FY14. Weak rupee led to a spurt in earnings as trading volumes remained lower at 79 mmscmd (-2% YoY and -4% QoQ).

(5,000)

Natural Gas Trading LPG & Liquid Hydrocarbons Transmision services - LPG Others

Petrochemicals Transmission services - Gas Unallocated

Source: Company, Centrum Research

Earning Revision
FY14E Particulars (Rs bn) Revenue EBITDA EBITDA Margin (%) PAT New 563.9 71.5 12.7 41.9 Old 539.3 56.4 10.5 31.7 Chg (%) 4.5 26.8 220 bps 32.4 New 618.3 71.3 11.6 40.5 FY15E Old 601.2 65.4 10.9 36.5 Chg (%) 2.8 9.0 70 bps 10.9

Outlook: We believe GAILs earnings will remain flat over the next 2 years owing to (1)
subdued gas transmission business; (2) dent in margins of Petchem and LPG/LHC segments due to higher gas prices; (3) volatile earnings as the share of EBITDA from gas trading business remains high at 20% in FY15E and (4) lack of clarity from MoPNG on lowering of subsidy burden from FY15E, although management is confident of zero subsidy from FY15E. We have factored-in subsidy of ~Rs 14 bn in FY15/16E. However, a scenario of zero subsidy from FY15/16E would lead to a target price of Rs 417.

Source: Centrum Research Estimates

Valuations and key risks: We value the gas transmission business using the DCF method
and the other business segments on EV/EBITDA(x) to arrive at our revised target price of Rs 370 (implied P/Ex of 11.6x at FY15E and EV/EBITDA of 7.7x FY15E). Key risk would be lower or higher than expected subsidy burden.
Y/E Mar Stand. (Rsmn) Net sales EBITDA PAT Operating Metrics: Gas trans. (mmscmd) Petchem (MMT) LPG & LHC (MMT) LPG & LHC EBITDA/MMT Petchem EBITDA/MMT Source: Company, Centrum Research YoY (%) Y/E Mar (Rsmn) Revenue FY12 4,09,385 25.6 FY13 4,76,017 16.3 FY14E 5,63,853 18.5 FY15E 6,18,306 9.7 FY16E 6,70,019 8.4 Source: Company, Centrum Research Estimates EBITDA 55,988 64,912 71,455 71,294 76,776 EBITDA (%) 13.7 13.7 12.7 11.6 11.5 RPAT 36,538 40,222 41,942 40,492 44,383 YoY (%) 2.6 10.1 4.3 (3.5) 9.6 DEPS Rs. 28.8 31.7 33.1 31.9 35.0 95 108 337 (0.01) 0.04 106 101 361 0.00 0.05 (10) 7 (7) NA (12) 99 121 350 0.00 0.04 (4) (11) (4) NA 1 100 110 348 (0.00) 0.04 (5) (2) (3) N.A (8) Q2FY14 1,39,446 14,634 9,157 Q2FY13 1,13,612 14,120 9,854 YoY (%) 23 4 (7) Q1FY14 1,28,556 15,084 8,082 QoQ (%) 8 (3) 13 Q1FY14E 1,28,986 16,628 9,029 Var (%) 8 (12) 1

Centrum vs. Bloomberg Consensus*

FY14E Particulars Centrum BBG (Rs bn) Sales EBITDA PAT 562.0 71.5 41.9 511.8 68.4 40.2 Chg (%) Centrum 9.8 4.4 4.4 616.4 71.3 40.5 FY15E BBG 611.5 72.6 41.2 Chg (%) 0.8 (1.7) (1.8)

Bloomberg Consensus BUY 26 SELL 8 HOLD 20 Target Price (Rs) 360

Centrum Target Price (Rs) 370

Variance (%)

2.7

*as on 25 October2013; Source: Bloomberg, Centrum Research Estimates

Sachin Mehta, sachin.mehta@centrum.co.in 91 22 4215 9854 RoE (%) 17.9 17.5 16.4 14.3 14.3 RoCE (%) 16.5 14.8 13.2 11.4 11.4 P/E (x) 11.9 10.8 10.4 10.8 9.8 EV/EBITDA (x) 8.3 7.5 7.0 7.2 6.5

Centrum Equity Research is available on Bloomberg, Thomson Reuters and FactSet

Q2FY14

Exhibit 1: Sensitivity Analysis to FY15E

Sensitivity to key variables Increase in crude price Increase in transmission volumes Source: Company, Centrum Research Estimates change USD1 1% % impact on EBITDA 0.1 0.2 % impact on EPS 0.2 0.2

Exhibit 2: 1 year forward EV/EBITDA chart

14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

Exhibit 3: 1 year forward P/E chart

20 18 16 14 12 10 8 6 4 2 0

May-08

May-09

May-10

May-11

May-12

May-13

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

May-08

May-09

May-10

May-11

May-12

May-13
2.3 2.0

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

EV/EBITDA

Mean

Mean + Std Dev

Mean - Std Dev

P/E

Mean

Mean + Std Dev

Mean - Std Dev

Source: Bloomberg, Company, Centrum Research Estimates

Source: Bloomberg, Company, Centrum Research Estimates

Exhibit 4: Comparative Valuations

Company Mkt Cap CAGR FY13-FY15E (%) (Rs mn) Rev. EBITDA PAT
4,35,850 14.0 96,488 32,356 15.1 (4.3) 4.8 2.7 (7.3) 0.3 (20.6) (13.2)

EBITDA Margin (%)

13.7 5.9 96.0 12.7 4.1 91.6 11.6 4.7 90.7 10.8 8.4 6.0

PE (x)
10.4 14.4 7.2 10.8 13.3 8.0

EV/EBITDA (x)
7.5 6.0 3.7 7.0 8.2 4.6 7.2 7.2 4.9 17.5 28.2 19.9

RoE (%)
16.4 14.1 14.3 14.3 13.8 11.6

Div Yield (%)

3.3 2.3 2.0 3.3 3.3 2.3 2.0

FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E FY13 FY14E FY15E

GAIL India Petronet LNG GSPL

Source: Companies, Centrum Research Estimates

Valuation and View We value the annuity-like earnings model of the gas transmission business by discounting free cash flow to firm (FCFF) over the forecast period. We assign a target multiple to EBITDA for the other business segments. Accordingly, we arrive at our revised SOTP-based target price of Rs 370 (implied P/E of 11.6x at FY15E and EV/EBITDA of 7.7x FY15E) (Rs 345 earlier). Our price target was primarily revised to factor-in lower subsidy burden. Exhibit 5: Valuation SoTP
SOTP Valuation Gas Transmission Petrochemicals LPG Production LPG Transmission E&P Gas Trading/Marketing Investments Sub-total Less: Net Debt Fair Value Rs/share 249 63 51 3 11 23 29 391 62 370 Comments DCF, CoE at 15% 6x Sep-15E EBITDA 4.5x Sep15E EBITDA 4x Sep15E EBITDA Recoverable reserves of 84 mn boe, EV/BOE of US$3.5/bbl for Myanmar and OS/2 blocks and US$6/bbl for CB-ONN-2000/1 block 2x Sep15E EBITDA 1x FY15E BV. Investments considered as strategic and hence at 1x book value

Source:, Centrum Research Estimates

GAIL (India)

Sep-13

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Exhibit 6: Quarterly Financials

Particulars (Rs mn) Net Sales Other operating income Purchases Raw material consumption Increase / Decrease in stock Staff cost Other operating expenses Total operating expenses EBITDA Depreciation Interest Other Income PBT Tax RPAT YoY Growth (%) Net Sales EBITDA PAT Margins (%) EBITDA RPAT Source: Company, Centrum Research Q3FY12 112,598 344 77,229 6,574 1,941 1,983 7,265 94,993 17,949 1,975 207 214 15,980 5,066 10,914 34.6 34.6 12.8 15.9 9.7 Q4FY12 104,546 338 81,522 6,263 (4,132) 531 13,023 97,207 7,677 2,143 523 2,299 7,309 2,476 4,833 17.6 (40.4) (38.3) 7.3 4.6 Q1FY13 110,886 234 74,894 5,956 2,349 1,636 7,061 91,895 19,225 2,169 588 378 16,846 5,508 11,338 25.0 21.9 15.1 17.3 10.2 Q2FY13 113,612 317 84,609 7,017 (1,604) 1,736 8,051 99,809 14,120 2,491 261 2,368 13,736 3,882 9,854 17.1 (15.7) (10.0) 12.4 8.7 Q3FY13 124,743 299 86,557 7,852 385 1,683 8,545 105,021 20,021 2,424 552 1,542 18,587 5,738 12,849 10.8 11.5 17.7 16.0 10.3 Q4FY13 124,086 621 87,910 8,862 (1,699) 2,371 15,276 112,719 11,988 2,726 549 2,696 11,409 5,227 6,182 18.7 56.2 27.9 9.7 5.0 Q1FY14 128,556 442 96,473 10,495 (3,779) 2,004 8,722 113,915 15,084 2,808 612 577 12,241 4,159 8,082 13.2 6.8 (18.0) 11.7 6.3 Q2FY14 1,39,446 579 95,140 13,814 3,992 2,031 10,414 1,25,391 14,634 2,888 1,082 2,219 12,883 3,726 9,157 22.7 3.6 (7.1) 10.5 6.6

Key pointers;o During the quarter, GAIL received an approval from MoPNG wherein its subsidy was provisionally capped at Rs 14bn in FY14E, so effectively there would be no subsidy pay-out in H2FY14. We remain conservative and factor-in a similar subsidy pay-out of ~Rs 14bn over FY15/FY16E since we believe that the new government in May-14 would take a re-look at the entire subsidy sharing formula and hence await tangible developments. o The spurt in other income at Rs 2.2 bn (-6% YoY and +285% QoQ) was primarily owing to dividend income of Rs 1.4bn from IGL and OCGC amongst others. o In the 2HFY14, we expect profits of the LPG/LHC segment to bounce back owing to zero subsidy pay-out and higher sales realizations. Similarly, we expect Petchem to bounce back due to high realizations and incremental volumes from PATA expansion (0.45 MMT), which gets commissioned in Dec-13. Gas transmission volumes will pick-up in 2HFY14; whereas take-pay charges and higher tariffs of new pipelines will keep earnings buoyant.

GAIL (India)

Exhibit 7: Segment Revenue and Key Operating Parameters

Particulars (Rs mn) Subsidy burden Segment Revenue: Natural Gas Trading Petrochemicals LPG & Liquid Hydrocarbons Transmission services - Gas Transmission services - LPG Others Less : Inter Segment Revenues Net revenue from operations Segment Results (PBIT) Natural Gas Trading Petrochemicals LPG & Liquid Hydrocarbons Transmission services - Gas Transmission services - LPG Unallocated Others Total Segment PBIT Segment Margins % (PBIT) Natural Gas Trading Petrochemicals LPG & Liquid Hydrocarbons Transmission services - Gas Transmission services - LPG Sales volume: Average gas transmission (mmscmd) Gas Trading/Marketing (mmscmd) LPG and LHC ('000 MT) Petrochemical ('000 MT) LPG Transmission ('000 MT) Unit sales price: Gas transmission (Rs/scm) Petrochemicals (Rs/MMT) LPG & LHC (Rs/MMT) Gross operating profit: Gas transmission Gas trading/marketing LPG and Liquid hydrocarbons Petrochemicals LPG pipeline/Gailtel/unallocated Unit operating profit: Gas transmission (Rs/scm) Gas trading/marketing (Rs/scm) LPG and Liquid hydrocarbons (Rs/MMT) Petrochemicals (Rs/MMT) Source: Company, Centrum Research Q3FY12 5,361 91,495 8,780 9,654 10,872 1,216 344 (9,763) 112,598 3,230 3,875 3,055 6,208 775 (436) 16,707 4 44 32 57 64 119 85 361 113 871 0.93 0.08 0.03 7,380 3,240 3,280 4,300 (30) 0.69 0.42 0.01 0.04 Q4FY12 13,980 91,213 9,629 3,223 8,463 1,086 416 (9,483) 104,546 1,659 4,309 (3,317) 3,248 533 (375) 6,057 2 45 38 49 116 85 351 118 879 0.75 0.08 0.01 4,550 1,680 (3,040) 4,760 2,020 0.44 0.22 (0.01) 0.04 Q1FY13 7,000 92,421 5,741 10,723 9,152 1,136 560 (8,849) 110,886 4,956 1,958 4,373 5,673 709 81 17,751 5 34 41 62 62 110 83 322 66 845 0.87 0.09 0.03 6,910 4,990 4,590 2,400 710 0.70 0.67 0.01 0.04 Q2FY13 7,857 96,970 8,798 7,695 9,845 (40) 758 (10,414) 113,612 2,447 4,182 665 6,049 (489) 69 12,922 3 48 9 61 106 81 361 101 813 0.96 0.09 0.02 7,600 2,460 880 4,640 910 0.80 0.34 0.00 0.05 Q3FY13 7,000 101,180 11,070 12,772 9,894 808 435 (11,415) 124,743 2,986 4,395 5,920 6,195 133 (834) 18,796 3 40 46 63 16 105 82 340 128 733 0.97 0.09 0.04 7,750 3,000 6,130 4,830 (150) 0.82 0.41 0.02 0.04 Q4FY13 5,872 105,523 12,039 13,147 4,581 1,035 423 (12,662) 124,086 3,469 4,716 4,927 406 620 (338) 13,799 3 39 37 9 60 99 80 348 132 745 0.43 0.09 0.04 2,420 3,490 5,150 5,190 (1,560) 0.27 0.48 0.01 0.04 Q1FY14 7,000 110,585 11,033 10,037 9,994 939 576 (14,608) 128,556 3,025 4,383 (109) 5,538 550 (255) 13,132 3 40 (1) 55 59 99 82 350 121 699 1.04 0.09 0.03 7,400 3,030 110 4,840 280 0.83 0.41 0.00 0.04 Q2FY14 6,987 1,23,785 11,336 10,388 10,668 955 755 (18,441) 1,39,446 4,870 3,909 (2,279) 5,762 426 17 12,704 4 34 (22) 54 45 95 79 337 108 729 1.16 0.10 0.03 7,770 4,890 (2,060) 4,370 1,880 0.91 0.69 (0.01) 0.04

Exhibit 8: Key Performance Indicators

Assumptions Crude price (USD/bbl) Subsidy (Rs mn) Gas transmission (mmscmd) LPG Production (MMT) Polymer sales (MMT) LPG Transmission (MMT) Gas Trading (mmscmd) Source: Company, Centrum Research Estimates FY12 113 31,827 118 1.13 0.45 3.4 84 FY13 112 26,872 105 1.08 0.43 3.1 82 FY14E 105 14,466 101 1.13 0.46 3.1 87 FY15E 100 13,640 114 1.13 0.54 3.2 93 FY16E 100 13,640 135 1.13 0.54 3.3 97

GAIL (India)

Financials
Exhibit 9: Income Statement
Y/E March (Rsmn) Revenues COGS % of revenues Operating expenses % of revenues Employee Costs % of revenues EBITDA EBITDA Margin (%) Depreciation & Amortisation EBIT Interest expenses Other Income Exceptional item PBT Provision for tax Effective tax rate (%) Net Profit Min. int./ share from asso. Rep. PAT Adj. PAT after excp. FY12 4,09,385 3,09,346 75.6 37,549 9.2 6,503 1.6 55,988 13.7 7,907 48,081 1,165 6,484 53,400 16,862 31.6 36,538 36,538 36,538 FY13 4,76,017 3,63,656 76.4 39,594 8.3 7,854 1.7 64,912 13.7 9,809 55,103 1,950 7,425 60,578 20,356 33.6 40,222 40,222 40,222 FY14E 5,63,853 4,36,203 77.4 44,956 8.0 11,239 2.0 71,455 12.7 10,523 60,933 3,716 4,463 61,680 19,738 32.0 41,942 41,942 41,942 FY15E 6,18,306 4,79,823 77.6 51,778 8.4 15,410 2.5 71,294 11.6 13,178 58,116 4,270 5,701 59,547 19,055 32.0 40,492 40,492 40,492 FY16E 6,70,019 5,20,418 77.7 56,122 8.4 16,703 2.5 76,776 11.5 13,472 63,304 4,199 6,164 65,269 20,886 32.0 44,383 44,383 44,383

Exhibit 11: Balance Sheet

Y/E March (Rsmn) Equity Share Capital Share Ap. Money Pend. Allot. Reserves Shareholders' fund Debt Minority Interest Deferred Tax/non current Liability Total Capital Employed Gross fixed assets Accumulated depreciation CWIP Net Fixed Assets Investments Inventories Sundry Debtors Cash & bank balances Loans and advances Other current assets Total current assets Current liabilities & prov. Net current assets Deferred Tax Asset/Others Total Assets FY12 12,685 2,03,560 2,16,245 48,894 17,686 2,82,825 2,63,066 (1,04,490) 79,425 2,38,001 35,489 14,197 19,045 9,313 72,068 12 1,14,636 1,08,022 6,614 2,721 2,82,825 FY13 12,685 2,29,594 2,42,279 83,645 23,001 FY14E 12,685 2,57,140 2,69,825 1,07,295 23,001 FY15E 12,685 2,83,236 2,95,921 1,19,645 23,001 FY16E 12,685 3,13,223 3,25,907 1,04,706 23,001

Source: Company, Centrum Research Estimates

Exhibit 10: Key Ratios

Y/E March Growth Ratio (%) Revenues EBITDA Rep. Profit Profitability Ratio (%) EBITDA Margin PBIT Margin PBT Margin PAT Margin Return Ratio (%) ROE ROCE ROIC Turnover Ratio (days) Inventory period Debtors period Creditors period Net working capital Solvency Ratio (x) Debt-equity Net debt-equity Current Ratio Interest coverage Dividend Dividend per share Dividend payout ratio (%) Dividend yield (%) Per share (Rs) Basic EPS Fully diluted EPS - Adjusted Fully diluted EPS - Reported CEPS Book value Valuation (x) P/E P/BV EV/EBITDA EV/Sales Mcap/Sales FY12 25.6 2.3 2.6 13.7 11.8 13.1 9.0 17.9 16.5 15.9 12.7 17.0 57.7 5.9 0.2 0.1 1.1 46.9 8.7 35.1 2.9 28.8 28.8 28.8 35.0 170.5 11.9 2.0 8.3 1.1 1.1 FY13 16.3 15.9 10.1 13.7 11.6 12.8 8.5 17.5 14.8 14.9 11.8 19.7 56.3 14.0 0.3 0.2 1.2 32.1 9.6 35.3 3.3 31.7 31.7 31.7 39.4 191.0 10.8 1.8 7.5 1.0 0.9 FY14E 18.5 10.1 4.3 12.7 10.8 11.0 7.5 16.4 13.2 13.9 11.0 21.9 58.6 18.1 0.4 0.3 1.2 17.6 9.7 34.3 3.3 33.1 33.1 33.1 41.4 212.7 10.4 1.6 7.0 0.9 0.8 FY15E 9.7 (0.2) (3.5) 11.6 9.4 9.7 6.6 14.3 11.4 11.6 11.0 21.9 58.6 18.1 0.4 0.3 1.2 14.9 9.7 35.6 3.3 31.9 31.9 31.9 42.3 233.3 10.8 1.5 7.2 0.8 0.7 FY16E 8.4 7.7 9.6 11.5 9.5 9.8 6.6 14.3 11.4 11.7 11.0 21.9 58.5 18.1 0.3 0.2 1.2 16.5 9.7 32.4 3.3 35.0 35.0 35.0 45.6 256.9 9.8 1.3 6.5 0.7 0.7

3,48,924 4,00,120 3,11,489 3,50,761 (1,13,453) (1,23,130) 88,816 1,00,679 2,86,853 3,28,311 37,190 37,190 15,353 16,859 25,513 33,717 23,579 28,098 51,474 1,12,391 148 56 1,16,067 1,91,120 97,918 1,63,232 18,149 27,888 6,732 6,732 3,48,924 4,00,121

4,38,566 4,53,614 4,39,271 4,49,059 (1,35,461) (1,48,087) 60,218 75,513 3,64,028 3,76,485 37,190 37,190 18,492 20,044 36,984 40,087 30,820 33,406 1,23,281 1,33,624 62 67 2,09,640 2,27,227 1,79,024 1,94,021 30,616 33,207 6,732 6,732 4,38,566 4,53,614

Source: Company, Centrum Research Estimates

Exhibit 12: Cash Flow

Y/E March (Rsmn) PBT Total tax paid Depreciation Chg in debtors Chg in inventory Chg in loans & advances Change in other current assets Chg in creditors Chg in other current liabilities Change in other non-current liabilities Net chg in working capital CF from op. activities (a) Capital expenditure Chg in investments CF from invest. activities (b) Debt raised/(repaid) Dividend (incl. tax) Others CF from fin. activities (c) Net chg in cash (a+b+c) FY12 53,400 (15,508) 7,907 14 (5,646) (9,566) 24 16,883 2,990 4,699 50,499 (62,255) (9,664) (71,919) 25,794 (12,826) (3,547) 9,421 (12,000) FY13 60,578 (15,042) 9,809 (6,469) (1,156) 20,595 (136) 8,692 (18,796) 2,730 58,076 (57,815) (1,701) (59,516) 34,752 (14,208) (4,839) 15,705 14,265 FY14E 61,680 (19,738) 10,523 (8,204) (1,505) (60,917) 92 17,060 48,255 (5,220) 47,245 (51,135) 0 (51,135) 23,650 (14,396) (846) 8,408 4,518 FY15E 59,547 (19,055) 13,178 (3,267) (1,634) (10,891) (5) 8,712 7,079 (5) 53,664 (48,049) (48,049) 12,350 (14,396) (847) (2,893) 2,723 FY16E 65,269 (20,886) 13,472 (3,103) (1,551) (10,343) (5) 8,274 6,723 (5) 57,849 (25,083) (25,083) (14,939) (14,396) (847) (30,182) 2,585

Source: Company, Centrum Research Estimates

Source: Company, Centrum Research Estimates

GAIL (India)

Appendix A
Disclaimer
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We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We and our Group may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of Centrum. Centrum or its affiliates do not make a market in the security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the subject companys securities at the time that the research report was published. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients of Centrum. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. Centrum will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accented accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. Centrum does not provide tax advice to its clients, and all investors are strongly advised to consult regarding any potential investment. Centrum and its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk. Certain transactions including those involving futures, options, and other derivatives as well as non-investment-grade securities give rise to substantial risk and are not suitable for all investors. Please ensure that you have read and understood the current risk disclosure documents before entering into any derivative transactions. This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No representation or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or information in this report change. This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media without the express written consent of Centrum. This report or any portion hereof may not be printed, sold or distributed without the written consent of Centrum.

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The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Neither Centrum nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The distribution of this report in other jurisdictions may be restricted by law and persons into whose possession this report comes should inform themselves about, and observe any such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No representation is made that this report is accurate or complete. The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection. This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith. Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and affiliates have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a merger/acquisition or some other sort of specific transaction. As per the declarations given by them, Mr. Sachin Mehta, research analyst and and/or any of his family members do not serve as an officer, director or any way connected to the company/companies mentioned in this report. Further, as declared by him, he has not received any compensation from the above companies in the preceding twelve months. He does not hold any shares by him or through his relatives or in case if holds the shares then will not to do any transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a salary. They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the time of publication of the research report or at the time of the public appearance. While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances. Rating Criteria Buy: TP upside of >15% (>25% for stocks with market cap <Rs20bn) Hold: TP upside of between -15% and +15% (-25% to +25% for stocks with market cap <Rs20bn) Sell: TP downside of 15% or more (more than 25% for stocks with market cap of <Rs20bn)
Member (NSE, BSE, MCX-SX), Depository Participant (CDSL) and SEBI registered Portfolio Manager Registration Nos. CAPITAL MARKET SEBI REGN. NO.: BSE: INB011454239, NSE: INB231454233 DERIVATIVES SEBI REGN. NO.: NSE: INF231454233 (TRADING & SELF CLEARING MEMBER) CDSL DP ID: 12200.SEBI REGISTRATION NO.: IN-DP-CDSL-661-2012 PMS REGISTRATION NO.: INP000004383 MCX SX (Currency Derivative segment) REGN. NO.:INE261454230 Website: www.centrum.co.in Investor Grievance Email ID: investor.grievances@centrum.co.in Compliance Officer Details: Mr. Ashok Devarajan; Tel: (022) 4215 9000; Email ID: compliance@centrum.co.in

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