GAIL India’s Q4FY13 Numbers Under Pressure

GAIL India’s March 2013 quarter results have come in below the street estimates. The net profit for the quarter more than halved to Rs 618 crore as compared to that of Rs 1284.48 crore seen in the December 2012 quarter. Higher employee costs and depreciation cost are the major reasons for the decline. The employee costs went up around 28% to Rs 237 crore, and the depreciation cost also expanded 12% QoQ to Rs 272.56 crore.

A noteworthy fact is that the company's subsidy share to oil companies declined from Rs 1397 crore to Rs 587 crore on a YoY basis. GAIL India, along with other upstream firms, has a mandate to partly compensate oil retailers for selling petroleum products at subsidised rates.As for the whole year results, the company’s profits for FY13 climbed 10% to Rs 4022 crore on a YoY basis, and its sales were also up 17.5% to Rs 47332.67 crore. On a yearly basis, the firm's subsidy share declined from Rs 3182.62 crore to Rs 2687.18 crore.

If we further dig into the results, the underperformance of transmission services made a major dent. This is clear seen from the fact that the company’s March 2013 quarter revenues from natural gas transmission declined to Rs 458.14 crore from Rs 983.36 crore in the December 2012 quarter and Rs 846.32 crore in the March 2012 quarter.

GAIL has earmarked Rs 7500 crore to increase its total pipeline length to 15000 kilometres by FY15. The firm has already commissioned 1250 km of pipeline in the preceding fiscal. It also plans to come out with Rs 1000 crore worth of domestic bonds in the next quarter.

The results for the March 2013 quarter are clearly below street estimates. As a result the scrip may remain subdued in the near term.