Sometimes, perspective becomes very important while looking at raw data. Look at GAIL, the public sector gas giant that ranks just behind the venerable TCS in the super heavyweight category. The latest available data for the quarter ended 31 December 2015 shows that revenues have actually declined. The natural question someone could ask is: how can a company whose revenues have declined find a place in the list of “fastest growing” companies?
But a little perspective does help here. First, as the methodology clearly states, the rankings are based on the average annual growth rate in revenue over a four-year period. For GAIL, the four-year average is more than 15 per cent, a very healthy growth rate for a company whose annual revenues already exceed Rs 50,000 crore.
Global HeadwindsThe oil, gas and petroleum industry across the world have been hit by a crash in prices and global recession. Almost all Indian companies in this sector have been going through this downturn. Against this backdrop, the GAIL numbers for fiscal 2014-15 appear creditable. In fiscal 2014-15, revenues at GAIL declined by a little more than 1 per cent. Compare this with revenue decline in other oil and gas majors like Bharat Petroleum (8.5 per cent), Hindustan Petroleum (7.5 per cent) and Reliance Industries (15.5 per cent) and you get the perspective. Yet another company in the same category, Mangalore Refineries & Petrochemicals saw a 20 per cent dip in revenue.
For senior managers at GAIL, what is more exciting is the future. They are convinced that a few policy initiatives of the government and some strategic thinking done by the top management in the past will ensure that growth remains integral to GAIL.
Of course, GAIL managers or even analysts tracking the company are not expecting any miracles for the financial year ending March 2016. But it is the years after that which look both promising and exciting.
During the annual general meeting to discuss the 2014-15 financial results, chairman and managing director B.C Tripathi listed out how growth prospects now look exciting: “Numerous policy initiatives have provided the much-needed initial traction to the gas-related business, such as biannual announcement of formula-based gas pricing, price pooling for supply of R-LNG to the fertilizer and power sectors, priority allocation of gas for city-based distribution followed by the recent announcement of norms for allocation of marginal oil and gas fields.”
Tripathi and his team are particularly excited about the fact that GAIL has been nominated as the gas pool operator for the fertiliser and power sectors. All these measures will have a direct, and positive impact on the revenues of the company.
Over the last few years, GAIL has also been investing in some new projects that are ready for commissioning and will start generating revenues from fiscal 2016-17. Some of these projects are the largest ethylene-based polymer production facility in the world that will start marketing operations very soon; the BCPL facility in Assam that is ready for commissioning and a new 2,100 kilometer Jagdishpur-Haldia pipeline for linkages to fertiliser plants.
Besides these, GAIL has invested in marketing operations in Singapore, West Asia and the United States. Once the commodity cycle rebounds, these “assets” would be in place to reap revenues. In addition, GAIL has been slowly and steadily investing in solar and wind energy farms, many of which have already been commissioned. As this government lays down the red carpet for renewable energy platforms, solar and wind farms would become a wise strategic diversification from the core business of gas.
But what excites GAIL managers most is the Smart Cities mission. This government is committed to creating a 100 smart cities in the next five years. The first teach of 20 cities has already been identified. All of them represent a ripe opportunity for GAIL to significantly expand its footprints in retail gas supply.
sutanu@businessworld.in
