GAIL India Chairman's Speech > Engineering - Heavy > Chairman's Speech from GAIL India - BSE: 532155, NSE: GAIL

GAIL India

BSE: 532155|NSE: GAIL|ISIN: INE129A01019|SECTOR: Oil Drilling And Exploration
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Chairman's Speech (GAIL India) Year : Mar '15
Dear Shareholders,
 GAIL is committed to the pursuit of creating enduring value for its
 stakeholders. GAIL maintains leadership position by serving the
 country''s need for cleaner energy through its largest network of
 transmission services and also by marketing Natural Gas to various
 utilities. We endeavour to succeed through our project management,
 financial prudence, world-class assets and operational practices backed
 by a young motivated workforce. During the year GAIL undertook multiple
 initiatives for accelerating programmes under ''Make in India'', ''Swachh
 Bharat'', ''Skill and Digital India'' for shaping a strong India in
 addition to strengthening core businesses. The financial year 2014-15
 begun with renewed hope and brisk economic activity picking-up pace.
 Tender shoots of growth were evident in the economic indicators of the
 first quarter. The encouraging momentum remained through the fiscal''s
 second quarter for GAIL as well with robust year- on-year growth
 reflected in its financial performance. Turbulence gripped global
 macro-environment along with a free fall in crude oil / commodity
 prices impacting growth prospects and put cash flow positions under
 tremendous stress for corporates. GAIL continues to judiciously invest
 in expanding its core area of operations even though the energy outlook
 remains volatile.
 Global growth remained muted during the last year vis-a-vis the
 previous fiscal and the outlook for the current year is scaled back by
 50 basis points to 3.5 % GDP growth rate as per IMF''s revised
 projection.  Growth for some of the emerging economies led by China
 continues to be on a downward draft. Major economies of North America
 witnessed growth contraction attributed to significant downsizing of
 capital expenditure by the oil industry in the USA. Measures of a
 devalued Yuan could fuel a near term volatility in commodity prices.
 Major Euro zone economies and U.K are broadly on a tepid growth track
 and the likes of Greece, Spain etc. of the region continue with their
 economic hardship.  Liquidity positions have continued to remain edgy
 with a growing uncertainty over the timing of interest rate hike by the
 U.S. Federal Reserve, adding to the volatility and bear trend in the
 global commodity trade cycle. Measures initiated by the Indian
 Government for the domestic market can help revive growth and the
 country remains poised for better growth prospects over other emerging
 market economies.
 Rapid slide in crude oil spot prices from October''14 onwards with a
 drag in demand growth, inventory write-offs, crude inventory surpluses
 accompanied by OPEC''s resistance to cut-back production has all led to
 global economic scenario being jittery and volatile. Lifting of
 economic sanctions on Iran may possibly trigger a further round of pull
 down of crude oil/commodity prices in the short to medium term.
 Improvements in consumption growth and cranking up of the investment
 cycle can only expected to be but gradual if volatility persists.
 Your Company worked towards managing momentum in the core business
 areas in spite of a volatile macro environment and explored newer
 opportunities for aiding future growth. Despite operating in a harsh
 environment led by a steep fall in underlying crude oil prices by
 nearly 50% from S109/bbl. and with a year on year decline in domestic
 gas availability by 10% plus, your company managed a ROCE of 11% which
 is comparable to many of its global peers during the period.
 Challenging though it may be, your company holds shareholders'' interest
 paramount and has committed 60% dividend for FY 2014-15. The turnover
 for the year (net of excise duty) was Rs.56,569 crore compared to
 Rs.57,245 crore in the previous fiscal period.  Profit Before Tax
 (PBT) for the year was Rs.4,284 crore against Rs.6,402 crore, whereas
 Profit After Tax (PAT) clocked Rs.3,039 crore vis-a-vis Rs.4,375 crore
 of the previous fiscal year. Under the prevailing circumstances
 triggered by low availability of domestic gas and subdued crude oil
 price regime, your Company launched project ''Sanchay'' to embark on
 various modules for maximizing profit. Cost optimization in the feed
 gas mix for petrochemicals manufacturing is being worked upon with a
 simultaneous focus on enhancing value addition from the product slate
 apart from taking up other improvement measures in the medium term.
 Your Company has commenced execution of the 2050 kilometre
 Jagdishpur-Haldia Pipeline project. During the first phase of its
 execution, the fertilizer units under revival at Gorakhpur and Barauni
 in Eastern India would be connected. Additionally, pipeline
 connectivity to other industrial units and upcoming city gas projects
 at Varanasi, Allahabad, Patna etc., would be hooked up enroute to
 maximize usage of Natural Gas. Further, Gol has entrusted GAIL to model
 the 500 kilometre Ranchi-Talcher gas pipeline project under
 Public-Private Partnership mode as a pilot case before spreading such
 Natural Gas based infrastructure development projects in other parts of
 the Country. During the year, your company commissioned the 400,000
 tonne per annum petrochemical expansion project at Pata under PC-II
 phase. Full-fledged production of petrochemicals products from the
 subsidiary company in Assam and also from PC-II, Pata is expected
 within a quarter.
 Your Company has started marketing long-term LNG internationally. This
 is the first for any Indian company to market LNG overseas. Further,
 your Company is nominated by Gol as the gas pool operator to manage
 procurement and supply of R-LNG for stranded power plants in the
 country.  Based on the successful commencement of the same, GAIL has
 been assigned responsibility to play a similar role for the fertilizer
 sector also.
 In step with the Central Government''s mission to accelerate usage of
 gas in the piped natural gas segment for households, the subsidiary and
 Joint venture enterprises under your company were coordinated to
 provide around 2.5 lac PNG connections during the year creating an
 unprecedented record. In tune with the Government''s thrust to expand
 natural gas infrastructure to provide access of clean energy to the
 masses, your company''s subsidiary is authorised by the regulator to
 set-up city gas projects at Bengaluru and Haridwar. Better utilization
 of trunk pipeline infrastructure of GAIL in these regions can be
 expected over time with these initiatives fructifying.
 Your company is working to commence phase-II Pipeline project activity
 in the Kerala State post this monsoon to connect Mangalore with the
 Kochi end. Pre-project activities are progressing.
 During the year, GAIL''s U.S.A. based subsidiary tied-up 2.3 MMTPA
 equivalents Henry Hub linked natural gas with M/s WGL Midstream Inc.,
 in North America for a 20 year period to feed the liquefaction capacity
 Rooked at Maryland, U.S.A. It is also shared that all condition
 precedents have been met upon in respect of both the Sabine Pass and
 Dominion Cove Point LNG projects providing requisite firmness to 5.8
 MMTPA supplies Being on stream from early 2018.
 Under the ''Make in India'' initiative of Gol, GAIL with the guidance
 provided by nodal Ministry is finalizing the modalities for inviting
 participation of reputed international shipyards to collaborate with
 their Indian counterparts to build LNG vessels for charter hire by
 During the year, TAPI Pipeline Company Limited was incorporated by the
 member companies involved from respective countries under the
 transnational pipeline project for constructing Natural Gas pipeline
 connecting Turkmenistan to India via Afghanistan and Pakistan and your
 Company is a consortium member representing India. Dialogue has also
 been initiated with Iranian counterparts to revive the LNG supply
 long-term SPA.
 You would be glad to know that your Company has been progressively
 working to reduce carbon footprints under its manufacturing and
 processing facilities in relation to the baseline targets volunteered
 under ''Sustainability Aspirations 2020'' project. During the year, GAIL
 reduced GHG emission and fresh water consumption intensity by 41-5% and
 over 40% respectively vis-a-vis the base year and also registered a
 reduction on a year-on-year basis of around 8% for discharging treated
 waste water.
 On a clarion call by the Hon''ble Prime Minister, GAIL pursued several
 Swachh Bharat mission projects including adoption of the popular
 monuments - ''Purana Quila'' and ''Safdarjung''s Tomb'' at New Delhi and is
 managing upkeep of the Bhikaiji Cama Place surroundings where your
 Company operates its registered office. Under this mission, GAIL has
 also helped 2722 Schools by constructing 3871 functional toilet
 facilities (9% higher than target) across fourteen districts of three
 states, thereby touching the lives of over one lac school going
 children by equipping them with better sanitation infrastructure backed
 by sustainable provision for water supply.
 Vtkarsh'' a flagship CSR programme of your company has uplifted many
 families over the years and is growing in its popularity for not just
 leap fragging the careers of the economically deprived meritorious
 students but has also been successful in changing the destiny of their
 families towards a better future. This year 80% of the enrolled
 students under Vtkarsh'' have made it to the prestigious IITs/NITs and
 other institutions of technology.
 Your Company has maintained its streak of being rated as an ''Excellent''
 performer under the MoU 2013-14 with the Government.
 Your Company is acknowledged amongst India''s leaders during 2014 under
 Climate Disclosure Leadership programme Index and has the distinction
 of Being featured amongst the Top 22 Leaders in the Utilities category.
 GAIL is also featured in India''s 100 Best Companies to Work by Great
 Place to Work Institute in its 2014 study and this honour for your
 Company has been bestowed for third year in succession.
 Being sixth year in a row, your Company received NIL comments from
 the Comptroller & Auditor General of India for FY 2014-15. Your
 Company''s adherence to the best accounting practices is reassured.
 Maintaining strong relationships with Customers, Vendors, Partners,
 Communities and Regulators is intrinsic to your Company''s progressive
 ethos along with a proactive engagement with other Stakeholders,
 Central and State Governments as your company pursues the path of
 expanding vital energy infrastructure and business surrounding Natural
 Gas value chain to aid India''s advancement.
 Thank you, shareholders for your conviction to invest in GAIL.
                                                      J B. C.Tripathi
                                         Chairman & Managing Director
Source : Dion Global Solutions Limited
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