April 26, 2011

Gujarat State Petronet Limited (GSPL)

Natural Gas Transmission Investment Rationale Strong Transmission Volumes: GSPL which transports approximately 37 MMSCMD of gas in Gujarat, has seen a 32% CAGR in volumes from FY06-FY10. We expect GSPLs transmission volumes to register a CAGR of 10% from 32.4 MMSCMD in FY10 to 48 MMSCMD in FY14 driven by strong demand and steady supplies from RIL, Petronet LNG, Shell, Cairn, PMT who transmit through GSPLs network. Demand to remain robust over long term led by: (i) Commencement of three units of 350 MW each of GSPC Power plant over the next three quarters of FY12. (ii) Commissioning of gas based power plants by Torrent Power and DMIC (Delhi Mumbai Industrial Corridor) expected to add approximately 18-20 MMSCMD to the demand over the next 3-4 years. (iii) City Gas Distribution expected to grow from 7 MMSCMD in 2009 to 19 MMSCMD in 2020. (iv) Expected increase in demand (from 35 MMSCMD in 2009 to 73 MMSCMD in 2020) from industries such as sponge iron, petrochemicals, etc. Transmission Tariffs to remain stable at `750 per TSCM: All the sourcing points for natural gas in Gujarat are located in South while the pipeline infrastructure of GSPL is expanding across the state which would provide connectivity to the new consumers of gas . Hence we believe gas transported over longer distances will result into higher tariffs. Accordingly, we do not expect the transmission tariffs to fall below `750 per TSCM, which has been consistently re-iterated by the GSPL management. Expansion in Pipeline network: GSPL plans to cover all the 25 districts in Gujarat by FY14 by adding approximately 1000 km of pipeline infrastructure to the existing pipeline network. With pipeline infrastructure connecting all the major natural gas suppliers in place, GSPL is expanding its network to cater to the industrial clusters in Gujarat which are spread across the state. Outlook & Valuation: We expect GSPLs revenue and EBIDTA to grow at a CAGR of 6% each on the back of 10% growth in transmission volumes and stable tariffs at `750 per TSCM over the period FY10-13E. At CMP, the stock trades at a P/E of 11.6x and 10.4x for FY12E and FY13E respectively. Using the DCF valuation method, we arrive at a fair value of `119/share for the core natural gas transmission business of GSPL and assign `8/share for its investment in CGD business. We initiate coverage on GSPL with a BUY recommendation and price target of `127/share. Key Catalyst: Increase in the output of gas from KG - D6 block of RIL will translate into higher volume of gas flowing through GSPLs pipeline network.
Financial Performance of the Company Particulars FY09 Revenue (` Mn) 4875 Growth (Y-o-Y) 16.7% EBIDTA Margins 87.2% PAT (` Mn) 1229 PAT Margins 25.2% EPS 2.19 P/E (x) 46.9 P/BV (x) 4.8 EV/EBIDTA (x) 16.1
Source: Company, ULJK Research

Initiating Coverage BUY

GUJS IN, GSPT.BO CMP: `103 Price Target: `127

Durgesh Poyekar
(91-22) 3028-4714 durgesh.poyekar@uljk.in ULJK Financial Services Private Limited

Market Data Market Cap. (` Mn) Outstanding Shares (Mn) 52 Week High/Low (`) Avg. Volume ('000s) Face Value Shareholding Promoter MF/ Banks/ Indian Fis FII/ NRIs/ OCB Indian Public/ Others

57945 562.6 128/87 1458 10.0 % 37.74 30.61 11.57 20.08

Nifty and Stock Movement

160 140 120 100 80 60 40 20 0
Nov-10 Feb-11 Sep-10 Jun-10 Jul-10 Apr-10 Jan-11 May-10 Aug-10 Dec-10 Mar-11 Oct-10 Apr-11

GSPL

NIFTY

FY10 9920 103.5% 93.7% 4119 41.5% 7.37 14.0 3.7 7.4

FY11E 10184 2.7% 93.2% 4825 47.4% 8.58 12.0 2.9 7.4

FY12E 10800 6.1% 93.2% 5010 46.4% 8.91 11.6 2.4 6.9

FY13E 11881 10.0% 93.2% 5563 46.8% 9.89 10.4 2.0 6.1

Please refer to the important disclosures and analyst certifications at the end of the document

ULJK research reports are available on Bloomberg (ULJK <Go>

Gujarat State Petronet Ltd

Investment Thesis Strong Transmission Volumes The performance of GSPL is linked to the volume of the gas that flows through its pipeline network. The transmission volumes of GSPL has increased at a CAGR of 32% from 10.6 MMSCMD in FY06 to 32.4 MMSCMD in FY10 which aided revenue to grow at a CAGR of 39% from `2635 Mn in FY06 to `9920 Mn in FY10. Currently GSPL operates more than 1,692 km of pipeline network in the state of Gujarat and transports approximately 37 MMSCMD of gas. GSPLs Transmission Volumes, Revenue and PAT
Revenue (Rs Mn) 12000 32.4 10000 8000 6000 14.6 4000 2000 0 FY06
Source: Company, ULJK Research

PAT (Rs Mn)

Transmission Volumes (MMSCMD) [RHS] 35 30 25 20 17.1 15.1 15 10 5 0

10.6

FY07

FY08

FY09

FY10

The main suppliers of gas are RIL, Petronet LNG, Shell, Cairn, PMT, etc. who transmit through GSPLs network. We expect RIL to transmit around 19 MMSCMD gas in FY12 through GSPLs network (after factoring in the recent decline in production). However, the recent deal between RIL and BP will help RIL to leverage the technical capabilities of BP in deepwater exploration blocks and increase its production. Accordingly, we expect an increase in transmission volumes to 22 MMSCMD of gas in FY13. The current shortfall from RIL will be made up by the increasing transmission of volumes by Petronet LNG which is expected to run at more than 95% capacity utilization in FY12 (See Chart, Page 3). We expect 14 MMSCMD of gas from Petronet LNG to flow through GSPLs network in FY12 and 6-7 MMSCMD of gas to be transmitted by Shell, GSPC, Cairn, PMT. GSPC will commence production from its Deendayal block in KG basin in FY13 which along with expected increase in production from RIL KG-D6 and increasing LNG imports will provide visibility beyond FY14. GSPLs Transmission Volumes from the Source side
MMSCMD Petronet LNG RIL - KG D6 Shell/ GSPC/Cairn/PMT GSPC - KG basin Total
Source: ULJK Research, MoPNG

FY11E 11 20 5.5

FY12E 14 19 7

FY13E 14 22 7 1

FY14E 14 25 7 2 48

36.5

40

44

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Gujarat State Petronet Ltd

Allocation of RILs KG-D6 Gas in Gujarat

Plant Kribhco-Hazira GSFC - Vadodara IFFCO - Kalol GNFC-Bharuch GAIL (Vaghodia, Gandhar,Vijayapur, Usar & Auriya) Utran CCGT + Ext Hazira CCPP - (GSEG) Dhuvaran CCPP (GSEL)+ Extn. Vatwa CCGT (AEC) GPEC Paguthan CCGT GIPCL-Stage-ll CCGT Essar IMP CCGT Torrent Sugen NTPC Gandhar & Kawas Sabarmati Gas Ltd HPCL Essar Steel RIL., Gandhar & Nagothane RIL-Jamnagar OCL Total
Source: MoPNG, ULJK Research

Sector Fertilizer Fertilizer Fertilizer Fertilizer LPG plant Power Power Power Power Power Power Power Power Power CGD CGD Steel Petro-Chem Refinery Refinery

Gas Allocated (MMSCMD) 1.370 0.720 1.273 0.342 2.594 1.447 0.130 0.437 0.373 1.302 0.089 1.167 3.310 1.690 0.078 0.049 3.200 1.918 2.340 0.860 24.689

Petronet LNG Capacity Utilization

Volumes (MMSCMD) 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 FY12E FY13E 72% 75% 78% 99% 87% 105% 105% Capacity Utilization 120% 100% 80% 60% 40% 20% 0%

Source: Petronet LNG data, ULJK Research; Assuming 10.9 MTPA Production in FY12 and FY13

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Gujarat State Petronet Ltd

We expect GSPLs transmission volumes to register a CAGR of 10% from 32.4 MMSCMD in FY10 to 48 MMSCMD in FY14, revenue to register a CAGR of 7% from `9920 Mn in FY10 to `12960 Mn in FY14 and expect PAT to post a CAGR of 10% from `4146 Mn in FY10 to `6147 Mn in FY14. GSPLs Transmission Volumes, Revenue and PAT Estimates
Revenue (Rs Mn) 14000 12000 10000 8000 6000 4000 2000 0 FY10
Source: Company, ULJK Research

PAT (Rs Mn)

Transmission Volumes (MMSCMD) [RHS] 60 48.0 50 40 30 20 10 0

32.4

36.5

40.0

44.0

FY11E

FY12E

FY13E

FY14E

With demand for natural gas expected to remain robust, GSPL is dependent upon the development of natural gas supplies in Gujarat over the long term as it is developing the gas grid in the state. As such any positive development on the supply front (of natural gas) in Gujarat will benefit GSPL. According to Gujarat Industrial Development Board, the supply of natural gas is expected to increase at a CAGR of 7% from 48 MMSCMD in 2009 to 101 MMSCMD in 2020. Over the longer term, gas supplies will improve on account of increase in gas supply from RIL, GSPC - LNG terminal and GSPCs Deendayal gas discovery in KG basin. Long Term Supply Projections of Gas in Gujarat The supplies of RLNG and new gas find volumes are likely to augment the availability of natural gas in Gujarat. New gas supplies are expected from the following sources: Petronet LNG Ltd, Dahej: PLL has been operating the LNG re-gasification terminal since March, 2004. Currently, the capacity at Dahej terminal is 10 MTPA which can go upto 11.5 MTPA through debottlenecking exercise. PLL is also planning to set up another jetty at Dahej which would increase the capacity of Dahej terminal by another 3-4mmtpa and is expected to be commissioned by mid FY13E. Shell, Hazira: Shell is likely to increase supplies to a level of 13.5 MMSCMD or 3.5 MMTPA by FY12 with most of it to be consumed in Gujarat. Reliance Industries Limited (RIL): Reliance is expected to supply around 19 MMSCMD of natural gas to consumers in Gujarat in FY12. Currently RIL is producing approximately 51 MMSCMD of gas from KG-D6 block. We expect RIL to ramp-up production from KG-D6 block with the technical expertise of BP which has vast experience in exploration and production from deepwater blocks. GSPC LNG Terminal: GSPC LNG terminal is likely to come-up in Mundra and would be commissioned by FY2014 to take advantage of the increased supplies of LNG in the world market and the increasing demand in India by that time.
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Gujarat State Petronet Ltd

Gujarat State Petroleum Corporation (GSPC): GSPC has a large discovery of natural gas from its KG basin shallow water block KG-OSN-2001/3 awarded during NELP III. The estimated in-place reserves were initially put at around 20 trillion cubic feet (TCF) by GSPC and in December 2010, Director General of Hydrocarbons approved 2 TCF FDP. Considering the current state of progress, the gas production is expected to commence in FY13. Cairn Energy: Cairn discovered CB-X and Ambe fields in Gujarat, which are estimated to supply 1.2 MMSCMD from FY12 for a period of 7 years. Coal Bed Methane (CBM): The region of North Gujarat from Vadnagar to South of Ahmedabad has vast coal deposition at depths varying from 800 to 1300 meters. The total reserves of coal are estimated at 60 billion tonnes. CBM recovery from these Coal Seams appears to be a commercially viable proposition vis- -vis mining. Supply projections for Gujarat MMSCMD ONGC - Onshore PMT / HBJ Volumes PLL Shell RIL GSPC - KG Basin GSPC LNG Cairn CBM New Gas finds Total
Source: GIDB, ULJK Research

2009 5 9 13 6 15 0 0 0 0 0 48

2012 4 6 18 8 19 8 0 1 3 0 67

2015 3 4 18 8 30 8 13 0 3 6 93

2020 1 2 18 8 30 8 13 0 5 16 101

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Gujarat State Petronet Ltd

Demand to Remain Robust over Long Term As of FY10, GSPL has signed firm GTAs (Gas Transmission Agreements) for transporting 35.5 MMSCMD of gas to various customers as well as interruptible/short-term GTAs for 6.49 MMSCMD. GSPLs main customers include RIL, the Essar Group, Torrent Power, Shell, Petronet LNG, Cairn India and GSPC. GSPL has entered into a 15-year agreement with RIL for transmission of 11MMSCMD to its Jamnagar refinery, and with Torrent Power for transmission of 4.5 MMSCMD for 20 years. Over the next three quarters, GSPLs volumes will be driven by the commencement of three units of 350 MW each of GSPC Power plant in Q1, Q2 and Q3 of FY12. Over the next 3-4 years, the demand for natural gas would come from the commissioning of gas based power plants by Torrent Power and DMIC (Delhi Mumbai Industrial Corridor) which can add approximately 18-20 MMSCMD to the demand for natural gas. We believe the demand for natural gas in Gujarat will remain robust and there will always be off-takers for natural gas with supply being the lone constraint. The presence in Indias most industrialized state gives a natural advantage to GSPL. According to GIDB (Gujarat Industrial Development Board), the demand for natural gas in Gujarat is set to increase at a CAGR of 7% from 70 MMSCMD in the year 2009 to 146 MMSCMD in the year 2020. The incremental demand will largely be driven by industries (sponge iron, petrochemicals, etc) where demand is expected to increase from 35 MMSCMD in 2009 to 73 MMSCMD in 2020 as well as City Gas Distribution which is expected to grow from 7 MMSCMD in 2009 to 19 MMSCMD in 2020 depending upon the availability of natural gas. Gas Demand build-up in Gujarat 2009-2020 MMSCMD Power Fertilizer Industry Distribution Total
Source: GIDB, ULJK Research

2009 19 10 35 7 70

2012 32 12 49 10 102

2015 43 12 53 14 122

2020 43 12 73 19 146

Long term Gas demand in Gujarat and Transmission Volumes through GSPLs network
Gas demand in Gujarat (MMSCMD) GSPL Transmission Volumes (MMSCMD) 160 140 120 100 80 60 40 20 0 2009
Source: GIDB, ULJK Research

GSPL's volume as a % of total volumes in Gujarat

47% 46% 45% 44% 43% 42% 41% 40%

2012

2015

2020

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Gujarat State Petronet Ltd Transmission Tariffs to remain stable around `750 per TSCM We expect GSPLs transmission tariffs to remain at around `750 per TSCM which has been consistently re-iterated by the GSPL management. All the sourcing points for natural gas in Gujarat are located in south and the pipeline infrastructure of GSPL is now spreading across the state to provide connectivity to the new consumers of gas in future. Hence we believe gas transported over longer distances will result into higher tariffs. Accordingly, we do not expect the transmission tariffs to fall below `750 per TSCM. GSPLs transmission tariffs are based on Gas Transmission Agreement (GTA). GTA specifies tariffs, tenure and capacity reserved for the transportation of natural gas. Tariffs primarily consist of capacity charges, which are fixed fees for the reservation of capacity and typically cover 90% of the customers tariff commitment, and commodity charges, which are linked to the actual transportation of natural gas through gas transmission network. GTAs include ship or pay provisions, which require customers to pay the capacity charge for the capacity reserved by them regardless of the amount of natural gas they transport. GSPLs Pipeline network

New consumers in future located at greater distance from the gas sourcing points

Gas sourcing points are present in south of Gujarat Source: Company, ULJK Research

Transmission Tariffs and Revenue Trend

14000 12000 10000 8000 6000 4000 2000 0 FY06 FY07 FY08 FY09 FY10 FY11E FY12E FY13E FY14E
Source: Company, ULJK Research

Revenue (Rs Mn) (LHS) 898 689 605 680

Transmission Tariffs (Rs per TSCM) 850

1000 750 800 600 400 200 0

775

750

750

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Gujarat State Petronet Ltd

Expansion in Pipeline network to Enhance Reach Across Gujarat GSPL plans to cover all the 25 districts in Gujarat by FY14 by adding approximately 1000 km of pipeline infrastructure to the existing pipeline network. GSPL has already put in place the pipeline infrastructure to connect all the major sources of natural gas suppliers to Gujarat namely RIL (Bharuch Is the landfall point), Petronet LNG at Dahej, Shell at Hazira, Cairn, Niko Resources, GSPC and PMT. GSPL already has strong presence in the south of Gujarat and is now expanding its network across the state. As shown in the figure below, the industrial clusters in Gujarat are not concentrated in any one particular region, rather spread across the whole state. With the increase in availability of natural gas, industries across the state including small as well as medium enterprises are expected to shift to using this clean source of fuel. State-wide gas transmission grid will help GSPL to connect the gas suppliers who are located in south of Gujarat to the gas consumers who are spread across the state. Industry Cluster across Gujarat

Source: Vibrant Gujarat, ULJK Research

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Gujarat State Petronet Ltd Holdings in CGD Business in Gujarat GSPL has 36.5% stake in GSPC Gas Company and 13.5% stake in Sabarmati Gas which are into the City Gas Distribution business in the state of Gujarat. GSPC Gas is currently supplying around 3.60 MMSCMD of natural gas while Sabarmati Gas is supplying approximately 0.85 MMSCMD of gas. Currently both these companies have a Gross Margin of `2.5 per SCM. Both these companies being unlisted, we value them at a discount to their listed peers namely IGL and GGCL. Enterprise Value of GSPC Gas Co. and Sabarmati Gas
Company GGCL IGL Average Assigning a 50% discount GSPC Gas Co. Sabarmati Gas
Source: Company, ULJK Research

Volume (MMSCM) 1212 979

EV (` Mn) 54562 47321

EV / Volume 45.0 48.3 46.7 23.3

1296 306

30247 7142

Value Accretion of GSPC Gas and Sabarmati Gas to GSPL

Company EV (` Mn) 30247 7142 Net Debt (` Mn) 3000 Equity Value (` Mn) 27247 7142 GSPLs Stake GSPLs Share (` Mn) 9945 964 10909 19.4 7.8

GSPC Gas Co. Sabarmati Gas Total ` per GSPLs Share Assigning a 60% discount
Source: Company, ULJK Research

36.5% 13.5%

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Gujarat State Petronet Ltd Peer Comparison For peer comparison, we have chosen global peers of GSPL which are in the business of transmission or storage of natural gas or petroleum products. Further all the peers mentioned below do not have any exposure to commodity price risk like GSPL. GSPL trades at 11.6x one-year forward earnings as compared to the average of 19.7x for its global peers. The stock looks attractive with P/BV of 2.4x and 2.0x for FY12E and FY13E and EV/EBIDTA of 6.9x and 6.1x for FY12E and FY13E respectively. GSPL vis--vis its Peers
Mcap USD Bn 6.23 6.79 3.00 5.34 P/E P/BV EV/EBITDA EBITDA Margin (%) CY11E CY12E CY11E CY12E CY11E CY12E CY11E CY12E 20.4 20.2 1.8 1.9 13.3 12.6 59.0% 58.7% 19.4 17.7 4.7 4.5 14.9 13.9 36.5% 38.9% 19.4 18.0 2.1 2.2 22.7 20.3 91.9% 90.7% 19.7 18.6 2.9 2.9 17.0 15.6 62.5% 62.8% RoE CY11E 8.3% 27.1% 11.0% 15.5% (%) CY12E 9.1% 24.0% 13.1% 15.4%

Boardwalk Pipeline Magellan Midstream Spectra Energy Average

GSPL (ULJK est)

Mcap ` Bn 57.94

P/E FY12E FY13E 11.6 10.4

P/BV FY12E FY13E 2.4 2.0

EV/EBITDA FY12E FY13E 6.9 6.1

EBITDA Margin (%) FY12E FY13E 93.2% 93.2%

RoE (%) FY12E FY13E 20.7% 19.1%

Source: Bloomberg, ULJK Research

Key Risks & Concerns RIL KG-D6 gas supply In the near term, GSPLs transmission volumes are dependent on the RIL KG-D6 ramp up. RIL recently announced decline in gas output to 51 MMSCMD from expected 60 MMSCMD. Accordingly, we have estimated 19 MMSCMD of RIL KG-D6 gas in FY12 and 22 MMSCMD of gas in FY13 to flow through GSPLs transmission network in Gujarat. We believe going forward RIL will be able to ramp up its KG-D6 production with the technical expertise of BP Any failure to ramp up gas output can impact our valuations nega. tively. Transmission Tariffs below `750 per TSCM GSPL expects tariff notification from PNGRB for the existing pipelines in the next 3 to 6 months. If PNGRB determines tariffs below `750 per TSCM then it would affect the future revenue and earnings of GSPL. GSPLs FY12 EPS Sensitivity to Transmission Volumes and Tariffs
Transmission 38 7.53 7.91 8.30 8.68 9.07 Volumes (MMSCMD) 40 42 8.09 8.66 8.50 9.09 8.91 9.51 9.31 9.94 9.72 10.37

Transmission Tariffs (` per TSCM)

Source: ULJK Research

700 725 750 775 800

36 6.96 7.32 7.69 8.05 8.42

44 9.23 9.68 10.12 10.57 11.02

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Gujarat State Petronet Ltd Outlook & Valuation We expect GSPLs revenue and EBIDTA to grow at a CAGR of 6% each on the back of 10% growth in transmission volumes and stable tariffs at `750 per TSCM over the period FY10-13E. At CMP, the stock trades at a P/E of 11.6x and 10.4x for FY12E and FY13E respectively. We initiate coverage on the company with BUY recommendation and price target of `127/share. Using the DCF valuation method, we arrive at a fair value of `119/share for the core natural gas transmission business of GSPL and assign `8/ share for its investment in CGD business, which represents a potential upside of approximately 23% from the current levels. We have not factored in any upside from the new cross-country pipelines that GSPL has recently been awarded by PNGRB. DCF Valuation Assumptions
Market Premium Risk Free Rate Beta Cost of Equity Nominal Marginal Cost of Debt Debt/Capital Ratio Nominal Tax Rate Cost of Debt (Tax-Adjusted) Cost of Equity WACC Perpetual Growth Rate 6.00% 8.00% 0.89 13.34% 9.50% 40.00% 33.20% 6.35% 13.34% 10.54% 2.00%

DCF Analysis
Particulars (` Mn) Sales EBIT Less: Cash Taxes NOPLAT Depreciation Capital expenditure Changes in working capital FCFF Discounting factor Present value of FCFF Explicit year Cash Flows Terminal Value Gross Asset Value Add: Cash and Equivalents Less: Debt Net Asset Value Fair Value of GSPL's core business FY11E 10,184 8,334 2,767 5,567 1,157 (6,500) (30) 194 1.00 194 37,358 39,958 77,316 1,947 12,596 66,668 119 FY12E 10,800 8,718 2,894 5,824 1,347 (5,000) (52) 2,119 0.90 1916 FY13E 11,881 9,551 3,171 6,380 1,522 (5,000) (91) 2,810 0.82 2299 FY14E 12,960 10,406 3,455 6,952 1,672 (3,500) (91) 5,033 0.74 3725 FY15E 13,500 10,799 3,585 7,214 1,783 (2,500) (46) 6,451 0.67 4319

Sensitivity Analysis
1.0% 97 104 111 120 129 Terminal Growth Rate 1.5% 2.0% 100 103 107 111 115 119 124 129 134 140 2.5% 107 115 124 135 147 3.0% 110 119 130 141 155
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WACC

11.54% 11.04% 10.54% 10.04% 9.54%

Gujarat State Petronet Ltd

GSPL 1-Yr Forward P/E Bands

GSPL 160 140 120 100 80 60 40 20 0 P/E-8 P/E-10 P/E-12 P/E-15 P/E-18

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Jan-07

Jan-08

Jan-09

Jan-10

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Jan-11 Jan-11

Source: Company, Capital-line , ULJK Research

GSPL 1-Yr Forward PBV Bands

160 140 120 100 80 60 40 20 0
Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Jan-07 Jan-08 Jan-09 Apr-06 Apr-07 Apr-08 Apr-09 Jan-10 Apr-10 Apr-11 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10

GSPL

P/BV-1

P/BV-2

P/BV-3

P/BV-4

P/BV-5

Source: Company, Capital-line , ULJK Research

GSPL 1-Yr Forward EV/EBITDA Bands

GSPL 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 EV/EBITDA-4 EV/EBITDA-6 EV/EBITDA-8 EV/EBITDA-10 EV/EBITDA-12

Oct-06

Oct-07

Oct-08

Oct-09

Oct-10

Jan-07

Jan-08

Jan-09

Jan-10

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Jan-11

Source: Company, Capital-line , ULJK Research

Apr-11

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

Apr-11

Jul-06

Jul-07

Jul-08

Jul-09

Jul-10

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Gujarat State Petronet Ltd

Company Overview Gujarat State Petronet Limited (GSPL), a subsidiary of Gujarat State Petroleum Corporation (GSPC) was incorporated in the year 1998 to develop energy transportation infrastructure in Gujarat by connecting major natural gas supply sources and demand markets. GSPL is the first company in India to transport natural gas on an open access basis i.e. it makes the gas transmission capacity available to any shipper on a nondiscriminatory basis. Currently it transports approximately 37 MMSCMD of gas through its pipeline network of 1692 km and plans to cover all the 25 districts of Gujarat in next 4 to 5 years. GSPLs Existing Pipeline Network in Gujarat Network / Region Anand-Rajkot Mora-Vapi Rajkot-Vadinar Bhadbhut-Gana Paguthan-Baroda Kalol-Himmatnagar Amboli-Dahej Kalol-Mehsana Anklav-Dhuvran Bhadbhur-Pagutha GPEC spur line Mora-Uran Anbapur-Gandhinagar Petronet-Santej Hazira-mora Cairn-Mora GNFC Videocon Mora-KRIBHCO spur line Mora-KRIBHCO spur line Videocon spur line Gana-Hadala Morbi-Mundra Others Total Length (km) 290 129 110 109 83.5 63 44.8 40 30 25.7 25 15.5 15 13.8 6.4 4.7 2.6 0.7 85 130 468.3 1692

GSPLs Under Construction Pipeline Network in Gujarat Network / Region Darod - Jafrabad Mundra spurlines Salej - Sanand Mehsana - Palanpur
Source: CRISIL, ULJK Research

Length (km) 220 40 35 75

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Gujarat State Petronet Ltd

The consortium led by GSPL (GSPC - 52%, IOC - 26%, HPCL - 11% and BPCL - 11%) has won bids to lay three cross-country pipelines which will make GSPL a pan-India player providing visibility in the long term. GSPL is awaiting the Letter of Intent from PNGRB for these pipelines which it expects in the next 6 months.

Mallavaram - Bhilwara Pipeline (1585 km) Mehsana - Bhatinda Pipeline (1670 km) Bhatinda -Srinagar Pipeline (740 km)

The consortium has also submitted EoI for Surat - Paradip Pipeline (1680 km) with PNGRB.

Management Team Name Mr. Tapan Ray Mr. A K Joti Ms. Reena Desai Mr. Suresh Mathur Mr. J K Jain Mr. R Vaidyanathan Mr. N K Mitra Mr. D J Pandian Mr. Atanu Chakraborty
Source: Company

Designation Managing Director Non-Executive Chairman Company Secretary Independent Director Independent Director Independent Director Independent Director Non-Executive Director Non-Executive Director

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Gujarat State Petronet Ltd Financial Statements

Income Statement
Particulars Income from Operations Total expenditure EBITDA EBITDA Margins Depreciation EBIT EBIT Margins Other income Interest PBT Total Tax PAT PAT Margins EPS FY09 4,875 626 4,249 87.2% 1,705 2,544 52.2% 232 870 1,907 678 1,229 25.2% 2.19 FY10 622 9,297 93.7% 2,365 6,933 69.9% 247 938 6,242 2,123 4,119 41.5% 7.37 FY11E 692 93.2% 1,157 8,334 81.8% 178 1,289 7,223 2,398 4,825 47.4% 8.58 FY12E 734 93.2% 1,347 8,718 80.7% 189 1,407 7,500 2,490 5,010 46.4% 8.91 FY13E 808 93.2% 1,522 9,551 80.4% 208 1,431 8,328 2,765 5,563 46.8% 9.89 9,920 10,184 10,800 11,881 9,491 10,066 11,073

`in Millions
Cash Flow Statement
Particulars Profit before Tax Depreciation Change in Working Capital Direct Taxes Cash Flow from Operations Capital Expenditure Cash Flow from Investing Equity Raised Debt Raised Dividend Paid Cash Flow from Financing Net Change in Cash Opening Cash & Cash Eq Closing Cash & Cash Eq FY09 1,913 1,706 (1,752) 2,037 FY10 6,242 2,365 1,420 8,863 FY11E 7,223 1,157 (27) 6,673 FY12E 7,500 1,347 (52) 7,615 FY13E 8,328 1,522 (91) 8,491

(500) (1,959) (2,398) (2,490) (2,765) (4,579) (7,777) (6,500) (5,000) (5,000) (4,283) (7,617) (6,500) (5,000) (5,000) 2 1,849 (329) 652 (1,594) 2,569 975 5 1,086 (493) (478) 767 975 1,743 0 2,400 (656) 806 1,743 2,549 0 500 (658) 1,239 2,549 3,787 0 0 (658) 1,610 3,787 5,397

633 (1,377) (1,882)

Balance Sheet
Particulars Source of Funds Share Capital Reserves & Surplus Networth Total Debt Deferred tax Liability (Net) TOTAL Application of Funds Net Block Capital WIP Investments CA, Loans & Advances Sundry debtors Inventories Cash & bank balance Other Current Assets Loans & Advances Less: CL & Provisions Current liabilities Provisions Net Current Assets Misc Expenditure TOTAL 3,742 1,590 284 33 4,848 3,486 (785) 3 5,075 3,092 446 0 5,382 3,184 1,645 0 5,920 3,459 3,071 0 544 926 975 153 3,018 753 1,327 1,742 129 3,600 977 1,395 2,549 129 3,564 1,036 1,479 3,787 129 3,780 1,139 1,627 5,397 129 4,158 17,686 24,368 29,709 33,862 37,840 6,446 356 5,387 666 5,387 666 4,887 666 4,387 666 5,621 5,624 5,626 5,626 5,626 6,531 10,014 14,181 18,532 23,437 12,152 15,638 19,806 24,158 29,063 11,509 12,596 14,996 15,496 15,496 1,144 1,405 1,405 1,405 1,405 24,805 29,639 36,207 41,059 45,964 FY09 FY10 FY11E FY12E FY13E

Key Ratios
Particulars Per Share Data EPS (`) CEPS (`) Book Value (`) Growth Ratios Sales PAT Profitability Ratios EBITDA Margin Net profit Margin RoCE RoE Valuation Matrix PE (x) Price to Cash Earnings (x) P/BV (x) EV/EBIDTA (x) EV/Sales (x) Leverage Ratio Debt/Equity Ratio Interest Coverage Ratio 0.95 2.93 0.81 7.39 0.76 6.47 0.64 6.19 0.53 6.67 46.9 19.7 4.8 16.1 14.0 14.0 8.9 3.7 7.4 6.9 12.0 9.7 2.9 7.4 6.9 11.6 9.1 2.4 6.9 6.4 10.4 8.2 2.0 6.1 5.7 87.2% 25.3% 12.1% 10.1% 93.7% 41.8% 28.0% 26.5% 93.2% 47.4% 26.8% 24.4% 93.2% 46.4% 24.4% 20.7% 93.2% 46.8% 23.9% 19.1% 16.7% 103.5% 23.4% 236.2% 2.7% 16.4% 6.1% 3.8% 10.0% 11.0% 2.2 5.2 21.6 7.4 11.6 27.8 8.6 10.6 35.2 8.9 11.3 42.9 9.9 12.6 51.7 FY09 FY10 FY11E FY12E FY13E

24,805 29,639 36,207 41,059 45,964

Source: Company, ULJK Research

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Research Desk Institutional Sales Desk Disclosure Appendix

Tel: 022 - 3028 4719 Tel: 022 - 2272 1687

ULJK Financial Services Pvt Ltd: (Time range 12 months) BUY: Returns>20%; ACCUMULATE: 5%<Returns<20% ; HOLD: -5%<Returns<5%, REDUCE -20%<Returns<-5% and SELL: Returns<-20%

Analyst(s) holding in the Stock : Nil

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