Net profit of GAIL rises 18%

The net profit of state-run gas transmission major GAIL grew 18 percent to Rs 1,285 crore during Oct-Dec 2012 quarter.

The rise in the bottomline is attributed to a low subsidy burden and good performance of its petrochemicals division after a recent expansion.

The company’s LPG subsidy was restricted to Rs 700 crore, of which it took credit for Rs 85.7 crore excess provisions for the previous quarter. Consequently,
LPG and liquid hydrocarbons was the biggest contributor to the rise in profit of the firm.

The firm witnessed 94 percent rise in profit in this segment to Rs 592 crore. The petrochemical segment also performed well with revenues growing 26 percent to Rs 1,107 crore and profits rising 13.4 percent to Rs 439.5 crore.

Investors in the company’s stock are however worried over the steadily declining volumes of natural gas as well as the ad hoc nature of subsidies.

This is because the the company’s main business of natural gas transmission is suffering from steadily declining volumes. The negative impact was partially mitigated by higher tariffs from new pipelines.

Also, the ad hoc nature of subsidies means in spite of relatively lower subsidies till date, the March 2013 quarter subsidies could be substantially higher.

In the days ahead, analysts expect the fall in gas availability and subsidies to remain a major cause of concern for the firm.