GAIL - a key player in Green Hydrogen space

GAIL is a pioneer in the field of energy gas extraction, production & distribution across India and beyond India. GAIL is entering into the space of Green Hydrogen, a sunrise business space. A very handful of players are able to enter this space namely Reliance, Adani, NTPC and IOCL. GAIL stands out of its peers in multiple aspects, including the expertise and promising financial growth over the period of time. Here is the short list of data points from Annual Report 21-22 on what GAIL is and where it is heading.

• Company owns and operates about 14,500 km of trunk natural gas pipeline representing nearly two-third of the country’s existing network
• Company has acquired 26% stake from ILF&S in ONGC Tripura Power Company. This acquisition would encourage synergy and enable GAIL to stronghold its presence in North East region of the country.
• Company in line with the National Hydrogen Mission commenced India’s first-of-its-kind project of mixing hydrogen into natural gas system at Indore, Madhya Pradesh. The hydrogen blended natural gas is being supplied to Aavantika Gas Limited, one of GAIL’s Joint Venture (JV) Company with HPCL, operating in Indore.
• In line with Government of India’s ‘National Hydrogen Energy Mission’, Company is setting up a Green Hydrogen Production unit with a capacity of 4.3 Ton per day at Vijaipur (M.P.). The unit will produce Green Hydrogen using Polymer Electrolyte Membrane (PEM) technology based on water electrolysis. Also, study on technical feasibility of H2 blending in NG/CGD network has been initiated.
• India is planning a network of Liquefied Natural Gas (LNG) fuelling stations along its 6,000-km-long golden quadrilateral highways, a move that would encourage thousands of truckers to switch to the cleaner fuel from polluting diesel. 
• Company is authorised to operate in 67 Geographical Areas throughout India including major metro cities of Delhi, Mumbai, Hyderabad, Bengaluru, Kolkata, etc. These CGD networks together cater to around 67% of the total 93.02 lakh Domestic PNG (DPNG) connections in the country. Out of the total 4,433 CNG stations in the country, GAIL group operates 2,030 CNG stations representing 46% share. This year, your Company along with its JVs and subsidiaries has achieved a record PNG connection of more than 11.50 lakh households last year.
• Company was authorised to take up CGD Projects in six cities as part of the Pradhan Mantri Urja Ganga Project namely, Varanasi, Bhubaneshwar, Cuttack, Patna, Ranchi and Jamshedpur. In addition, GAIL is also executing the CGD project in Kolkata through its Subsidiary - Bengal Gas Company Limited. Supply of gas has already commenced to CNG, PNG customers in these cities.
• GAIL Gas Limited (a wholly-owned subsidiary) is executing and operating City Gas Distribution (CGD) projects in 16 GAs, including Bengaluru. Currently, GAIL Gas has 6 Joint Venture Companies (JVCs) and they are implementing CGD project in 09 GAs. GAIL Gas along with its JVCs is providing DPNG to 7.79 lakh households and catering to clean fuel requirements for vehicles through its 345 CNG stations spread across various GAs.

Financial Summary:

Balance Sheet			% to Assets		% of Assets		% of Assets	Remarks:
		2021-2022		2020-2021		2019-2020
Assets:
	Non Current	80252	83.11	70518	86.65	63257	84.44
	Current	16307	16.89	10867	13.35	11657	15.56
Total:		96559		81385		74914
Other details:
	Trade Receivables:	8501	8.80	4595	5.65	5847	7.80
	Cash In Hand:	1519	1.57	1506	1.85	624	0.83
	Inventory:	3576	3.70	2989	3.67	3183	4.25
	Total Fin Assets:	30922	32.02	21597	26.54	19148	25.56	Investements increased
Share Holder Equity:		64,305	66.60	53280	65.47	49355	65.88	Steady growth of Equity
Liabilities:
	Non Current	17161		15553		13083
	Current	15093		12552		12476
Total Liabilities:		32254	33.40	28105	34.53	25559	34.12
Other Details:
	Total Debt:	7830		6760		6338
	Trade payables	5361		4453		3922
	Total Fin Liability	19611		16858		12165
Total Shares:	6575099643
Book Value		97.80		81.03		75.06		Steady growth
Debt to Equity		0.12		0.13		0.13		Decreasing over the period
Debt to Assets		0.08		0.08		0.08		Borrowing correspond to 8% of assets
EPS:		27.6		13.61		20.89
Receivables/Payables		1.59		1.03		1.49		Payables < Receivables
Financial Leverage: Assets/Equity		1.50		1.53		1.52
Working capital:(C-Assets - C-Liability)		1214		-1685		-819		Sufficient working capital in hand

P&L:

		2021 - 2022	2020 - 2021	2019 - 2020
Revenue
	Operating Revenue	92,873.82	57,428.26	72576.98
	Other	1,172.25	1,120.2	1537.15
	Profit From Joint Ventures	1762.34	1714.58	2246.6
Total:		95,808.41	60,263.04	76,360.73
Expenses
	Fin	202.48	179.27	308.94
	D & A	2420.17	2173.82	2080.16
	Other	77722.24	50184.5	63542.69
Total		80344.89	52537.59	65931.79
EBITDA		15,151.58	7,243.76	9,034.29
EBITDA Margin/Operating margin		16.31	12.61	12.45
Profit Before Tax		15,463.52	7,725.45	10,428.94
Total Tax:		3159.89	1582.63	914.3
Net Profit		12,303.63	6,142.82	9,514.64
Profit margin		12.84	10.19	12.46

Why GAIL? Why not its pears?

• GAILs core business is GAS distribution, who else can match its expertise and infra, which provides an upper edge in GH2
• Stock is trading close to its book value, IOC is one such stock but its is struggling with financials and sales 
• PE value is much bellow its peers 
• Strong financial management and its almost debt free
• Adani - we all know the story :-)

Disclaimer:

Above content is completely based annual report and my knowledge, its up the will & wish of the reader to accept with open mind and take a mindful decision.