Monday, January 12, 2009

Stock Idea: GSPL

Gujarat State Petronet went public on 24th January 2006, with a public issue of 13.80 crore equity shares of Rs.10 each, at Rs.27 per share. Its 52 week high low were at Rs.114 and Rs.25 and is now ruling at Rs.41 levels.

The stock has been in the news for the last one month as huge delivery based buying has been seen in the stock. Share has risen by about 64% in the last one month, from Rs.25 on 10-12-08, which was also its 52 week low.

The company is the second largest natural gas transmission network in India and is the first and only pure natural gas transmission company in India, to transport natural gas on an “open access,” means, company making available its gas transmission capacity available to any shipper on non-discriminating basis.

The company presently has grid pipe network of 1,130 kms. which is being expanded to 2,200 kms. in the next 18 months. The company is presently transporting about 17 mmscmd of gas while in FY 08 transported 6,145 mmscm of gas. In first 6 months of FY 09, it transported 3,069 mmscm of gas. There is no overlapping pipeline network along the route of the company’s pipeline network.

The company has also signed a 15 year agreement with Reliance Industries Ltd., to transport 11 mmscmd (expandable to 14 mmscmd) of gas from Bharuch to Jamnagar and also with Torrent Power, of 20 years, to transport 4.5 mmscmd of gas. Both these contracts would be operational in the next 3 – 4 months, with commencement of gas production, by RIL, from its K G Basin. Hence, the company would be able to double its topline and bottomline.

For FY 08 the total income of company was at Rs.447 crores with net profit of Rs.100 crores and cash profit of Rs.265 crores on equity of Rs.562 crores. EPS for FY 08 was placed at Re.1.81 while cash EPS was at Rs.4.70. For first six months of FY 09, total income of the company was at R.252 crores with profit after tax of Rs.61 crores with cash profit of Rs.145 crores.

The company has been able to source gas upto points of Mundra Port and Pipavav Port and are connected to supply to Surat, Bharuch, Vadodara, Ahmedabad, Anand, Gandhinagar, Surendranagar, Sabarkantha, Kalol, Mehasana, Morbi, Vapi and Valsad.

The share capital of the company is at Rs.562 crores, of which, 37.77% is held by its promoters, Gujarat State Petroleum Corporation Ltd., while 35.91% is held by Banks, Mutual Funds, FIIs and state government companies. 26.32% stake is held by the public.

It is strange to see that Gujarat Maritime Board is holding 6.60%, Gujarat Urja 2.02%, GNFC 1.42% and GIDC 1.42% (totaling 11.46%( but the same has not been shown as promoters holding). So, in reality, Gujarat Govt is having a direct – indirect stake of close to 50%.

The controversy in respect to sharing 30% profit before tax of the company, for charity is also likely to be given re-thinking by the Gujarat Govt., as the similar proposal has been defeated by the shareholders of Guj. Alkalies and GNFC, where government stake is less than 50%,. So, if this company also drops this proposal, stock would get further re-rating.

Due to bright prospects of gas transportation sector, in Gujarat, the stock holds good growth potential as the company would be able to double its topline and bottomline in the next 6 months with its existing infrastructure and network.
Those who are holding the stock are advised to remain invested as stock has good medium term potential.

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