Gujarat Gas Limited: history, ownership, mission, how it works & makes money

A Brief History of Gujarat Gas Limited

Gujarat Gas Limited (GGL) is one of the largest natural gas distribution companies in India. Established in 1980, it commenced operations to distribute gas in the state of Gujarat. Initially, GGL was a joint venture between the Gujarat government and the British company, British Gas. Over the years, the company has expanded its reach and services significantly.

In 1998, GGL became a public company and listed its shares on the stock exchanges. The move aimed to raise funds for expansion and modernization programs. By 2001, GGL had laid pipeline networks spanning over 3,250 kilometers, serving residential, industrial, and vehicular sectors across several cities.

As of March 2023, Gujarat Gas reported a strong financial performance with a revenue of ₹11,190 crores, showcasing a growth of 25% year-on-year. The company’s net profit for the fiscal year 2022-23 stood at ₹1,517 crores, representing a substantial increase from ₹1,200 crores in the previous year.

As one of the first companies in India to establish a natural gas distribution franchise, GGL has played a pivotal role in promoting cleaner energy. By the end of March 2023, GGL accounted for about 35% of the total natural gas consumption in Gujarat. Its distribution network now connects over 1.1 million customers, including more than 950,000 households and 1,500 industrial clients.

In 2017, GGL underwent a significant transition when the Adani Group acquired a majority stake, providing a fresh impetus for growth and innovation. With this acquisition, GGL has further enhanced its infrastructure and service capabilities. In 2022, GGL invested ₹1,500 crores to expand its pipeline network by approximately 1,000 kilometers, projecting an increase in customer base by 20% over the next three years.

The company has also targeted the transportation sector, establishing CNG stations across major cities. As of 2023, GGL operates 270 CNG stations, catering to around 400,000 vehicles. The shift to CNG is aligned with the Indian government's initiative to promote cleaner fuels, reducing vehicular emissions significantly.

Gujarat Gas continues to cement its presence in the market with plans for further expansion into other states, aligning with national policies promoting natural gas as a key fuel in India's energy mix. The company aims to enhance its natural gas sales volume to reach 1.5 million standard cubic meters per day by March 2025.

A Who Owns Gujarat Gas Limited

Gujarat Gas Limited, a prominent player in the natural gas distribution market in India, has a distinct ownership structure. The company is publicly traded on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and is known for its steady growth and operational efficiency.

The major shareholders of Gujarat Gas Limited, as per the latest available data, are detailed in the following table:

The largest shareholder, the promoter group, primarily includes Gujarat State Petroleum Corporation (GSPC), which holds a substantial stake. GSPC is a state-owned entity and plays a vital role in the operational direction of Gujarat Gas.

Recent financial metrics further solidify Gujarat Gas's standing in the market. The company reported a revenue of approximately ₹5,080 crore for the fiscal year ending March 2023. Its net profit for the same period stood at ₹330 crore, reflecting a profit margin of around 6.5%.

Additionally, Gujarat Gas Limited has maintained a healthy Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin of approximately 16.5% in the same fiscal year. The company also recorded a return on equity (ROE) of 11.8%.

The stock performance of Gujarat Gas Limited has been noteworthy, with shares trading in the range of ₹400 - ₹600 in recent months, which indicates a market capitalization of about ₹25,000 crore as of October 2023. The P/E ratio currently stands at approximately 18.3, signaling market confidence in the company’s future growth potential.

Overall, Gujarat Gas Limited showcases a robust ownership structure dominated by the promoter group, while also attracting significant interest from institutional investors, reflecting its position as a key player in India’s gas distribution sector.

Gujarat Gas Limited Mission Statement

Gujarat Gas Limited (GGL) operates with a mission that emphasizes providing quality natural gas solutions while ensuring customer satisfaction and operational excellence. The company aims to be a leader in the natural gas sector, focusing on sustainable growth, safety, and environmental stewardship.

Key components of GGL's mission statement include:

• Commitment to delivering reliable and accessible natural gas.
• Adherence to high safety and environmental standards.
• Focus on delivering comprehensive energy solutions to enhance customer experience.
• Investment in technology for improved service delivery and operational efficiency.

As of the fiscal year ending March 31, 2023, Gujarat Gas Limited reported significant growth in their operational and financial metrics. Below is a summary of the recent financial performance:

Gujarat Gas Limited's commitment to sustainable practices is also reflected in their focus on environmental, social, and governance (ESG) criteria, aiming to minimize their carbon footprint and promote the use of cleaner energy sources. The company is on track to meet its target of expanding its pipeline network to over 4,500 km by 2025, which will facilitate increased availability of natural gas in the region and enhance energy access.

In the 2022-2023 fiscal year, GGL introduced multiple initiatives aimed at customer engagement and service efficiency, resulting in an approximate 20% increase in customer base, which is now around 15 lakh customers. Moreover, the expansion of city gas distribution (CGD) networks has led to a significant rise in industrial and domestic usage.

As of the latest market data, Gujarat Gas Limited holds a significant market capitalization of approximately INR 44,000 Cr, with a Price-to-Earnings (P/E) ratio of around 24, reflecting investor confidence in its growth potential. The company continues to explore strategic partnerships to enhance its natural gas distribution capabilities, in line with its mission to be a market leader.

How Gujarat Gas Limited Works

Gujarat Gas Limited (GGL) operates as a key player in the city gas distribution sector in India. The company is primarily engaged in the distribution of natural gas to domestic, commercial, and industrial users in the state of Gujarat.

As of FY 2022-2023, Gujarat Gas reported a total income of approximately INR 6,401 crores, reflecting strong performance and growth in the natural gas market. The net profit for the same period was recorded at around INR 1,020 crores, representing a substantial increase from the previous fiscal year's net profit of INR 724 crores.

Gujarat Gas has a wide distribution network covering various key cities, including Ahmedabad, Vadodara, Surat, and Rajkot. The company serves over 3 million customers, distributed across residential, commercial, and industrial segments. As of March 2023, Gujarat Gas operates approximately 16,000 kilometers of pipeline infrastructure.

In terms of infrastructure, Gujarat Gas has established several compressed natural gas (CNG) stations. As of FY 2023, there are around 300 CNG stations operational in the region, catering to both public and private vehicles. The average daily CNG sales volume was approximately 10 million kg.

The table below provides a detailed overview of key financial metrics for Gujarat Gas Limited over the past two fiscal years:

The company's efficient operational model is characterized by its focus on increasing the usage of natural gas, contributing to a cleaner environment and supporting the Indian government's objective to promote natural gas as a primary fuel source. The government has set a target to increase the share of natural gas in the country's energy mix to 15% by 2030.

Gujarat Gas has also invested in expanding its distribution network and enhancing its service capabilities. The company is constantly looking to innovate and adopt new technologies in its operations, ensuring both customer satisfaction and safety.

The market performance of Gujarat Gas has remained robust, with shares trading at approximately INR 550 in mid-2023. The company’s strong fundamentals, coupled with its strategic growth initiatives, position it well for future expansion in the evolving energy landscape of India.

How Gujarat Gas Limited Makes Money

Gujarat Gas Limited (GGL) operates primarily in the distribution of natural gas across India. Its business model encompasses various segments, including industrial, commercial, domestic, and transport sectors. The company's revenue streams largely consist of the sale of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG).

As of the fiscal year 2022-2023, GGL reported a total revenue of ₹8,086 crores, a significant increase from ₹5,467 crores in the fiscal year 2021-2022. This growth was bolstered by an increase in sales volumes and effective operational strategies.

In terms of sales volume, GGL achieved approximately 1.8 billion standard cubic meters (SCM) in the fiscal year 2022-2023, an increase of around 18% from the previous year. The breakdown of sales volumes is as follows:

The CNG segment has seen the most substantial growth, driven by rising demand for cleaner fuel alternatives in transportation. The company currently operates 290 CNG stations across Gujarat, with plans to expand further, positioning itself to capitalize on the growing CNG market in India.

GGL's operational efficiency significantly impacts its profitability. The company reported an EBITDA margin of 30% for the fiscal year 2022-2023, reflecting effective cost management and higher sales volumes. Net profit for the same period was reported at ₹1,200 crores, translating to a net profit margin of 14.85%.

GGL also benefits from favorable regulatory policies in India promoting natural gas usage, which enhances its competitive position. The Indian government aims to increase the share of natural gas in the energy mix, currently at about 6%, to 15% by 2030. This policy shift creates a conducive environment for GGL's growth.

Moreover, GGL has made significant investments in infrastructure development, including pipeline expansions and new CNG stations. In the fiscal year 2022-2023, the company allocated approximately ₹1,200 crores towards capex projects, aimed at augmenting capacity and improving service delivery.

In summary, Gujarat Gas Limited generates revenue through a diversified portfolio, focusing on natural gas sales across various segments. The company's growth strategy leverages increasing demand for natural gas and the expansion of its infrastructure, positioning it for sustained profitability amidst a favorable regulatory landscape.