The June quarter profit of gas major GAIL grew by 15 per cent over the same period last year, and more than doubled on a sequential basis. After the company’s dismal performance in March due to high subsidy burden, this good show was cheered by the market. But weak volumes across segments, especially in the mainstay gas transmission business, is a concern.
June quarter performance was salvaged by its trading businesses – in gas and in LPG and liquid hydrocarbons. Profit in the gas trading segment grew by almost 58 per cent year-on-year despite stagnant volumes. Also, though sales volume in LPG and liquid hydrocarbons fell around 8 per cent, the segment’s profit almost doubled. This suggests pricing power in the trading segments, which offset the persistent weakness in the key and high-margin gas transmission segment. With domestic gas output continuing to fall, GAIL’s transmission volumes fell more than 6 per cent year-on-year to around 110 mmscmd, and the segment’s profit dipped 13 per cent. Over the past several quarters, weak transmission volumes have dragged the stock. At the same time, the company incurring more cost on depreciation (up 22 per cent in the June quarter) and interest (almost doubled year-on-year). The petrochemicals segment also disappointed with profit falling nearly 20 per cent due to lower volumes. GAIL’s subsidy burden in the June quarter (Rs 700 crore) was around 3 per cent higher year-on-year, and 50 per cent lower than in the March quarter. The quarterly subsidy numbers though don’t mean much, since the final adjustment usually happens in the last (March) quarter each fiscal.