The GAIL full form is Gas Authority of India Ltd. It operates a network of 13,340 kms across India (as of 10th September 2021). GAIL dominates 70% of India’s gas transmission market and 50% gas trading share. GAIL also has a presence in the following segments:
Trading
Transmission
Liquified Petroleum Gas (LPG) production and transmission
Liquified Natural Gas (LNG) re-gasification
Petrochemicals
City gas, exploration & production, and other areas of the natural gas value chain.
History of GAIL
GAIL’s LOGO
Key Personnel at GAIL
Shri Anjani Kumar Tiwari. Director (Finance)
Shri Manoj Jain- CMD, Director (Projects) and Director (HR)
Great Cash Conversion of Profits: GAIL is able to convert 89.23% of operating earnings into operating cash flow. This signals a great working capital cycle and large cash flows for either funding or dividends. This has a positive impact on GAIL’s shareholders.
CONS
Low Sustainable RoE: GAIL’s return on equity (ROE) is lower than the expected cost of capital. This means that the underlying business will destruct value over a period of time due to its inability to generate superior returns on capital.
Low Return on Capital Employed: GAIL is unable to generate sufficient return on capital employed. This has affected its ability to generate high returns for shareholders after accounting for taxes, interest and other non-equity stakeholders.
Highly Cyclical Industry: GAIL operates an extremely cyclical business with unpredictable earnings and cash flows. This can result in very high stock price volatility and returns which could negatively impact shareholder returns.
Capital Intensive Business: GAIL operates an extremely capital intensive business with a low Asset turnover ratio of 1.11. A low asset turnover ratio negatively impacts RoE and reduces shareholder returns. Also due to the capital intensive nature of business, growth of the business would need to be funded either via increasing borrowings or diluting shareholding, both of which negatively impacts shareholder value and returns.
Extremely Speculative Stock: GAIL’s stock is extremely speculative in nature which is likely to work negatively to impact long term shareholders of the company.
Low Shareholder Pedigree: GAIL has a very poor long term shareholder base and a large part of the shareholders are short term shareholders. This increases stock volatility and high speculative activity works negatively for long term shareholders of the company.
Competitor Analysis of GAIL (As on 10th September 2021)
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