GSPL shares may appreciate by 50% in 12 months

GSPL shares may appreciate by 50% in 12 months

By Rajiv Kapoor | 4 March, 2017

Gujarat State Petroleum Corporation Ltd (GSPC) is one of the leading oil-gas exploration, development and production companies in India, with a significant presence in the gas transmission and gas distribution business. The exploration, development and production activities are conducted both onshore and offshore in India and overseas. The primary asset of GSPC is the Deen Dayal field in the Krishna-Godavari basin, located off the east coast of Andhra Pradesh and having significant gas reserves developed for commercial production. GSPC also holds participating interest in 16 producing fields in the Cambay basin, apart from holding participating interest in 26 onshore and offshore exploration and production blocks. Out of above, 24 of these blocks are located in India, while two are located in Australia and Indonesia. It conducts all its exploration, development and production activities through joint ventures with other domestic oil and gas companies.

Gujarat is a highly industrialised state and looking at the sharp rise in gas availability on account of exploration and development of LNG terminals, a well developed natural gas transportation infrastructure was required to serve various industrial belts of the state. GSPC identified Gujarat’s concern for infrastructure development to support the future hydrocarbon economy and industry. A new company was set up in December 1998, Gujarat State Petronet Limited (GSPL), with a mandate to create a high-pressure pipeline network for natural gas transportation in Gujarat. GSPL’s primary objective is to connect various supply sources and users of natural gas in Gujarat through gas pipeline network. Having commenced transportation of natural gas in November 2000, it currently operates a natural gas transmission grid comprising approximately 2600 km of pipeline network. Gujarat State Petronet Limited (GSPL) is a gas transmission company, while Gujarat Gas Ltd and Sabarmati Gas are engaged in the business of city gas distribution and related pipeline infrastructure. Between them, these companies have developed pipeline infrastructure and supply piped gas to domestic customers, industrial customers, commercial customers and compressed natural gas stations in Gujarat. It also trades in liquefied natural gas catering to industries engaged in power generation, steel and city gas distribution, among others.

The outlook for GSPL is extremely bright, with Q3 FY17 numbers being very good and many brokerage houses are viewing the company with renewed interest. The company’s transmission business is expected to report steady volume growth in the backdrop of higher growth in domestic power demand, increased LNG capacity at Dahej and Mundra terminals and lower gas prices. Any upward revision of transmission tariff can be a key positive for GSPL and hence the stock currently quoting at Rs 162 can create immense value for shareholders in the long term. Analysts are expecting the stock to appreciate by 50% in the next 12 months.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.


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