Oil & gas. First big ticket reforms by government. Sector Update. ICICI Securities Ltd Retail Equity Research. October 20, 2014

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1 Sector Update October 20, 2014 Oil & gas Rating Matrix Company CMP Target Price Rating ONGC Buy GAIL Buy Oil India Buy IOCL Buy HPCL Buy Gujarat Gas Hold IGL Hold EPS Estimates Company FY15E FY16E FY17E ONGC GAIL NA Oil India IOCL NA HPCL NA Gujarat Gas NA IGL NA P/E ratio estimates Company FY15E FY16E FY17E ONGC GAIL NA Oil India IOCL NA HPCL NA Gujarat Gas NA IGL NA P/BV ratio estimates Company FY15E FY16E FY17E ONGC GAIL NA Oil India IOCL NA HPCL NA Gujarat Gas NA IGL NA Analyst Mayur Matani Utkarsh Tathagath First big ticket reforms by government The Cabinet Committee on Economic Affairs (CCEA) on Saturday initiated some major policy decisions pertaining to the oil & gas sector. The new government took some bold steps to start off the reforms process. The Finance Minister announced the following reforms: 1) diesel price deregulation 2) new gas pricing of US$5.6 per mmbtu 3) modified direct benefit transfer scheme in LPG and 4) policy framework for relaxations of PSC norms. Diesel price deregulation bold move in right time The government s move to announce a cut in diesel prices by 3.4 per litre and deregulate diesel prices comes at the right time when there has been a sharp decline in crude oil prices. Diesel prices will be market determined at both retail and refinery gate level for all consumers. The move to deregulate diesel prices will lead to a decline in crude oil gross under-recoveries, with only kerosene and LPG prices under the regulatory regime. The gross under-recoveries are now expected to decline from crore in FY14 to 83,326.5 crore in FY16E. ONGC, Oil India and PSU downstream companies would be the key beneficiaries and may see a reduction in their net subsidy burden, going forward. We expect more reforms from the government on the subsidy sharing mechanism, wherein lower subsidy burden needs to be set for upstream and downstream companies. We expect the decision on the subsidy sharing mechanism to come sooner than later, given the strong government and political sensitivity of the decision being the least. We expect net oil realisation for ONGC at $44.1/bbl, $45.5/bbl and $57.5/bbl for FY15E, FY16E and FY17E and for Oil India at $50.9/bbl, $53/bbl and $65/bbl for FY15E, FY16E and FY17E, respectively. For downstream companies, we expect the net subsidy burden to reduce from 1.5% in FY14 to 1% and 0.5% in FY15E and FY16E, respectively. Deregulation of diesel prices will facilitate greater competition in the auto fuels retail segment and enhanced efficiency in service delivery of oil companies. The deregulation of diesel also opens up the sector to private players like Reliance and Essar Oil to open retail outlets and compete with PSU companies. OMCs also stand to benefit if they are able to increase their diesel marketing margins by 0.5 per litre (HPCL to benefit the most among OMCs). New domestic gas price of US$5.6 per mmbtu The CCEA also tweaked the gas pricing formula of the previous government by raising gas prices to US$5.6 per mmbtu on a gross calorific value (GCV) basis. Hence, the net calorific value (NCV) works out to ~US$6.2 per mmbtu, which is comparable to the earlier price of US$4.2 per mmbtu on a NCV basis. The gas price for new discoveries in deepwater areas would also be at a premium to new prices. Although the new price is below our estimates, we believe the hike is positive as it a step in the right direction. The new gas price would be applicable from November 1, 2014 with a revision every six months beginning April 1, The new price is based on the modification to the Rangarajan formula. ONGC and Oil India would be the major beneficiaries of this price hike as they are the largest producers of gas in the country.

2 The CCEA made the following changes to the Rangarajan formula: Removal of both the Japanese and Indian LNG import components in the formula Consideration of Alberta Gas Reference price in place of Henry Hub Prices for Canadian consumption Consideration of Russian actual price in place of National Balancing Point price for Russian consumption considered under Former Soviet Union (FSU) countries Consideration of appropriate deductions on account of transportation & treatment charges, etc., for different hub prices The options of bi-annual and annual price revision instead of quarterly revision may be considered The modified Rangarajan formula is as follows: P = (VHH * PHH) + (VAC * PAC) + (VNBP * PNBP) + (VR * PR) / (VHH + VAC + VNBP + VR) Where (a) VHH = Total annual volume of natural gas consumed in USA & Mexico. (b) VAC = Total annual volume of natural gas consumed in Canada. (c) VNBP = Total annual volume of natural gas consumed in EU and FSU, excluding Russia. (d) VR = Total annual volume of natural gas consumed in Russia. (e) PHH and PNBP are the annual average of daily prices at Henry Hub (HH) and National Balancing Point (NBP) less the transportation and treatment charges. (f) PAC and PR are the annual average of monthly prices at Alberta Hub and Russia, respectively, less the transportation and treatment charges. A premium in pricing in ultra deep water areas, deep water areas and high pressure-high temperature areas would be beneficiary for oil upstream companies as the gas discoveries would become viable, thus leading to higher investments in offshore gas discoveries and higher gas production in future. As far as Reliance Industries is concerned, the matter relating to cost recovery on account of shortfall in envisaged production from D1, D3 discoveries of Block KG-DWN-98-3 is under arbitration. Hence the operator would be paid the earlier price of US$4.2 per mmbtu till the shortfall quantity of gas is made good. It is proposed that the difference between the revised price and the present price (US$4.2 per million BTU) would be credited to the gas pool account maintained by Gail and whether the amount so collected is payable or not, to the contractors of this Block, would be dependent on the outcome of the award of pending arbitration and any attendant legal proceedings. The gas price hike decision would be neutral for gas utilities as we believe higher gas costs would be passed on to customers. We expect CNG and PNG prices to be hiked by per kg and per scm, respectively to pass on higher costs to customers. As gas is the feedstock for Gail s petrochemical and LPG business, the gas hike will have a negative impact on Gail. However, we believe the reduction in Gail s subsidy burden from crore in FY14 to 1400 crore and 1000 crore in FY15E and FY16E, respectively, would neutralise the negative impact of the gas price hike. Page 2

3 Modified direct benefit transfer scheme in LPG (DBTL) The CCEA has also approved the Modified Direct Benefit Transfer Scheme in LPG being re-launched in 54 districts from mid-november, 2014 and in rest of country from January 1, The Cabinet revisited the scheme design and processes and it approved the Modified DBTL. The salient features of the Modified DBTL scheme are as follows: The subsidy per domestic subsidised cylinder shall be fixed. All LPG consumers who join the modified DBTL scheme in future can receive LPG cash subsidy In this scheme, the consumer will have to pay full market price of the cylinder and the consumer will get the subsidy transferred in the bank account as soon as the refill is booked. This will help the government to target the subsidy in a better and more organised manner, thereby repairing government finances. Policy framework for relaxations of stringent PSC norms CCEA approved the proposal of Ministry of Petroleum and Natural Gas regarding Policy Framework for Relaxations, Extensions and clarifications at the Development and Production stage under PSC regime for early Monetization of hydrocarbon discoveries. There are reform initiatives, which would help in monetisation of some of the pending discoveries, lead to resolution of various long pending operational issues, which are hampering E&P operations and create a better climate for investment. The salient features of this reform measure are as follows:- Extension of Appraisal period for submission of Declaration of Commerciality (DOC) in respect of hydrocarbon discovery. Extension of time period for submission of Field Development Plan (FDP) after review of DOC by the Management Committee. Reduction in Minimum Work Program (MWP) in case a block or its part is unavailable for exploration activities consequent to denial of permission by government agencies Swapping of 2D and 3D Seismic Minimum Work Programme, on the request of the operator In cases where the committed minimum work programme of any particular exploration phase is incomplete, entry into subsequent exploration phases would be permitted after paying cost of unfinished MWP of previous phases. Condoning delays in submission of notice for entering into next phase. Condoning delays in submission of Annual Work Programme and Budget and the appraisal work programme Permission for drilling of appraisal wells after submission of DOC Probing additional reservoirs during appraisal programme Acceptance of discoveries for which notification to the government has not been made while notification for testing has also not been provided as prescribed These changes do not change the basic structure of the PSC and have been approved in the overall interest of the energy security of the country. Page 3

4 These proposals are expected to yield the following benefits: Monetisation of some of the discoveries, which are struck because of expiry of timelines Additional discoveries in the appraisal period Improvement in investment climate because of resolution of disputes between the contractors and the government Enhancement of production of oil and gas from these blocks Preparation of a more robust FDP The revised gross crude oil under-recoveries post diesel price deregulation is as follows:- Exhibit 1: Current under-recoveries scenario Year FY13 FY14 FY15E FY16E Products ( Crore) HSD 92, , , LPG 39, , , ,547.2 SKO 29, , , ,779.3 Total Sharing Macro (%) Upstream 37.3% 47.9% 65.2% 72.0% Downstream 0.6% 1.5% 1.0% 0.5% Government 62.1% 50.6% 33.8% 27.5% Total Sharing ( Crore) Upstream 60, , , ,955.3 Downstream 1, , Government 100, , , ,954.5 Total Sharing among various stakeholders ( Crore) ONGC 49, , , ,111.0 OIL India 7, , , ,844.3 GAIL 2, , , ,000.0 IOC , HPCL Government 100, , , ,954.5 Page 4

5 Exhibit 2: ONGC Valuation Valuation based on P / BV multiple Adjusted Book Value for FY17E ( Crore) Adjusted number of shares (Crore) Adjusted Book Value per share ( ) Multiple 1.6 Value of core business ( per share) Add: Listed investments (25% discount to CMP) ( per share) 10 Fair Value per share ( ) 455 Valuation based on P / E multiple Profit after tax for FY17E ( Crore) Less: Other Income adjusted for tax ( Crore) Adjusted profit after tax for FY17E ( Crore) Number of shares (Crore) Adjusted EPS for FY17E ( ) 47.7 Multiple 12.0 Fair value per share without investments ( ) Add: Value of Investments ( per share) Listed investments (25% discount to CMP) 10 Other Investments 1.5 Fair value per share ( ) 584 Weighted Target Price ( per share) 519 Exhibit 3: Oil India Valuation Valuation based on P / BV multiple Adjusted Book Value for FY17E ( Crore) Adjusted number of shares (Crore) 60.1 Adjusted Book Value per share ( ) Multiple 1.3 Value of core business ( per share) Add: Unlisted investments ( per share) 114 Fair Value per share ( ) 738 Valuation based on P / E multiple Profit after tax for FY17E ( Crore) Less: Other Income adjusted for tax ( Crore) Adjusted profit after tax for FY17E ( Crore) Number of shares (Crore) 60.1 Adjusted EPS for FY17 ( ) 70.4 Multiple 10.0 Fair value per share without investments ( ) Add: Value of Investments ( per share) Other Investments 114 Fair value per share ( ) 818 Weighted Target Price ( per share) 778 Page 5

6 Exhibit 4: Gail Valuation Segments Enterprise Value ( Crore) per share % of SOTP Method Transmission Business Natural Gas Transmission DCF LPG Transmission DCF Value of transmission business Other Businesses Natural Gas Trading x FY16E EV/EBITDA Petrochemicals x FY16E EV/EBITDA LPG and Liquid Hydrocarbons x FY16E EV/EBITDA Value of Other Businesses Investments Quoted % discount to CMP Unquoted Value of Investments Firm Value Less: Net Debt Equity Value Exhibit 5: Indian Oil Valuation Valuation based on Price / BV Multiple Adjusted Book Value for FY16E ( Crore) Adjusted number of shares (Crore) Adjusted Book Value per share ( ) Add: Listed investments (25% discount) Book Value of core business ( per share) Multiple 1.1 Fair Value per share ( ) 474 Valuation based on P / E multiple Profit after tax for FY16E ( Crore) Less: Other Income adjusted for tax ( Crore) Adjusted profit after tax for FY16E ( Crore) Number of shares (Crore) Adjusted EPS for FY15E ( ) 24.8 Multiple 12.0 Fair value per share without investments ( ) 298 Add: Value of Investments ( per share) Listed investments (25% discount) Other Investments 3.6 Fair value per share ( ) 431 Weighted Target Price ( per share) 452 Page 6

7 Exhibit 6: HPCL valuation Valuation based on Price / BV Multiple Adjusted Book Value for FY16E ( Crore) Adjusted number of shares (Crore) 33.9 Adjusted Book Value per share ( ) Add: Listed investments (25% discount) 64.6 Book Value of core business ( per share) Multiple 1.0 Fair Value per share ( ) 545 Valuation based on P / E multiple Profit after tax for FY16E ( Crore) Less: Other Income adjusted for tax ( Crore) Adjusted profit after tax for FY15E ( Crore) Number of shares (Crore) 33.9 Adjusted EPS for FY15E ( ) 46.3 Multiple 12.0 Fair value per share without investments ( ) 555 Add: Value of Investments ( per share) Listed investments (25% discount) 64.6 HPCL - Mittal Energy 76.0 Other Investments 10.9 Fair value per share ( ) 707 Weighted Target Price ( per share) 626 Exhibit 7: Gujarat Gas valuation Pariculars WACC 12.0% Present Value of Cash Flows till FY19E Terminal Growth Rate 3% Terminal Value Present Value of Terminal Cash Flows Total Present Value of the Firm Less: Net Debt (FY14E) Total Present Value of Equity Number of Outstanding shares (In Crore) 12.8 DCF - Target Price ( per share) 395 Exhibit 8: Indraprastha Gas valuation Particulars Amount WACC 12.0% Present Value of Cash Flows till FY19E Terminal Growth Rate 3.0% Terminal Value Present Value of Terminal Cash Flows Total Present Value of the Firm Less: Net Debt (FY14E) 23.5 Total Present Value of Equity Number of Outstanding shares (In Crore) 14.0 DCF ( per share) 390 Page 7

8 ONGC: Financial summary Profit and loss statement ( Crore) Revenue 174, , , ,404.0 Growth (%) (Inc.)/Dec. in stock trade Raw material Costs Employee Costs Statutory Levies Other Expenditure Op. Expenditure EBITDA 58, , , ,707.8 Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT 26, , , ,248.6 Growth (%) EPS Cash flow statement ( Crore) Profit after Tax 26, , , ,248.6 Less: Dividend Paid 9, , , ,734.3 Add: Depreciation 25, , , ,091.8 Add: Others Cash Profit 44, , , ,808.1 Increase/(Decrease) in CL 10, , , ,261.6 (Increase)/Decrease in CA 10, , CF from Operating Activities Purchase of Fixed Assets 22, , , ,724.1 (Inc)/Dec in Investments -1, Others CF from Investing Activities -23, , , ,724.1 Inc/(Dec) in Loan Funds 3, , ,050.0 Inc/(Dec) in Sh. Cap. & Res , ,228.0 Others CF from financing activities 3, , ,278.0 Change in cash Eq. 44, , , ,954.0 Op. Cash and cash Eq. 19, , , ,377.1 Cl. Cash and cash Eq. 64, , , ,331.0 Balance sheet ( Crore) Source of Funds Equity Capital 4, , , ,277.8 Reserves & Surplus 164, , , ,459.5 Shareholder's Fund 168, , , ,737.2 Loan Funds 10, , , ,367.6 Abandon cost liability 23, , , ,050.4 Deferred Tax Liability 18, , , ,646.2 Minority Interest 2, , , ,051.6 Source of Funds 222, , , ,853.0 Application of Funds Net Block 44, , , ,606.6 Capital WIP 21, , , ,524.3 Producing Properties 85, , , ,553.2 Pre-Producing Properties 19, , , ,641.6 Total Fixed Assets 170, , , ,325.7 Investments 3, , , ,307.2 Inventories 13, , , ,073.7 Debtor 16, , , ,417.0 Cash 64, , , ,331.0 Loan & Advance, Other CA 18, , , ,006.5 Total Current assets 113, , , ,828.2 Current Liabilities 38, , , ,143.1 Provisions 26, , , ,261.1 Total CL and Provisions 64, , , ,404.2 Net Working Capital 48, , , ,424.0 Miscellaneous expense Application of Funds 222, , , ,853.0 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 8

9 Oil India: Financial summary Profit and loss statement Revenue 9, , , ,025.8 Growth (%) (Inc.)/Dec. in stock trade Raw material Costs Employee Costs Statutory Levies Other Expenditure Op. Expenditure EBITDA 4, , , ,943.0 Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT 2, , , ,367.1 Growth (%) EPS Cash flow statement Profit after Tax 2, , , ,367.1 Less: Dividend Paid 1, , , ,758.3 Add: Depreciation 1, ,289.4 Add: Others Cash Profit 2, , , ,999.2 Increase/(Decrease) in CL (Increase)/Decrease in CA CF from Operating Activities Purchase of Fixed Assets 1, , , ,231.8 (Inc)/Dec in Investments -9, , Others CF from Investing Activities -10, , ,231.8 Inc/(Dec) in Loan Funds 8, Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities 8, Change in cash Eq , , ,662.3 Op. Cash and cash Eq. 12, , , ,005.1 Cl. Cash and cash Eq. 12, , , ,667.4 Balance sheet Source of Funds Equity Capital Preference capital Reserves & Surplus 20, , , ,471.9 Shareholder's Fund 20, , , ,073.0 Loan Funds 9, , , ,532.7 Deferred Tax Liability 1, , , ,614.2 Minority Interest Source of Funds 32, , , ,433.6 Application of Funds Net Block Capital WIP Producing Properties 4, , , ,446.0 Pre-Producing Properties 1, , , ,203.0 Total Fixed Assets 6, , , ,828.9 Investments 11, , , ,785.9 Inventories , , ,523.2 Debtor Cash 12, , , ,667.4 Loan & Advance, Other CA 2, , , ,883.9 Total Current assets 16, , , ,815.5 Current Liabilities 1, , , ,058.3 Provisions 1, , , ,938.3 Total CL and Provisions 3, , , ,996.6 Net Working Capital 13, , , ,818.9 Miscellaneous expense Application of Funds 32, , , ,433.7 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 9

10 Gail India: Financial summary Profit and loss statement ( crore) Revenue 47, , , ,444.7 Growth (%) (Inc.) / Dec stock in trade Raw material Costs Purchase of trading goods Employee Costs Other Expenditure Op. Expenditure EBITDA 6, , , ,843.6 Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT 4, , , ,423.8 Growth (%) EPS Cash flow statement ( crore) Profit after Tax 4, , , ,423.8 Less: Dividend Paid 1, , , ,621.4 Add: Depreciation , ,121.2 Add: Others Cash Profit 4, , , ,073.7 Increase/(Decrease) in CL -1, , , ,747.9 (Increase)/Decrease in CA , , ,577.5 CF from Operating Activities Purchase of Fixed Assets 4, , , ,543.0 (Inc)/Dec in Investments -2, , Others CF from Investing Activities -6, , , ,943.0 Inc/(Dec) in Loan Funds 2, , Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities 2, , Change in cash Eq , ,085.1 Op. Cash and cash Eq ,398.7 Cl. Cash and cash Eq , ,483.8 Balance sheet Source of Funds Equity Capital 1, , , ,268.5 Preference capital Reserves & Surplus 22, , , ,245.7 Shareholder's Fund 24, , , ,514.2 Loan Funds 8, , , ,086.1 Deferred Tax Liability 2, , , ,866.4 Minority Interest Source of Funds 34, , , ,466.6 Application of Funds Gross Block 31, , , ,056.3 Less: Acc. Depreciation 11, , , ,631.0 Net Block 19, , , ,425.3 Capital WIP 7, , , ,063.8 Total Fixed Assets 27, , , ,489.1 Investments 5, , , ,197.4 Inventories 1, , , ,513.2 Debtor 3, , , ,293.5 Cash , ,483.8 Loan & Advance, Other CA 5, , , ,067.7 Total Current assets 10, , , ,358.2 Current Liabilities 7, , , ,309.6 Provisions 1, , , ,267.5 Total CL and Provisions 9, , , ,577.1 Net Working Capital 1, , ,781.1 Miscellaneous expense Application of Funds 34, , , ,467.6 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 10

11 Indian Oil Corporation: Financial summary Profit and loss statement Revenue 447, , , ,306.2 Growth (%) (Inc.)/(Dec.) in stock in trade Raw material Costs Purchase of Products Employee Costs Other Expenditure Op. Expenditure EBITDA 13, , , ,690.6 Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT 5, , , ,011.0 Growth (%) EPS Cash flow statement Profit after Tax 5, , , ,011.0 Less: Dividend Paid 1, , , ,698.7 Add: Depreciation 5, , , ,226.0 Add: Others Cash Profit 8, , , ,838.3 Increase/(Decrease) in CL 1, , , ,606.5 (Increase)/Decrease in CA -8, , , ,172.0 CF from Operating Activities Purchase of Fixed Assets 10, , , ,500.0 (Inc)/Dec in Investments , , Others CF from Investing Activities -10, , , ,500.0 Inc/(Dec) in Loan Funds 9, , , ,000.0 Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities 9, , , ,000.0 Change in cash Eq , , ,227.2 Op. Cash and cash Eq , ,071.2 Cl. Cash and cash Eq , , ,844.0 Balance sheet Source of Funds Equity Capital 2, , , ,428.0 Preference capital Reserves & Surplus 58, , , ,363.4 Shareholder's Fund 61, , , ,791.4 Loan Funds 89, , , ,010.7 Deferred Tax Liability 5, , , ,216.2 Minority Interest Source of Funds 156, , , ,018.3 Application of Funds Gross Block 104, , , ,650.8 Less: Acc. Depreciation 44, , , ,400.3 Net Block 60, , , ,250.5 Capital WIP 18, , , ,337.4 Total Fixed Assets 78, , , ,588.0 Investments 18, , , ,594.2 Inventories 59, , , ,890.4 Debtor 11, , , ,939.1 Cash , , ,844.0 Loan & Advance, Other CA 55, , , ,162.6 Total Current assets 126, , , ,836.1 Current Liabilities 49, , , ,695.3 Provisions 18, , , ,304.7 Total CL and Provisions 67, , , ,000.0 Net Working Capital 58, , , ,836.1 Miscellaneous expense Application of Funds 156, , , ,018.3 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 11

12 HPCL: Financial summary Profit and loss statement Revenue 206, , , ,798.0 Growth (%) (Inc.)/(Dec.) in stock in trade Raw material Costs Purchase of Products Employee Costs Other Expenditure Op. Expenditure EBITDA 4, , , ,141.0 Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT , , ,059.5 Growth (%) EPS Cash flow statement Profit after Tax , , ,059.5 Less: Dividend Paid Add: Depreciation 1, , , ,732.2 Add: Others Cash Profit 3, , , ,296.7 Increase/(Decrease) in CL , ,130.2 (Increase)/Decrease in CA -2, ,465.0 CF from Operating Activities Purchase of Fixed Assets 4, , , ,880.0 (Inc)/Dec in Investments Others CF from Investing Activities -4, , , ,880.0 Inc/(Dec) in Loan Funds 4, , ,500.0 Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities 4, , ,500.0 Change in cash Eq , , Op. Cash and cash Eq , ,751.8 Cl. Cash and cash Eq. 1, , ,263.8 Balance sheet Source of Funds Equity Capital Preference capital Reserves & Surplus 13, , , ,982.9 Shareholder's Fund 13, , , ,321.9 Loan Funds 39, , , ,679.8 Deferred Tax Liability 3, , , ,108.4 Minority Interest Source of Funds 56, , , ,110.1 Application of Funds Gross Block 37, , , ,166.6 Less: Acc. Depreciation 14, , , ,840.9 Net Block 22, , , ,325.7 Capital WIP 5, , , ,585.6 Total Fixed Assets 27, , , ,911.2 Investments 10, , , ,859.8 Inventories 16, , , ,313.3 Debtor 4, , , ,078.3 Cash 1, , ,263.8 Loan & Advance, Other CA 14, , , ,019.3 Total Current assets 36, , , ,674.7 Current Liabilities 16, , , ,117.1 Provisions 2, , , ,218.6 Total CL and Provisions 18, , , ,335.7 Net Working Capital 18, , , ,339.0 Miscellaneous expense Application of Funds 56, , , ,110.1 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 12

13 Gujarat Gas: Financial summary Profit and loss statement (Year-end March) CY12 FY14 FY15E FY16E Revenue 3, , , ,170.8 Growth (%) Raw material Costs Employee Costs Other Expenditure Op. Expenditure EBITDA Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT Growth (%) Adjustments Adj. Net Profit EPS Cash flow statement (Year-end March) CY12 FY14 FY15E FY16E Profit after Tax Less: Dividend Paid Add: Depreciation Add: Others Cash Profit Increase/(Decrease) in CL (Increase)/Decrease in CA CF from Operating Activities Purchase of Fixed Assets (Inc)/Dec in Investments Others CF from Investing Activities Inc/(Dec) in Loan Funds Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities Change in cash Eq Op. Cash and cash Eq Cl. Cash and cash Eq Balance sheet (Year-end March) CY12 FY14 FY15E FY16E Source of Funds Equity Capital Preference capital Reserves & Surplus , , ,602.3 Shareholder's Fund , , ,627.9 Loan Funds Deferred Tax Liability Minority Interest Source of Funds 1, , , ,128.2 Application of Funds Gross Block 1, , , ,699.6 Less: Acc. Depreciation Net Block Capital WIP Total Fixed Assets ,030.3 Investments ,001.0 Inventories Debtor Cash Loan & Advance, Other CA Total Current assets Current Liabilities Provisions Total CL and Provisions Net Working Capital Miscellaneous expense Application of Funds 1, , , ,128.2 Key ratios (Year-end March) CY12 FY14 FY15E FY16E Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) 2, , , Debt to EBITDA (x) Current Ratio Quick ratio Page 13

14 Indraprastha Gas: Financial summary Profit and loss statement ( Crore) Revenue 3, , , ,841.2 Growth (%) Raw material Costs Employee Costs Other Expenditure Op. Expenditure EBITDA Growth (%) Depreciation EBIT Interest Other Income PBT Growth (%) Tax Reported PAT Growth (%) Adjustments Adj. Net Profit EPS Cash flow statement ( Crore) Profit after Tax Less: Dividend Paid Add: Depreciation Add: Others Cash Profit Increase/(Decrease) in CL (Increase)/Decrease in CA CF from Operating Activities Purchase of Fixed Assets (Inc)/Dec in Investments Others CF from Investing Activities Inc/(Dec) in Loan Funds Inc/(Dec) in Sh. Cap. & Res Others CF from financing activities Change in cash Eq Op. Cash and cash Eq Cl. Cash and cash Eq Balance sheet Source of Funds Equity Capital Preference capital Reserves & Surplus 1, , , ,337.0 Shareholder's Fund 1, , , ,477.0 Loan Funds Deferred Tax Liability Minority Interest Source of Funds 2, , , ,065.0 Application of Funds Gross Block 2, , , ,573.3 Less: Acc. Depreciation , , ,400.3 Net Block 1, , , ,173.0 Capital WIP Total Fixed Assets 2, , , ,435.3 Investments Inventories Debtor Cash Loan & Advance, Other CA Total Current assets ,138.2 Current Liabilities Provisions Total CL and Provisions Net Working Capital Miscellaneous expense Application of Funds 2, , , ,064.9 Key ratios Per share data ( ) Book Value Cash per share EPS Cash EPS DPS Profitability & Operating Ratios EBITDA Margin (%) PAT Margin (%) Fixed Asset Turnover (x) Inventory Turnover (Days) Debtor (Days) Current Liabilities (Days) Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) PE Price to Book Value EV/EBITDA EV/Sales Leverage & Solvency Ratios Debt to equity (x) Interest Coverage (x) Debt to EBITDA (x) Current Ratio Quick ratio Page 14

15 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ANALYST CERTIFICATION We /I, Mayur Matani, MBA; Utkarsh Tathagath MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc. Disclosures: ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. 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Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. 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Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Mayur Matani MBA; Utkarsh Tathagath MBA research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Mayur Matani, MBA; Utkarsh Tathagath MBA research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. ICICI Securities has received an investment banking mandate from Government of India for disinvestment in ONGC. This report is prepared based on publicly available information. Page 15