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GAIL Announces Share Buyback Worth 1,083 Crores

12 April 2022
4 minutes

The stock of gas transmission major, GAIL, surged over 5% in the past week as on April 1, 2022, post the announcement of its share buyback. The company looks to reward its shareholders given its healthy balance sheet. Many analysts expect the buyback to provide around 10-20% returns to the shareholders. Since January this year, the stock has rallied 22%, as opposed to a +/- 1% movement in the benchmark indices during the same time frame.

GAIL Buyback 2022 details

GAIL (India) approved a buyback of around 5.7 crore shares on March 31, 2022. The total buyback value will come up to Rs 1,083 crore. This represents at least 2.5% of the company’s paid-up capital and free reserves as of March 31, 2021. The buyback price has been set at Rs 190 per share.

The record date for the buyback has been set as April 22, 2022.

The GAIL buyback price is at a 24% premium to the closing price on March 31, 2022. The buyback price is 11% higher than its 52-week high of Rs 171.3 per share.

As of April 1, 2022, the stock’s PE ratio was at 11.44 while the industry PE is around 14.35.

The company mentioned that the buyback would help in optimizing the capital structure and improving return on equity, by a reduction in the equity base, thereby leading to a long-term increase in shareholders‟ value.

About GAIL and its prospects

Gas Authority of India (GAIL), is one of the leading players in natural gas in India. It has diversified operations including sourcing, transportation, distribution and processing of natural gas in India along with LPG production and transmission, petrochemicals and LNG re-gasification. 

The company has a gas pipeline network of around 13,700 KM in India and it has further expansion plans of 6000 KM in the coming years. About 70% of natural gas transported in India is through GAIL’s pipeline. 

Learn more about Buyback here – What is share buyback

Operations

GAIL is not only present in all the cities in India but also has an international presence across countries including the US, Singapore, Myanmar, Russia, Egypt and China.  

Growth drivers

  • Considering the demand for gas is continual, GAIL is likely to benefit. Further, the advantages (environmentally) of using gas over fuel could aid the prospects of GAIL. 
  • The Government’s push toward the gas grid – ‘one nation, one grid’ is another positive for the company. For instance, the setting of the national gas grid could not only help in increasing gas access across all regions in a city but also enable access to high power-consuming sectors like fertilizers, refineries and power generation.
  • According to many experts, the bottlenecks in infrastructure are being eased via large investments in the gas sector. This could help in faster pipelines for the company. 

Financials 

GAIL has been rewarding its shareholders through regular dividends. And the debt-equity ratio of the company had been stable at 0.2 times. And the company has sufficient cash reserves to cover its debt too. In the recent December quarter, the company reported revenue growth of 67% y-o-y with revenue increase across all its segment. It also reported a profit growth of 121% y-o-y during the same period. 

Outlook of GAIL Buyback 2022

  • As per reports, GAIL has lined up its Capex spending of over Rs 450 billion for pipeline expansion. The company is already in the works for executing around 6000 KM of the gas pipeline as part of national gas grid connectivity which would translate into steady revenue in the coming years. GAIL also continues to bid for the national gas grid and expand its presence. 
  • It also plans to increase its petrochemicals capacity. The company is setting up a 500 KTA (kilo tonnes per annum) propane dehydrogenation and polypropylene plant in Maharashtra with an investment of around Rs 8,800 crore. 
  • The company is expanding its footprints beyond natural gas to drive growth. The main focus areas for future investments include natural gas pipeline, city gas distribution, petrochemicals, renewables, ethanol and compressed biogas. 
  • As per media reports, GAIL is expecting to start gas supply to four fertilizers plants by H2FY23 post trail runs.

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Research Analyst: Bavadharini KS

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