GAIL to benefit from Gas Highways Authority of India

GAIL Cmp Rs.383 Solid Long term Buy
PSU Stocks has been active in recent days after Government said it wants to raise money to bridge fiscal deficit.

India has just 10500km of pipelines and even a small neighboring country Pakistan has 56400km of pipeline which is nearly 6 times that of India’s (2007 stats). India needs a bigger pipeline Infrastructure and the government has already started action on this need- the government is likely to put in place an apex planning body for laying major gas pipeline projects - Gas Highways Authority of India (GHAI) on the lines of the National Highways Authority of India (NHAI) - by March 2010 and GAIL, being vastly experienced, will be one Company which can benefit from pipeline highway.

GAIL’s pipeline is around 7,000 km long now and would go up to 14,000 km by FY-2013, Transmission capacity would increase to 300 mmscmd from 150 mmscmd. GAIL current capacity utilisation to be 55-60% is expected higher with capacity utilisation at 70-75% by 2012-13. New tariff regime – likely to be announced by December2009, average blended tariff to increase by 5-10% say’s management in analyst meet.

Negative: Subsidy sharing for Oil losses has been drag on the stock, GAIL management reportedly asked the Petroleum Ministry to exempt it from sharing the subsidy burden as it did not benefit from any uptick in crude oil prices.

Many fears of rising Global asset bubble due to low interest rates in my view can come true, so my selection of stocks are mostly on strength of promoters and GAIL being a PSU can with stand a Double recession if it were to happen.

World Bank president: some risks to global growth in 2010, asset bubbles could undermine confidence in East Asia economies, there is some pressure on China to strengthen yuan


by A.K.PRABHAKAR