Financial Information Memorandum GSPC Gas Company Limited: (Strictly Private & Confidential)

FINANCIAL INFORMATION MEMORANDUM
(Strictly Private & Confidential)
GSPC GAS COMPANY LIMITED
Prepared by
SBI CAPITAL MARKETS LIMITED

202, Maker Tower ‘E’, Cuffe Parade, Mumbai 400 005
Tel. (022) 22178300, Fax. (022) 2216 0379 / 2218 8332
Website: www.sbicaps.com
____________________________________________
A Subsidiary of State Bank of India
July 2009
Strictly Private and Confidential
IMPORTANT NOTICE
This Financial Information Memorandum (‘FIM’) is strictly confidential and accordingly,
this FIM and its contents are on the basis that they will be held in and with complete
confidentiality. By accepting a copy of this FIM, the recipient agrees to keep its contents and
any other information, which is disclosed to such recipient, confidential and shall not
divulge, distribute or disseminate any information contained herein, in part or in full, without
the prior written approval of SBI Capital Markets Limited (“SBICAP”). The recipient also
agrees to indemnify SBICAP against any claims that may arise as a result of a breach of any
confidentiality arrangement, which governs the contents of this FIM.
This FIM has been prepared for the internal use of prospective lenders of GSPC Gas
Company Limited (“GSPC Gas” or “The Company”) on the basis of information provided
by the Company. This FIM has been prepared by SBICAP, inter alia on the basis of the
information and documents available in the public domain, data made available by the
Company and in-house databases available to SBICAP as a part of its professional practice
and, which SBICAP believes to be reliable. SBICAP has not carried out any independent
verification for the accuracy or truthfulness of the same.
This FIM constitutes an opinion expressed by SBICAP and each party concerned has to draw
its own conclusions on making independent enquiries and verifications and SBICAP cannot
be held liable for any financial loss incurred by anyone based on this report. Further, on
accepting a copy this FIM , the recipient accepts the terms of this Notice, which forms an
integral part of this and the recipient shall be deemed to have agreed to indemnify SBICAP
against any claims that may be raised against SBICAP as a result of or in connection with
the data and opinions presented in this FIM .
The delivery of this FIM at any time does not imply that the information in it is correct as of
any time after the date set out on the cover page hereof, or that there has been no change in
the operation, financial condition, prospects, creditworthiness, status or affairs of the subject
or anyone else since that date. Further, capital costs and operating expenditures are subject
to uncertainties concerning the effects that changes in legislation or economic or other
circumstances may have on future events, and different people may have a different view in
future. There will usually be differences between projected and actual results because events
and circumstances do not occur as expected, and those differences may be material. Under
the circumstances, no assurance can be provided that the assumptions or data upon which
any projections have been based are accurate or whether these business-plan projections will
actually materialize.
Financial Information Memorandum – GSPC Gas Limited ii

Neither SBICAP, nor State Bank of India or any of its associates, nor any of their respective
directors, employees or advisors make any expressed or implied representation or warranty
and no responsibility or liability is accepted by any of them with respect to the accuracy,
completeness or reasonableness of the facts, opinions, estimates, forecasts, projections, or
other information set forth in this FIM or the underlying assumptions on which they are
based or the accuracy of any computer model used and nothing contained herein is, or shall
be relied upon as a promise or representation regarding the historic or current position or
performance of the Company, or any future events or performance of the Company.
This FIM is divided into sections & sub-sections only for the purpose of reading convenience.
Any partial reading of this FIM may lead to inferences, which may be at divergence with the
conclusions and opinions based on the entirety of this report.
Neither this Report, nor the information contained herein, may be reproduced or passed to
any person or used for any purpose other than stated above.
Financial Information Memorandum – GSPC Gas Limited iii

CONTACTS
Requests may be addressed to:
SBI CAPITAL MARKETS LIMITED

202, Maker Tower ‘E’, Cuffe Parade, Mumbai 400 005
Tel: (022) 22178300
Fax: (022) 22160379
www.sbicaps.com
For the attention of:

Mr. Rajesh Agarwal
Vice President, Project Advisory & Structured Finance
Tel: (022) 22178513
Mob: 9987042706
Fax: (022) 22160379
Email: rajesh.agarwal@sbicaps.com
Mr. Saiprasad Modi

Manager, Project Advisory & Structured Finance
Tel: (022) 22178523
Mob: 9820591603
Fax: (022) 22160379
Email: saiprasad.modi@sbicaps.com
Mr. Sumit Snghvi

Manager, Project Advisory & Structured Finance
Tel: (022) 22178507
Mob: 9920071811
Fax: (022) 22160379
Email: sumit.singhvi@sbicaps.com
Mr. Aditya Godbole

Dy., Manager, Project Advisory & Structured Finance
Tel: (022) 22178498
Mob: 9920207430
Fax: (022) 22160379
Email: aditya.godbole@sbicaps.com
Financial Information Memorandum – GSPC Gas Limited iv

CONTENTS
1. EXECUTIVE SUMMARY....................................................................................1
1.1. INTRODUCTION......................................................................................................1
1.2. THE COMPANY.......................................................................................................1
1.2.1. Past Financials...................................................................................................................2
1.3. THE PROMOTERS...................................................................................................3
1.3.1. Gujarat State Petroleum Corporation Limited...................................................................3
1.3.2. Gujarat State Petronet Limited...........................................................................................4
1.4. THE PROJECT.........................................................................................................5
1.5. PROJECT COST.......................................................................................................6
1.6. MEANS OF FINANCE..............................................................................................7
1.7. PROFITABILITY PROJECTIONS................................................................................7
1.8. SENSITIVITY ANALYSIS..........................................................................................9
2. INTRODUCTION..............................................................................................10
3. THE COMPANY................................................................................................12
3.1. BACKGROUND.....................................................................................................12
3.2. CAPITAL STRUCTURE...........................................................................................12
3.3. SHAREHOLDING PATTERN....................................................................................13
3.4. PAST FINANCIALS................................................................................................13
3.4.1. Summary of Profit & Loss Accounts...............................................................................13
3.4.2. Summary of Balance Sheet..............................................................................................14
3.5. EXISTING BORROWING DETAILS.........................................................................15
3.6. BOARD OF DIRECTORS........................................................................................15
3.6.1. Director Profiles...............................................................................................................16
3.7. MANAGEMENT.....................................................................................................17
3.8. ORGANIZATION STRUCTURE................................................................................18
4. PROMOTERS....................................................................................................19
4.1. GSPC LTD...........................................................................................................19
4.1.1. Background......................................................................................................................19
4.1.2. Board of Directors of GSPC............................................................................................20
4.1.3. Capital Structure & Shareholding Pattern........................................................................21
4.1.4. Past Financials.................................................................................................................21
4.2. GUJARAT STATE PETRONET LIMITED...................................................................22
4.2.1. Capital Structure & Shareholding Pattern........................................................................23
4.2.2. Past Financials.................................................................................................................24
4.3. GROUP COMPANIES OF GSPC.............................................................................25
4.3.1. Gujarat State Energy Generation Limited (GSEG).........................................................25
4.3.2. GSPC LNG Limited (GSPC LNG)..................................................................................26
4.3.3. GSPC Pipavav Power Company Limited (GPPCL)........................................................26
5. THE GAS DISTRIBUTION MARKET...........................................................27
5.1. GLOBAL NATURAL GAS INDUSTRY.....................................................................27
5.2. GLOBAL NATURAL GAS CONSUMPTION..............................................................27
5.2.1. Global Natural Gas Supply..............................................................................................28
5.3. INDIAN NATURAL GAS INDUSTRY.......................................................................29
5.3.1. Domestic Gas Demand....................................................................................................29
5.3.2. Domestic Gas Supply.......................................................................................................30
5.3.3. Natural Gas Market in Gujarat.........................................................................................31
Financial Information Memorandum – GSPC Gas Limited v

5.4. GAS INFRASTRUCTURE......................................................................................32

5.5. CITY GAS DISTRIBUTION IN INDIA......................................................................33
5.6. DEMAND DRIVERS FOR CGD NETWORKS...........................................................34
5.7. KEY MARKET PLAYERS.......................................................................................35
5.7.1. Gujarat Gas Company Limited........................................................................................35
5.7.2. Mahanagar Gas Limited...................................................................................................35
5.7.3. Indraprastha Gas Limited.................................................................................................35
5.7.4. Green Gas Limited...........................................................................................................36
5.7.5. Sabarmati Gas Company Limited....................................................................................36
5.7.6. Central UP Gas Limited...................................................................................................36
6. MARKET STUDY FOR THE PROJECT.......................................................37
6.1. INDUSTRIAL DEMAND.........................................................................................37
6.2. DOMESTIC DEMAND............................................................................................38
6.3. COMMERCIAL DEMAND.......................................................................................39
6.4. CNG DEMAND.....................................................................................................40
6.5. SUPPLY OF NATURAL GAS...................................................................................42
6.6. TRANSMISSION OF NATURAL GAS.......................................................................43
6.7. PRICING OF NATURAL GAS..................................................................................43
7. PROJECT...........................................................................................................46
7.1. MASTER PLAN OVERVIEW...................................................................................46
7.2. PROJECT SYNOPSIS..............................................................................................46
7.3. CAPITAL EXPENDITURE PLAN.............................................................................48
7.3.1. City Gate Stations (CGS).................................................................................................49
7.3.2. Steel Network..................................................................................................................49
7.3.3. Polyethylene Network......................................................................................................50
7.3.4. District Regulating Stations (DRS)..................................................................................51
7.3.5. Domestic PNG Connections............................................................................................51
7.3.6. Metering and Regulating Stations (MRS).......................................................................51
7.3.7. CNG Stations...................................................................................................................52
7.3.8. Other Facilities.................................................................................................................52
8. PROJECT IMPLEMENTATION.....................................................................53
8.1. PROJECT MANAGEMENT......................................................................................53
8.2. PNGRB STATUS..................................................................................................53
9. PROJECT COST...............................................................................................55
9.1. OVERVIEW...........................................................................................................55
9.2. STEEL NETWORK.................................................................................................56
9.3. POLYETHYLENE NETWORK.................................................................................56
9.4. SERVICE REGULATORS.........................................................................................56
9.5. ODORISATION UNIT.............................................................................................56
9.6. DOMESTIC PNG CONNECTION COST AND MRS..................................................57
9.7. PRESSURE REGULATING SYSTEMS.......................................................................57
9.7.1. District Regulating Stations (DRS)..................................................................................57
9.7.2. Meter Regulating Station (MRS).....................................................................................57
9.7.3. Central Pressure Regulating System................................................................................57
9.8. CNG STATIONS....................................................................................................57
9.9. CONTINGENCY.....................................................................................................58
9.10. INFLATION & ESCALATION..................................................................................58
9.11. IDC & FINANCING CHARGES..............................................................................58
9.12. MARGIN MONEY.................................................................................................58
Financial Information Memorandum – GSPC Gas Limited vi

10. MEANS OF FINANCE......................................................................................60

10.1. OVERVIEW.........................................................................................................60
10.2. EQUITY FINANCING.............................................................................................60
10.3. DEBT FINANCING.................................................................................................60
11. FINANCIAL ANALYSIS...................................................................................61
11.1. PROFITABILITY PARAMETERS..............................................................................62
11.2. SENSITIVITY ANALYSIS........................................................................................62
12. SWOT ANALYSIS.............................................................................................64
12.1. STRENGTHS..........................................................................................................64
12.2. WEAKNESSES.......................................................................................................65
12.3. OPPORTUNITIES...................................................................................................65
12.4. THREATS..............................................................................................................65
13. RISK ANALYSIS – ALLOCATION & MITIGATION..................................66
14. TERM SHEET FOR RUPEE TERM LOAN..................................................71
15. ANNEXURES.....................................................................................................77
15.1. ANNEXURE I- P&L ACCOUNT.............................................................................77
15.2. ANNEXURE II- BALANCE SHEET.........................................................................78
15.3. ANNEXURE III - ASSUMPTIONS...........................................................................79
15.4. ANNEXURE IV – PROJECTED FINANCIALS...........................................................83
15.4.1. Projected Profit and Loss Account..............................................................................83
15.4.2. Projected Cash Flow Statement..................................................................................84
15.4.3. Projected Balance Sheet..............................................................................................85
15.4.4. DSCR Calculations.....................................................................................................86
Financial Information Memorandum – GSPC Gas Limited vii

LIST OF TABLES
TABLE 1: COMPANY DETAILS....................................................................................................12
TABLE 2: CAPITAL STRUCTURE AS ON MARCH 31, 2009.........................................................12
TABLE 3: GSPC GAS - SHAREHOLDING PATTERN....................................................................13
TABLE 4: GSPC GAS - SUMMARY OF P&L..............................................................................13
TABLE 5: GSPC GAS - SUMMARY OF BALANCE SHEETS.........................................................14
TABLE 6: CURRENT SANCTIONED FACILITY AS ON MARCH 31, 2009......................................15
TABLE 7: BOARD OF DIRECTORS..............................................................................................15
TABLE 8: GSPC’S BOARD OF DIRECTORS................................................................................20
TABLE 9: SUMMARY OF PROFIT AND LOSS ACCOUNT OF GSPC..............................................21
TABLE 10: SUMMARY OF BALANCE SHEET OF GSPC..............................................................22
TABLE 11: SHAREHOLDING PATTERN OF GSPL........................................................................23
TABLE 12: SUMMARY OF P&L ACCOUNT.................................................................................24
TABLE 13: SUMMARY OF BALANCE SHEET...............................................................................24
TABLE 14: SUMMARY OF P&L ACCOUNT.................................................................................25
TABLE 15: NATURAL GAS CONSUMPTION................................................................................27
TABLE 16: GLOBAL NATURAL GAS RESERVES.........................................................................28
TABLE 17 : MAJOR GAS PRODUCING NATIONS (BCM)..............................................................29
TABLE 18: PROJECTED SECTOR WISE GAS DEMAND (MMSCMD).........................................30
TABLE 19: DOMESTIC GAS SUPPLY...........................................................................................30
TABLE 20: PROJECTED DEMAND SUPPLY SCENARIO FOR NATURAL GAS................................31
TABLE 21: PROJECTED LNG CAPACITY IN INDIA....................................................................31
TABLE 22: PROJECTED GAS DEMAND SCENARIO IN GUJARAT................................................32
TABLE 23: INDUSTRIAL DEMAND GROWTH RATES..................................................................37
TABLE 24: DEMAND PROJECTIONS FOR THE SELECTED LOCATIONS (MMSCMD)..................37
TABLE 25: REALIZABLE DEMAND PROJECTIONS - INDUSTRIAL (SCMD)................................38
TABLE 26: TOTAL GAS DEMAND FROM HOUSEHOLD SEGMENTS (IN MMSCMD)..................39
TABLE 27: REALIZABLE DEMAND PROJECTIONS - DOMESTIC (MMSCMD)............................39
TABLE 28: TOTAL DEMAND PROJECTIONS - COMMERCIAL (MMSCMD)................................40
TABLE 29: REALIZABLE DEMAND PROJECTIONS - COMMERCIAL (MMSCMD)......................40
TABLE 30: HISTORICAL GROWTH RATES AND PENETRATION RATES........................................40
TABLE 31: TOTAL GAS DEMAND FROM TRANSPORT SEGMENT (IN MMSCMD)......................41
TABLE 32: REALIZABLE DEMAND PROJECTIONS - TRANSPORTATION (MMSCMD)................41
TABLE 33: SUMMARY OF TOTAL DEMAND PROJECTIONS (MMSCMD)...................................42
TABLE 34: SUMMARY OF REALISABLE DEMAND PROJECTIONS (MMSCMD).........................42
TABLE 35: PRICING OF LPG EQUIVALENT PNG........................................................................44
TABLE 36: PRICING OF AUTO-FUEL EQUIVALENT CNG.............................................................44
TABLE 37: PRICING OF FUEL OIL ON ENERGY EQUIVALENCE BASIS.......................................45
TABLE 38: PROJECT FACILITIES................................................................................................48
TABLE 39: LOCATION OF MRS.................................................................................................52
TABLE 40: PROJECT COST SUMMARY.......................................................................................55
TABLE 41: UNIT COST OF STEEL PIPELINE................................................................................56
TABLE 42: PE NETWORK COST..................................................................................................56
TABLE 43: COST BREAK-UP OF MOTHER CNG STATIONS........................................................58
TABLE 44: COST BREAK-UP OF MOTHER CNG STATIONS........................................................58
TABLE 45: MEANS OF FINANCE................................................................................................60
TABLE 46: GAS PURCHASE AND SALES PRICES........................................................................61
TABLE 47: SALES VOLUMES.....................................................................................................61
TABLE 48: PROFIT & LOSS ACCOUNT.......................................................................................62
TABLE 49: PROFITABILITY PARAMETERS..................................................................................62
TABLE 50: RESULTS OF SENSITIVITY ANALYSIS.......................................................................63
Financial Information Memorandum – GSPC Gas Limited viii

LIST OF FIGURES
FIGURE 1: GSPC GAS – ORGANIZATION STRUCTURE...............................................................18

FIGURE 2: GAS NETWORK OF GSPL.........................................................................................23
FIGURE 3: GAS TRANSPORTATION NETWORK IN INDIA.............................................................33
Figure 4: GSPL’s Gas Grid.....................................................................................................47
Financial Information Memorandum – GSPC Gas Limited ix

ABBREVIATIONS
Abbreviation Long-form
BHEL Bharat Heavy Electricals Ltd.
BPCL Bharat Petroleum Corporation Limited
CGD City Gas Distribution
CGS City Gate Stations
CNG Compressed Natural Gas
CPRS. Central Pressure Regulating System
CWIP Current Work in Progress
DGH Directorate General of Hydrocarbon
DRS District Regulatory Stations
DRS District Regulating Stations
DSCR Debt Service Coverage Ratio
DSRA Debt Service Reserve Account
E&P Exploration & Production
EIA Energy Information Administration
EPC Engineering Procurement & Construction
FO Furnace Oil
GAIL Gas Authority of India Limited
GBA Gas Balancing Agreement
GGCL Gujarat Gas Company Limited
GI. Galvanized Iron
GPPCL GSPC Pipavav Power Company Limited
GSEG Gujarat State Energy Generation Ltd
GSPC GSPC Gas Company Limited
GSPC LNG GSPC LNG Limited
GSPL Gujarat State Petronet Limited
GUVNL Gujarat Urja Vikas Nigam Limited
HBJ Hazira Bijaipur Jadishpur
IDC Interest during Construction
IGL Indraprastha Gas Limited
IPO Initial Public Offer
JV Joint Venture
KG Block KG Basin block KG-OSN- 2001/3
LDO Light Diesel Oil
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas
LSHS Low Sulphur Heavy Stock
LSHS Low Sulphur High Stock
LSTK Lump Sum Turnkey
MGL Mahanagar Gas Limited
mmbtu Million British Thermal Unit
mmcal Million Calorie
mmscm Million Metric Standard Cubic Meter
mmscmd/MMSCMD Million Metric Standard Cubic Meter Day
MoPNG Ministry of Petroleum & Natural Gas
MRS Meter Regulating Stations
MW Mega Watt
NG Natural Gas
OD Outer Diameter
Financial Information Memorandum – GSPC Gas Limited x

ONGC Oil and Natural Gas Corporation

PE Polyethylene
PLL Petronet LNG Limited
PMT Panna Mukta Tapti
PNG Piped Natural Gas
RIL Reliance Industries Limited
RTL Rupee Term Loans
SBICAP SBI Capital Markets Limited
SCADA Supervisory Control and Data Acquisition
SCMD Standard Cubic Meter Day
TRA Trust & Retention Account
VAT Value Added Tax
Financial Information Memorandum – GSPC Gas Limited xi

1. EXECUTIVE SUMMARY
1.1. Introduction
GSPC Gas Company Limited (“GSPC Gas” or “the Company”) a subsidiary of Gujarat State
Petroleum Corporation (“GSPC”) has been established to retail natural gas by setting up of natural
gas distribution networks at various locations in Gujarat. The Company operates at more than 25
locations spanning South Gujarat, Central Gujarat and Saurashtra, supplying about 1.71 mmscmd of
gas to 44170 domestic, 231 commercial and 491 industrial customers. The Company’s present
infrastructure includes 202 km of steel pipeline network, 1893 km of Polyethylene (PE) pipeline
network and it has commissioned 18 mother CNG stations and 5 daughter CNG stations.
Increasing industrialization and urbanization in Gujarat has resulted in gas demand growing at 8-
10%. To tap this opportunity GSPC Gas proposes to develop a pan-Gujarat City Gas Distribution
(CGD) network. This would enable the Company to meet the current and future needs of Piped
Natural Gas (PNG) requirements for industrial, commercial, transportation and residential
segments.
As part of the current Project, the Company plans to expand in its existing areas of operation in the
next 2 years by setting up domestic and industrial PNG network and CNG stations. As a part of this
expansion, the Company will be laying 452 km of steel pipeline network, 3853 km of
Polyethylene (PE) pipe network and set up 70 district regulatory stations (DRS). The Company is
also planning to set up 67 CNG stations and 4 Central Pressure Regulating System (CPRS).
The estimated cost of the Project is Rs.1199.30 Crore, which will be financed in a debt- equity ratio
of 2.33:1 i.e. debt of Rs. 839.15 Crore and equity of Rs. 360.15 Crore. The debt required for the
Project would be primarily raised through Rupee Term Loans (RTL) and equity required for the
Project would be funded out of cash accruals of the Company and/or fresh equity infusion and/or
Initial Public Offer (IPO) by the Company
1.2. The Company
GSPC Gas Company Limited was incorporated on March 11, 1999 under the Companies Act as
Gujarat State Fuel Management Company Limited. Initially, it was engaged in providing a range of
commercial, technical and legal advisory services for efficient and economic management of fuels
in the state of Gujarat. The Company’s name was changed to GSPC Gas Company Limited in
Financial Information Memorandum – GSPC Gas Limited 1

December 2005 to reflect the change in its business objective. The Company is now focused upon
developing retail gas business including the development of CGD networks across Gujarat. As on
March 31, 2009, the Company’s authorized share capital was Rs.100 Crore comprising of 10 Crore
equity shares of Rs.10/- each and it’s paid up share capital was Rs.59.20 Crore, comprising 5.921
Crore equity shares of Rs 10/- each. The shareholding pattern of GSPC Gas as on March 31st 2009
is indicated in the following table.
Rs. Crore
Shareholder Paid Up % holding
Gujarat State Petroleum Corporation Limited Capital
36.69 61.97%
Gujarat State Petronet Limited 21.66 36.59%
Other Government of Gujarat Companies and Others 0.85 1.44%
Total 59.20 100.00%
1.2.1. Past Financials
A brief summary of the financials of GSPC Gas for the last 3 years ended March 31st 2009 is given
in the following table
Rs Crore
Summary of P&L Account
Period Ended March 31 2007 2008 2009*
Natural Gas sales qty (MMSCM) 12.5 180.76 447.19
Total Income 44.43 345.25 878.86
PBDIT 3.52 70.88 150.55
PBT -3.37 56.14 111.11
PAT -4.54 37.2 75.43
Cash Profit 3.43 47.81 105.37
Summary of Balance Sheet
As on 31st March 2,007 2,008 2,009
Sources of Funds
Share Capital 1.09 59.21 69.21*
Net Worth 74.37 128.86 227.43
Secured Term Loans 62.37 139.50 281.17
Total Liabilities 137.93 270.39 530.95
Application of Funds
Gross Block 110.32 209.83 377.25
Accumulated Depreciation 13.70 16.91 36.85
Net Block (Incl. CWIP) 132.23 293.33 499.66
Net Current Assets (1.53) (23.12) 31.11
Total Uses of Funds 137.93 270.39 530.95
D/E Ratio 0.83 1.07 1.31
* Provisional

During FY 2008-09, the Company achieved natural gas sale of Rs.841 Crore as against natural gas
sale of Rs.323 Crore in FY 2008 i.e. an increase of 160% over the previous year. Also during FY
2008-09 its net profit was Rs.75.43 Crore as against Rs.37.20 Crore during FY 2008 i.e. increase of
119% over the previous year. This growth in turnover and net profit was mainly on account creation
of infrastructure that helped the Company to achieve higher sales volume i.e. 447.19 mmscm during
FY 2009 as against 180.76 mmscm during FY 2008. The brief past financials of the Company are
given in following table.
As given above, the Company’s net worth was Rs 227.43 Crore in as on 31 st March ’09 against Rs
128.86 Crore as on March 31, 2008. The debt to equity ratio and current ration of the Company was
comfortable at 1.31 as on March 31, 2009.
1.3. The Promoters
1.3.1. Gujarat State Petroleum Corporation Limited
Gujarat State Petroleum Corporation Limited (GSPC) is one of the major oil and gas company in
India with a significant presence in the state of Gujarat. It is present across the complete energy
value chain involving exploration & production (E&P) of oil and gas, transmission, distribution,
power generation and petrochemicals. The company primarily operates in two business segments:
viz. Petroleum Upstream Business and Gas Marketing Business
The company holds participating interest in 61 E&P blocks including 12 overseas blocks.
GSPC has made significant oil and gas discoveries in the various blocks including its most
successful KG Basin discovery. At present 13 out of 49 blocks domestic blocks of company are in
production and in addition its Tarapur and Sanand Miroli blocks are expected to start production in
current financial year.
Presently Government of Gujarat (GoG) holds 95% equity of the company and remaining equity is
held by other GoG companies. GSPC is the second largest gas marketing company in India and it
traded about 98.3 mmbtu of gas during FY 2007-08.
A brief summary of the financials of GSPC for the last 3 years ended March 31st 2008 is indicated
in the following table.
(Rs. Crore)


Period Ended March 31 2006 2007 2008
Total Income 1,775.87 2,651.94 4,145.49
EBITA 420.20 408.63 764.00
PAT 281.39 227.17 405.76
As on 31st March 2,006 2,007 2,008
Share Capital 105.61 105.61 105.61
Net worth 1,281.32 1,484.03 1,864.42
Debt 270.00 839.79 2,186.91
Total Sources 1,553.49 2,323.95 4,052.65
Gross Block 895.49 966.49 1,067.42

Net Block 1268.87 2031.55 3660.65
Investments 286.83 285.52 381.39
Total Application 1,553.49 2,323.95 4,052.65
During FY 2008, the company achieved sales turnover of Rs. 4145.49 crore as against Rs. 2651.94
crore in FY 2006-07 i.e. increase of 56.3%. The Company earned a net profit Rs. 405.76 crore in
FY 2008 as against net profit of Rs. 227.17 crore in FY 2007 i.e. an increase of 78% over the
previous year. The Company’s sales turnover & net profit for FY 2009 is estimated to be Rs. 5800
crore and a corresponding net profit of Rs. 450 crore. The net worth of the company has increased
from Rs. 1484.03 Crore in FY 2007 to Rs. 1864.42 crore in FY 2008
1.3.2. Gujarat State Petronet Limited
Gujarat State Petronet Limited (GSPL), a subsidiary of GSPC is in the business of natural gas
transmission and owns the second largest natural gas network in India. GoG directly hold about
37.8% equity of the company and remaining equity is held by other GoG bodies (11.02%), Private
Corporate bodies (7.67%), Public (15.6%) and banks and FII’s.
GSPL currently owns and operate 1370 km of gas pipeline network covering 14 districts in Gujarat
and has more than 50% share of gas transmission business in Gujarat. The company plans to
expand its network to 2500 kms in next 3 years. Its network is connected with the HBJ pipeline of
GAIL, gas producers in the state and both operating LNG terminals of Petronet LNG at Dahej and
Shell at Hazira and would be connected to Reliance’s East West Pipeline thus giving it access to
national gas grid. A brief summary GSPL’s past financials is given in the following table.
(Rs crore)


Period Ended March 31 2006 2007 2008
Total Income 267.93 335.02 447.28
EBITA 198.62 285.18 393.86
Depreciation 79.06 102.61 163.22
Tax 41.21 45.65 81.51
PAT 46.68 89.38 99.92
Balance Sheet Summary
As on March 31 2006 2007 2008
Share Capital 542.24 542.8 562.01
Net worth 907.5 965.91 1,140.96
Loans 578.62 863.84 966.04
Net Block 759.99 1,566.09 1,537.13
CWIP 605.07 136.78 588.79
Net Current Assets 159.58 209.25 39.07
The company’s networth increased from Rs 965.91 crore in FY 2006-07 to Rs 1140.96 crore in FY
2007-08. The company achieved a turnover of Rs.447.28 crore in FY 2008 as against Rs. 335.02
crore in FY 2007 i.e. an increase of 33.5% and earned a net profit of Rs. 99.92 crore in FY 2008 as
against Rs. 89.38 crore in FY 2007. Post expansion of pipeline network and availability of RIL gas
for transportation, the revenue is expected to increase substantially in near future.
1.4. The Project
The increasing industrialization, vehicle population and urbanization clubbed with improved
availability of gas and rising alternate fuel prices have created new opportunities in downstream gas
business. To tap the new opportunities GSPC Gas wants to expand its network to have a pan-
Gujarat presence. Gujarat is presently the most developed gas market in the country representing
more than 42% of India’s total gas consumption. The gas demand in Gujarat is expected to grow at
a CAGR of 6%. Thus for meeting above demand GSPC Gas would be expanding its network and it
has prepared a master plan for the same.
As a part of its master plan, during next 2 years the Company plans to lay 452 km of steel pipeline
network, 3853 km of Polyethylene (PE) pipe network along with setting up of 70 District
Regulatory Stations (DRS), 67 CNG stations and 4 Central Pressure Regulating System (CPRS). A
brief of the project facilities proposed to be set-up by the Company is given the following table:

Facility Unit
Steel Network 452 km
Steel Pipes – Industrial (8”) 448 km
Steel Pipes - 4” 4 km
PE Network
PE Pipes 3,853 km
PE Network Valves 497 units
Other Infrastructure
DRS 70 units
Odorization Unit 4 units
Domestic PNG Connections 302,993 nos
MRS 528 units
CNG Stations 67
Mother CNG Stations 27
Daughter CNG Stations 40
1.5. Project Cost
The Total Project Cost is estimated to be Rs 1199.30 crore comprising of hard cost of Rs. 1129.16
Crore and soft cost of Rs 70.14 Crore. A summary of the Project cost is given in the following table:
Item Cost (Rs. Cr.)

Steel Pipes - 4" and 8" 349.85
PE Network 229.27
Service Regulators 14.88
DRS 11.67
Odorization Unit 1.15
Domestic PNG 219.65
MRS 31.68
CNG Stations 138.93
Central Pressure Regulating System (CPRS) 6.60
Core Cost 1,003.68
Contingency 50.18
Inflation Adjustment 75.30
Hard Costs 1,129.16
Margin Money 37.50
Financing Charges 2.78
IDC 29.86
Total Soft Costs 70.14
Total Project Cost 1,199.30

1.6. Means of Finance
The Project Cost of Rs 1,199.30 is proposed to be funded by mix of debt and equity in the ratio of
2.33:1 i.e. debt of Rs 839.15 crore and equity of Rs.360.15 crore.
The debt requirement of Rs 836.15 crore would be primarily raised through Rupee Term Loans
(RTL). The door to door tenor for RTL would be 10 years comprising of drawdown period of 2
years, moratorium period of 1 year and repayment period of 7 years. The rate of interest applicable
for the Facility shall be floating linked to respective bank PLR with a negative spread to have an
effective rate of interest of 10.0% p.a. The spread so arrived will remain constant through out the
loan tenor.
The total equity requirement for the project has been estimated at Rs. 360.15 Crore. The Company
is expected to generate cash profits in the range of Rs.330 crores in next 24 months in addition to
cash accruals of Rs.105 crore in FY 2009. The Company is also planning to come out with an IPO
in near future. As such the equity contribution for the project would consist of contributions from
the promoters, internal generations and/or IPO proceeds.
1.7. Profitability Projections
Profitability projections for the Company have been made for next 15 years. The key assumptions
taken for profitability projections are as follows:
 Gas purchase price: Rs 11.25/scm (USD 7/ mmbtu)
 Gas Sale Price
Customer Segment Selling Price - Rs/scm

Domestic 12.50
Commercial 18.00
CNG 21.70
Industrial 15.75
 Gas Sale Volumes (mmscmd)
FY 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Domestic 0.03 0.04 0.06 0.06 0.07 0.07 0.07 0.08 0.08 0.09 0.09
Commercial 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
CNG 0.20 0.25 0.33 0.36 0.38 0.40 0.42 0.44 0.46 0.49 0.51

Industrial 2.17 2.83 3.67 4.04 4.24 4.45 4.68 4.91 5.16 5.41 5.68
Total 2.41 3.13 4.07 4.47 4.70 4.93 5.18 5.44 5.71 6.00 6.30
 In addition the gas transportation charges are based on existing transportation

charges payable to GSPL and operating expenses are based on the actual expenses for the year.
Based on above key financial projections, a summary of profitability projection is as follows :
Rs Cr.
FY 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Gas Sales -mmscmd 2.41 3.13 4.07 4.47 4.70 4.93 5.18 5.44 5.71 6.00 6.30
Revenues
Domestic 15.4 20.0 26.0 28.6 30.0 31.5 33.1 34.8 36.5 38.3 40.3
Commercial 2.3 3.0 3.9 4.3 4.5 4.8 5.0 5.3 5.5 5.8 6.1
CNG 98.8 128.4 167.0 183.7 192.8 202.5 212.6 223.2 234.4 246.1 258.4
Industrial 1,219.9 1,585.9 2,061.7 2,267.9 2,381.3 2,500.3 2,625.3 2,756.6 2,894.4 3,039.2 3,191.1
Total Income 1,336.4 1,737.4 2,258.6 2,484.5 2,608.7 2,739.1 2,876.1 3,019.9 3,170.9 3,329.4 3,495.9
Expenses
Gas Purchase Cost 984.5 1,279.8 1,663.7 1,830.1 1,921.6 2,017.7 2,118.6 2,224.5 2,335.7 2,452.5 2,575.1
Gas Transportation
122.5 159.3 207.1 227.8 239.1 251.1 263.7 276.8 290.7 305.2 320.5
Charge
Operating &
8.6 13.5 17.0 17.9 18.7 19.7 20.7 21.7 22.8 23.9 25.1
Maintenance Exp.
Other Expenses 28.9 35.4 43.5 47.8 50.9 54.3 58.2 62.3 66.8 71.8 77.1
Total Expenses 1,144.5 1,487.9 1,931.2 2,123.6 2,230.4 2,342.9 2,461.1 2,585.4 2,716.0 2,853.4 2,997.8
EBIDTA 192.0 249.4 327.4 360.9 378.3 396.2 415.0 434.5 454.8 476.0 498.0
Total Interest 26.4 49.2 96.2 98.1 82.3 69.7 60.4 48.9 35.8 21.7 9.5
PBDT 165.6 200.3 231.2 262.8 296.0 326.5 354.6 385.6 419.1 454.3 488.6
Depreciation 26.9 48.9 73.4 82.3 83.3 86.0 88.6 91.3 93.9 96.5 99.2
PBT 138.7 151.4 157.8 180.5 212.6 240.5 266.0 294.3 325.2 357.8 389.4
Current Tax 23.6 25.7 26.8 30.7 36.1 40.9 45.2 50.0 105.5 126.3 139.7
Deferred Tax
23.6 25.7 26.8 30.7 36.1 40.9 45.2 50.0 5.0 (4.7) (7.3)
Liability / (Assets)
PAT 91.6 99.9 104.2 119.1 140.4 158.8 175.6 194.3 214.6 236.2 257.0
 The main profitability parameters of the project are given in the following table:
S. No. Parameters Results

1 Project IRR 25.09%
2 Average DSCR 2.09
3 Minimum DSCR 1.46
1.8. Sensitivity Analysis
Sensitivity analysis has been carried out to assess the impact of change in revenues, project cost and
operating costs on the profitability parameters on the Project cash flows. Different scenarios taken
for sensitivity analysis and the results thereof are summarized in the following table:

Scenario Avg. DSCR Min DSCR Project IRR

Base Case 2.09 1.46 25.09%
1. Cost Overrun (10%) 1.96 1.39 23.24%
2. Increasing in operating cost (10%) 2.05 1.44 24.50%
3. Decrease in Margin (5%) 1.99 1.39 23.38%

2. INTRODUCTION
GSPC Gas Company Limited (‘GSPC Gas’ or ‘the Company) a subsidiary of Gujarat State
Petroleum Corporation (“GSPC”) has been established to retail natural gas by setting up of natural
gas distribution networks at various locations in Gujarat. The Company presently has city gas
distribution infrastructure and operations in more than 25 locations spanning South Gujarat, Central
Gujarat and Saurashtra. As on date, the Company has laid 202 km of steel pipeline network, 1893
km of Polyethylene (PE) pipeline network and has commissioned 18 mother CNG stations and 5
daughter CNG stations. The Company is currently supplying about 1.71 mmscmd of gas to 44170
domestic customers, 231 commercial customers and 491 industrial customers.
Gujarat contributes to around 42% of the total gas demand in India, i.e. 56 mmscmd of gas, largely
due to the availability of gas and development of infrastructure for gas transmission. The demand
for gas is growing at 8-10% p.a. in the state and to meet this large demand, GSPC Gas proposes to
develop a pan-Gujarat City Gas Distribution (CGD) network to cater to the current and future needs
of Piped Natural Gas (PNG) of industrial, commercial, transportation and residential segments. In
order to cater to this huge expected demand, the Company has prepared a Master Plan to expand the
existing gas distribution network over the next 5 years. As per the master plan the company
proposes to provide PNG connectivity to at least 2 million households besides commercial
establishment / industrial units and setting up of 300 CNG stations to cater to the needs of
transportation sector.
The Company has identified 34 locations in different parts of Gujarat including 25 locations where
it is currently operating, for expanding its business. These locations have been categorized into 10
regions and the Company has applied to PNGRB for approval for its City Gas Distribution business
in 10 different regions covering the existing and proposed business locations of the Company. The
Company is catering to various consumers in the industrial, domestic and commercial segments in
these locations. The Company also has a CNG retail network in these areas. The Company plans to
expand the existing network and lay new CGD network in the next few years.
As part of the current Project, the Company plans to expand in its existing areas of operation in the
next 2 years by setting up domestic and industrial PNG network and CNG stations. As a part of this
expansion, the Company will be laying 452 km of steel pipeline network, 3853 km of

Polyethylene (PE) pipe network and set up 70 district regulatory stations (DRS). The Company is
also planning to set up 67 CNG stations and 4 Central Pressure Regulating System (CPRS).
The estimated cost of the Project is Rs.1199.30 Crore, which will be financed in a debt- equity ratio
of 2.33:1 i.e. debt of Rs. 839.15 Crore and equity of Rs. 360.15 Crore. The debt required for the
Project would be primarily raised through Rupee Term Loans (RTL) and equity required for the
Project would be funded out of cash accruals of the Company and/or fresh equity infusion and/or
Initial Public Offer (IPO) by the Company.

3. THE COMPANY
3.1. Background
GSPC Gas Company Limited was incorporated on March 11, 1999 under the Companies Act as
Gujarat State Fuel Management Company Limited. Initially, it was engaged in providing a range of
commercial, technical and legal advisory services for efficient and economic management of fuels
in the state of Gujarat. The Company’s name was changed to GSPC Gas Company Limited in
December 2005 to reflect the change in its business objective. The incorporation details of GSPC
Gas are as follows:
Table 1: Company Details

Name GSPC Gas Company Ltd.
Corporate Office 101-106, 1st Floor, IT Tower-1, Infocity, Gandhinagar,
Gujarat-382009
Registered Office 3rd Floor, Block No 15, Udyog Bhavan, Sector -11,
Gandhinagar, Gujarat -382016
Date of Incorporation March 11, 1999
Date of Commencement of Business April 7th, 1999
The Company is now focused upon developing retail gas business including the development of
CGD networks across Gujarat. The company already has CGD network in 25 different locations
mainly in South Gujarat, Saurashtra and Central Gujarat. The Company is presently supplying
about 1.71 mmscmd of gas to more than 44170 domestic customers, 231 commercial customers and
491 industrial customers in the state of Gujarat. The Company is supplying gas to some of the top
industrial units in Gujarat i.e. United Phosphorus Ltd., L&T Ltd. etc. and now proposes to lay city
gas distribution networks in new areas and expand it in its existing areas of operation.
3.2. Capital Structure
As on March 31, 2009, the authorized share capital of the Company was Rs.100 Crore comprising
10 Crore equity shares of Rs.10/- each. The paid up capital of the Company as on the same date was
Rs.59.21 Crore, comprising 5.921 Crore equity shares of Rs 10/- each.
Table 2: Capital Structure as on March 31, 2009

Share Capital Rs. Crore
Authorized Share Capital 100.00
Paid up & Subscribed Share Capital 59.21

3.3. Shareholding Pattern
The shareholding pattern of GSPC Gas as on March 31st 2009 is indicated in the following table.
Table 3: GSPC Gas - Shareholding Pattern

(Rs. Crore)
Name Paid up Capital Holding
Gujarat State Petroleum Corporation Limited 36.69 61.97%
Gujarat State Petronet Limited 21.66 36.59%
Other Government of Gujarat Companies and Others 0.85 1.44%
Total 59.20 100.00%
3.4. Past Financials
3.4.1. Summary of Profit & Loss Accounts
The detailed profit & loss statement of GSPC Gas for last 3 years ended March 31 st 2009 is given in
Annexure I and summary of the same is indicated in the following table.
Table 4: GSPC Gas - Summary of P&L

(Rs. Crore)
Sale of Natural Gas (MMSCM) 12.5 180.76 447.19
Sale of Natural Gas 32.73 323.57 841.13
Other Income 11.70 21.68 37.73
Total Income 44.43 345.25 878.86
Expenditure
Purchase of NG / Petroleum Products 31.03 220.89 592.24
Gas Transportation Charges 2.31 36.99 93.87
O&M Expenses 2.10 6.06 13.56
Administration & Other Expenses 5.47 10.43 28.64
Total Expenses 40.91 274.37 728.31
PBDIT 3.52 70.88 150.55
Interest & Finance Charges 0.01 11.37 19.45
Depreciation & Amortisation 6.88 3.37 19.94
PBT (3.37) 56.14 111.11
PAT (4.54) 37.20 75.43
Cash Profit 3.43 47.81 105.37
PBDIT/Sales 10.75% 21.91% 17.13%
* Provisional
During FY 2009, the Company achieved natural gas sale of Rs.841 Crore as against natural gas sale
of Rs.323 Crore in FY 2008 i.e. an increase of 160% over the previous year. During FY 2009 the
Company earned net profit of Rs.75.43 Crore as against net profit of Rs.37.20 Crore during FY
2008 i.e. increase of 119% over the previous year. This substantial increase in turnover and net

profit of the Company was mainly on account creation of infrastructure that lead to an increase in
volume of gas sales during the year i.e.447.19 mmscm during FY 2009 as against 180.76 mmscm
during FY 2008. The infrastructure created by the Company in previous year and planned in the
current year will help the Company to meet gas demand in larger areas and increase its revenue
significantly.
3.4.2. Summary of Balance Sheet
The detailed Balance Sheets of GSPC Gas for the last 3 years ended March 31, 2009 is given in
Annexure II and a summary of the same is indicated in the following table.
Table 5: GSPC Gas - Summary of Balance Sheets

(Rs. Crore)
As On March 31 2007 2008 2009*
Liabilities
Share Capital 1.09 59.21 69.21^
Net Worth 74.37 128.86 227.43
Unsecured Loan 0 0 20.00
Deposits from Customers 1.19 2.03 2.35
Total Liabilities 137.93 270.39 530.95
Assets
Gross Block 110.32 209.83 377.25
Accumulated Depreciation 13.7 16.91 36.85
Investments 0.18 0.18 0.18
Net Current Assets (1.53) (23.12) (31.11)
Current Assets 23.86 47.81 158.41
Current Liabilities 25.39 70.93 127.30
Total Uses of Funds 137.93 270.39 530.95
D/E Ratio 0.83 1.07 1.31
* Provisional, ^Including share application money of Rs.10Crore from GSPL
The net worth of the company has increased from Rs.128.86 Crore (as on March 31, 2008) to
Rs.227.43 Crore (as on March 31, 2009). The debt to equity ratio (D/E ratio) of the Company was
comfortable at 1.31 as on March 31, 2009.
3.5. Existing Borrowing Details
Table 6: Current Sanctioned Facility as on March 31, 2009

(Rs. Crore)
S. No. Bank Sanctioned Availed O/S
1 SBI (Lead) 100 87.55 80.86
2 Axis Bank 50 43.43 40.43
3 Dena Bank 50 43.43 40.42
4 State Bank of Mysore 50 43.43 40.42
5 IDBI Bank 40 34.74 32.33
6 Bank of India 26 22.61 21.04
7 KCCB 25 25 25.00
Total 341 300.19 280.50
The Company has tied up a rupee term loan of Rs.341 Crore from 7 lenders for its capital
expenditure in the past. The Company has already availed Rs.300 Crore and would avail balance
Rs.41 Crore during the first quarter of FY 2010 for ongoing capex. The Company has repaid Rs.20
Crore till date and is regular in meeting its debt and interest service obligations to the lenders. The
existing loans are secured through a pari-passu first charge on the fixed assets of the Company. The
Company already has in place additional sanction for approx. Rs.150 crore which may be used for
the project.
3.6. Board of Directors
As per the Articles of Association of GSPC Gas, the Board of Directors of the Company will
comprise of a maximum of 12 directors and a minimum of 3 directors. The present Board of GSPC
Gas comprises 5 Directors, as indicated in the following table.
Table 7: Board of Directors

Sr. No. Name Designation
1 Shri. S.Jagadeesan, IAS Chairman
2 Shri. D.J. Pandian, IAS Director
3 Shri. P.K. Pujari, IAS Director
4 Shri. I. Chuaungo, IAS Director
5 Shri. K.D. Chatterjee Director
The directors of the Company have a rich and wide experience in oil & gas sector, project
implementation etc.
3.6.1. Director Profiles
The brief details of the Directors are given in the following sections.
Shri S. Jagadeesan

Shri S.Jagadeesan, a senior IAS officer is the Principal Secretary of Energy and Petrochemicals
Department, Government of Gujarat. Shri S.Jagadeesan, Chairman of GSPC Gas is also a director
of GSPC. He is actively involved in providing direction to many Gujarat state PSU’s such as
Gujarat State Electricity Corporation Ltd. Gujarat Industrial Power Company Ltd., Gujarat Power
Corporation Ltd etc.
Shri D J Pandian, IAS

Shri D.J. Pandian holds a degree in Master of Business Administration from Madras University. He
is a senior IAS officer having administrative and corporate experience spanning 25 years. Prior to
joining GSPC he was working on deputation with the World Bank in Washington, D.C. He was
Director, External Commercial Borrowing, Ministry of Finance, Government of India from 1995 to
1997. In addition, Shri D.J. Pandian has also held various appointments in the Government of
Gujarat. He has also headed Gujarat Lease Finance Limited from 1993 until 1994. Since 2001, he is
working as Managing Director of GSPC and GSPL. Shri Pandian has a vast experience in the Oil
and Gas sector.
Shri P K Pujari, IAS

Shri Pujari holds a Master of Arts degree in economics from Delhi University and a Master of
Science in macro economic policy and planning from Bradford University, UK. He is a senior IAS
officer having administrative and corporate experience spanning 25 years. He is working as
commissioner commercial tax department of Gujarat. He was also Managing Director of Civil
Supply Corporation Limited. He has held important positions in the Finance Department, Sales Tax
Department, Government of Gujarat and the Department of Power, Government of India.
Shri L Chuaungo, IAS

Shri L Chuaungo holds a degree in History/Political Science. He is an IAS officer having wide
administrative and corporate experience. Presently, he is the Managing Director of Gujarat Urja
Vikas Nigam Limited.
Shri K D Chatterjee
Shri Krishna Das Chatterjee has done a B.Sc. from University of Calcutta in 1959 and is a member
of the Institute of Cost and Works Accountants of India. Shri Chatterjee was awarded the
V.Srinivasan Memorial Gold Medal. Shri Chatterjee has worked with Dunlop India Limited and
Gujarat State Fertilizers & Chemicals Limited. He was Executive Director (Finance) of Gujarat

Narmada Valley Fertilizers Company Limited. He has a rich experience in the fields of finance,
human resources development, marketing, information systems and administration functions.
3.7. Management
GSPC Gas has a core team of highly experienced professionals to implement the Project in a time
bound manner. The team, led by Mr. D.J. Pandian (Managing Director) comprises amongst others,
P.P.G. Sharma (CEO), Mr. Ahmed Khan (DGM – Finance and Company Secretary) and Mr. M.
Goswami (Manager- Projects). The Company has already engaged a team of professionally
qualified personnel at various levels belonging to different disciplines like project implementation,
marketing, finance, civil etc. The brief profile of key management personnel is given in the
following sections.
Mr. P.P.G. Sharma
Shri P.P.G. Sharma is the Chief Executive Officer of the Company for last three years. Previously
he was working as Technical Director of British Gas India Ltd., Gurgaon. He holds a Bachelor’s
degree in Mechnical Engineering and has a rich experience of 23 years in the hydrocarbon segment.
Under his leadership, the Company’s turnover has reached to Rs. 900 Crores.
Mr. Ahmed Khan
Shri Ahmed Khan is the Deputy General Manager (Finance & Accounts) and is also the Company
Secretary of GSPC Gas. He has been associated with the GSPC group since the last nine years. He
is in charge of the finance, secretarial and legal departments of the Company.
Mr. M. Goswami
Shri Manish Goswami, Chief Project Coordinator is a Mechanical Engineering and has been
actively involved in developing CGD business of GSPC Gas.
3.8. Organization Structure
Organizational structure of GSPC Gas is shown below.

Figure 1: GSPC Gas – Organization Structure

Mr. D.J.Pandian
(MD)
Mr. P.P.G. Sharma

(CEO)
Finance, Project
Central Services Secretarial and Implementation, Human Resources
C&M Admin.
Legal O&M
Mr. M. Dhruv
Mr. M. Goswami
(Manager) Mr. Ahmed Khan Mr. M. Goswami Dhaval Shah Vijay
(Manager)
) (DGM) (Manager) (Deputy Manager) Rajan

4. PROMOTERS
GSPC Ltd. and GSPL are the promoters of GSPC Gas with combined holding of over 98% of the
share capital of the Company.
4.1. GSPC Ltd.
4.1.1. Background
Gujarat State Petroleum Corporation Limited (GSPC) is one of the major oil and gas company in
India with a significant presence in the state of Gujarat. Incorporated in 1979 as a petrochemical
company, GSPC has today metamorphosed into an energy conglomerate with presence across the
complete energy value chain involving exploration & production (E&P) of oil and gas,
transmission, distribution, power generation and petrochemicals. GSPC primarily operates in two
business segments:
 Petroleum Upstream Business
 Gas Marketing Business
Petroleum Upstream Business
GSPC went on to attain many more milestones in the energy sector, after the first ever credible
breakthrough in the form of natural gas discovery at Hazira in 1994. GSPC has acquired various
blocks in India and abroad and presently it holds interest in 61 E&P blocks worldwide. Among
these, GSPC is operator for 9 domestic blocks and 9 overseas blocks. The company has made
significant discoveries in the various blocks including its most successful KG Basin discovery. In
addition to KG Block, GSPC has also made oil and gas discoveries in the recent past in its
Ahmedabad, Sanand-Miroli, Ankaleshwar and Tarapur blocks. At present out of 49 domestic oil and
gas blocks, 13 are already under production which includes blocks at Hazira, Bhandut, Asjol, Allora
etc. The Tarapur and Sanand Miroli blocks are expected to start production in FY 2009-10. The
overseas assets of the company are also in the prospective areas of Australia, Yemen, Egypt and
Indonesia. Oil production from its Tarapur and Sanand Miroli fields is expected to start from the
current year and Gas production from KG Basin is expected to start during FY 2012.
Gas Marketing Business
GSPC is the second largest gas marketing company in India. Subsidiaries and joint venture of
GSPC companies have extensive trunk pipeline and CGD network across Gujarat, the most

developed gas market and accounts for 42% of the country’s total gas demand at 56 mmscmd in FY
2007-08. The Gujarat gas demand is expected to grow at a CAGR of 6% and expected to reach
about 140 mmscmd by FY 2022.
GSPC has developed an extensive state-wide gas distribution infrastructure over the years through
its subsidiaries covering virtually entire Gujarat. This network gives Gujarat a unique distinction of
the state with all its major cities connected to the gas grid. GSPC acts as an aggregator sourcing
natural gas from different sources at different prices and varied terms. From this aggregated supply,
the company fulfills the demand of its customers in various regions. In the process, GSPC retains
its leading position as gas marketer while helping customers to manage their energy requirement.
During FY 2007-08, the Company traded 98.3 million mmbtu of gas with revenues of about Rs
3794.27 Crore that contributed more than 90% of the Company revenues. The operating margin for
gas business increased from about 7.2% in FY 2006-07 to 17.56% in FY 2007-08.
4.1.2. Board of Directors of GSPC
GSPC is a Board managed company and its present Board comprises of 10 Directors. The details of
GSPC’s Board as on March 31st 2009 are indicated in the following table.
Table 8: GSPC’s Board of Directors

S. No. Name Designation
1 Shri D. Rajgopalan , IAS Chairman
2 Shri D. J. Pandian, IAS Managing Director
3 Shri K. Kailashnathan, IAS Director
4 Shri P. V. Swaminathan, IAS (retd.) Director
5 Shri P. K. Pujari, IAS Director
6 Shri Hasmukh Adhiya, IAS Director
7 Shri Tapan Ray, IAS Director
8 Shri M.M. Srivastava, IAS Director
9 Shri Suresh Mathur, Ex MD & CEO - PLL Independent Director
10 Dr. Urjit Patel Independent Director
GSPC has a core team of experienced professionals looking after organizational activities and
operations. The team comprises professionally qualified personnel at various levels belonging to
different disciplines like Geology, Petro physics, Mechanical, Electrical, Civil, Instrumentation,
Materials, Marketing, Pipeline, Finance etc., besides Corporate, Secretarial and other non-official
staff members.

4.1.3. Capital Structure & Shareholding Pattern
As on March 31, 2009, GSPC’s authorized capital was Rs 300 crore comprising of 30 crore equity
shares of Rs.10 each. Paid-up capital of the company as on 31st March 2009 was Rs 211.22 crore.
The Government of Gujarat is holding 95% and other Government of Gujarat companies are
holding the balance 5% of the share capital of the Company.
Summary of Profit and Loss Account
A brief summary of the profit and loss statement of GSPC for the last 3 years ended March 31 st
2008 is indicated in the following table.
Table 9: Summary of Profit and Loss Account of GSPC
(Rs. Crore)
For the FY ending 31st March 2006 2007 2008
Sales Turnover
Gas Business 1173.99 2216.48 3794.27
E&P Business 575.97 415.65 323.22
Other Income 9.47 19.81 28.00
Total Income 1,775.87 2,651.94 4,145.49
Expenditure
Purchase of Gas/Petro products 1,030.07 2,055.79 3,128.22
Production, Selling & Operational Exp. 307.43 171.57 155.98
Other Operating Expenses 18.17 15.95 97.29
PBDT 420.16 408.00 757.47
Depreciation, Depletion & Amortization 117.23 104.17 129.47
Tax 21.54 76.66 222.24
PAT 281.39 227.17 405.76
During FY 2007-08, the company achieved sales turnover of Rs. 4145.49 crore as against Rs.
2651.94 crore in FY 2006-07 i.e. increase of 56.3%. The Company earned a net profit Rs. 405.76
crore in FY 2008 as against net profit of Rs. 227.17 crore in FY 2007 i.e. an increase of 78% over
the previous year. The Company’s sales turnover & net profit for FY 2009 is estimated to be Rs.
5800 crore and a corresponding net profit of Rs. 450 crore.

A brief summary of the balance sheet of GSPC for the last 3 years ended March 31 st 2008 is given
Table 10: Summary of Balance Sheet of GSPC

(Rs. Crore)
For the FY ending 31st March 2006 2007 2008
Sources of Funds
Share Capital 105.61 105.61 105.61
Reserves & Surplus 1175.70 1,378.42 1,758.81
Net worth 1,281.32 1,484.03 1,864.42
Total Debt 270.00 839.79 2,186.91
Deferred Tax Liabilities 2.17 0.13 1.32
Total Sources 1,553.49 2,323.95 4,052.65
Application of Funds
Gross Block 895.49 966.49 1,067.42
Net Block 1268.87 2031.55 3660.65
Investments 286.83 285.52 381.39
Net Current Assets (2.21) 6.88 10.54
Deferred Tax Assets - - 0.07
Total Application 1,553.49 2,323.95 4,052.65
The net worth of the company has increased from Rs. 1484.03 Crore in FY 2007 to Rs. 1864.42
crore in FY 2008.
4.2. Gujarat State Petronet Limited
Gujarat State Petronet Limited (GSPL), a subsidiary of GSPC is in the business of natural gas
transmission and owns the second largest natural gas network in India. GSPL currently owns and
operate 1370 km of gas pipeline network and plans to expand the network to 2500 kms in next 3
years. It was the first company in India to provide gas network on an Open Access basis. It acts as a
link between gas suppliers and users through gas transportation contracts. GSPL has a network
covering 14 districts in Gujarat and has more than 50% share of gas transmission business in
Gujarat. GSPL network is connected with the HBJ pipeline of GAIL, gas producers in the state and
both operating LNG terminals of Petronet LNG at Dahej and Shell at Hazira. Its network will be
further connected to Reliance’s cross country pipeline from KG Basin to Bharuch. The present gas
network of GSPL is shown in the following map.
Figure 2: Gas Network of GSPL

4.2.1. Capital Structure & Shareholding Pattern
As on March 31st 2009, the authorized share capital of GSPL was Rs.700 crore comprising 70 crore
equity shares of Rs.10 each and the paid up capital was Rs.562.01 crore comprising 56.20 crore
shares of Rs.10 each. The shareholding pattern of GSPL as on 31 st March 2009 was as indicated in
the following table.
Table 11: Shareholding Pattern of GSPL

(Rs. Crore)
Name of Shareholder Amount Holding
Gujarat State Petroleum Corporation (GSPC) 212.38 37.79%
Other Govt. of Gujarat Bodies 61.93 11.02%
Bank, FIs, Insurance, FIIs, Others 156.97 0.2793
Private Corporate Bodies 43.11 7.67%
General Public 87.73 15.61%
Total 562.01 100%

A brief summary of the profit and loss statements of GSPL for the last 3 years ended March 31 st
2008 is given in the following table.
Table 12: Summary of P&L Account

(Rs Crore)
Year Ended March 31 2006 2007 2008
Total Income 267.93 335.02 447.28
Expenditure 69.31 49.84 53.42
PBDT 198.62 285.18 393.86
Depreciation 79.06 102.61 163.22
Tax 41.21 45.65 81.51
PAT 46.68 89.38 99.92
Operating Margin 75.39% 89.80% 94.25%
Net Margin 17.72% 28.15% 23.91%
Brief summary of the balance sheet of GSPL for last the 3 years ended March 31, 2008 is given as
under:
Table 13: Summary of Balance Sheet

(Rs. Crore)
Year Ended March 31 2006 2007 2008
Share Capital 542.24 542.80 562.01
Reserves and Surplus 365.26 423.11 578.95
Net worth 907.50 965.91 1,140.96
Loans 578.62 863.84 966.04
Net Block 759.99 1,566.09 1,537.13
CWIP 605.07 136.78 588.79
Debt Equity ratio 0.64 0.89 0.85
Current Ratio 1.90 2.15 1.08
GSPL achieved a turnover of Rs.447.28 crore in FY 2008 as against Rs. 335.02 crore in FY 2007
i.e. an increase of 33.5%. The company earned a net profit of Rs. 99.92 crore in FY 2008 as against
Rs. 89.38 crore in FY 2007. Post expansion and post availability of RIL gas for transportation, the
revenue is expected to increase substantially in near future.

4.3. Group Companies of GSPC
GSPC Group has s presence across the complete energy value chain involving Exploration &
Production (E&P) of oil and gas, transmission, distribution, power generation and petrochemicals.
The brief details of group companies of GSPC Group are outlined in the subsequent sections.
4.3.1. Gujarat State Energy Generation Limited (GSEG)
Gujarat State Energy Generation Ltd (GSEG), incorporated in 1998, is a power generation
company, promoted by GSPC along with other Government of Gujarat companies and GAIL.
Currently, GSPC holds 31.40% equity in GSEG. The company is operating a 156.1 MW combined
cycle power plant at Hazira with availability of over 80%. GSEG is increasing its capacity by 1050
MW by setting up three combined cycle gas-fired units of 350 MW each in three phases at Hazira,
near to the existing plant site. The land acquisition for all the three phases is complete and the EPC
contract has been awarded to Bharat Heavy Electricals Ltd. (BHEL) Phase I of 350 MW is expected
to be ready by 2010. A summary of past financials of GSEG are as given in the following tables.
Past Financials
A brief summary of the profit and loss statement of GSEG for the last 3 years ended March 31,
2008 is given in the following table.
Table 14: Summary of P&L Account
(Rs Crore)
Financial Year 2006 2007 2008
Total Revenues 264.69 299.99 285.06
Operating Expenses 177.59 208.98 205.23
PBDIT 87.10 91.01 79.83
Interest & Financial Charges 37.37 33.23 30.68
Profit Before Tax 22.85 30.84 49.15
Profit After Tax 20.87 24.34 18.72

A brief summary of the balance sheet of GSEG for the last 3 years ended March 31st 2008 is given
Table 15: Summary of Balance Sheet

(Rs. Crore)
Financial Year Ending March 2006 2007 2008
Net worth 219.01 234.14 263.42

Total Secured Debt 327.84 302.77 202.95
Total Unsecured Debt - - 100.00
Net Block 386.76 366.39 340.07
CWIP 0.49 0.97 119.34
4.3.2. GSPC LNG Limited (GSPC LNG)
GSPC LNG Limited was incorporated in to set up a Greenfield LNG terminal at Mundra in Gujarat.
GSPC presently holds 100% of GSPC LNG’s equity. However, in future, GSPC plans to have a
controlling stake in the project while divesting the remaining in favour of some strategic investors,
including the Adani group. The LNG terminal is planned to have a capacity of 5 MMTPA, LNG
receiving and regasification facilities and gas evacuation arrangement. The project is being setup
through the LSTK mode wherein time/price fixed contracts will be awarded to EPC contractors.
The site for the LNG terminal has been finalized and gas tie up is being arranged by the company.
Expected completion time for the project is 3 years from the start of construction. With the expected
shortage of natural gas in the country and increasing gas imports, this terminal will cater to the
import requirement of GSPC, its subsidiaries and other entities.
4.3.3. GSPC Pipavav Power Company Limited (GPPCL)
GSPC Pipavav Power Company Limited is a 100% subsidiary of GSPC. The company was
incorporated in 2006 for setting up a 1050 MW combined cycle power plant at Pipavav in Gujarat.
The power plant is planned to be implemented in two phases with installation of 700 MW in phase-
I. The company has also signed a gas supply agreement with GSPC and gas transportation
agreement with GSPL. For off take, a power purchase agreement has been signed with GUVNL.
The first phase of project is expected to be complete by end of FY 2013.

5. THE GAS DISTRIBUTION MARKET
5.1. Global Natural Gas Industry
Globally, the share of natural gas in the total energy consumption has been increasing, following
discoveries of huge gas reserves and favorable economics vis-à-vis other fuels such as coal and
crude oil. The share of natural gas in total energy consumption in 2007 was about 24% while the
share of crude oil and coal stood at 36% and 29% respectively. The US is the largest consumer of
natural gas in the world, accounting for 22% of the global consumption in 2007. US consumption
grew by around 6.5% in 2007, accounting for nearly half of the consumption growth.
5.2. Global Natural Gas Consumption
Stringent environmental norms being adopted by many countries have increased the suitability of
natural gas as an alternate fuel to more traditional fuels like coal and crude oil. Conventionally, the
natural gas industry operates on a long term contractual basis with back-to-back contracts between
various users in the value chain – producers, transmitters and off-takers. Rising prices and
increasing demand coupled with limited supply have helped in development of a spot market for
natural gas.
The following table illustrates the country-wise consumption of natural gas. While Japan and South
Korea have traditionally been the largest gas consumers in Asia, the rapidly developing countries of
China and India are also accounting for significant gas consumption. Natural Gas Consumption by
different countries is depicted in the following table.
Table 15: Natural Gas Consumption

(BCM)
Country / Region 2003 2004 2005 2006 2007 Change in 2007 2007, share
over 2006 (%) of total (%)
USA 630.8 634.0 623.3 613.1 652.9 6.5% 22.6%
Total North America 773.0 776.2 767.6 761.4 801.0 5.2% 27.6%
Total Europe, Eurasia 1070.7 1104.3 1128.3 1151.5 1155.7 0.4% 39.4%
Iran 82.9 93.4 102.4 108.7 111.8 2.9% 3.8%
Saudi Arabia 60.1 65.7 71.2 73.5 75.9 3.3% 2.6%
Total Middle East 226.1 252.8 276.8 291.4 299.4 2.7% 10.2%
Australia 22.4 22.8 21.9 24.0 25.1 4.9% 0.9%
China 33.9 39.7 46.8 56.1 67.3 19.9% 2.3%
India 29.5 31.9 35.7 37.3 40.2 7.6% 1.4%
Japan 79.8 77.0 78.6 83.7 90.2 7.8% 3.1%
South Korea 26.9 31.5 33.7 35.6 37.0 4.0% 1.3%
TOTAL WORLD 2590.9 2689.2 2765.2 2834.4 2921.9 3.1% 100.0%
(Source: BP Statistical Review 2008)

Demand for natural gas primarily arises from four sectors – industrial, domestic, transportation and
commercial establishments. The bulk of demand arises from the industrial segment, primarily the
power sector. According to an EIA study, the power sector globally is expected to grow at about 3%
per annum upto 2030, creating a strong potential demand for natural gas. While demand for gas has
been ever increasing, supply and reserve accretions have been concentrated only in a few locations.
Large discoveries of natural gas have been made in Qatar and Iran in recent years, taking the total
natural gas reserves to 6,263 tcf as of 2007. Russia, Iran and Qatar together account for almost 55%
of the total natural gas reserves. With a Reserve to Production (R/P) ratio of 60, the current proven
gas reserves are expected to last for 60 years, assuming that consumption and demand remain at the
current levels. Russia was the largest gas exporter in 2007 exporting 147 bcm of gas accounting for
almost 25 % of total exports, with Russia, Canada, Norway and Netherlands accounting for almost
70 % of exports. Qatar has emerged as the largest LNG supplier, exporting almost 38.5 bcm of gas.
5.2.1. Global Natural Gas Supply
Natural gas reserves in various countries are outlined in the following table.
Table 16: Global Natural Gas Reserves
(TCM)
Region 2006 2007 % age of total in 2007
USA 5.98 5.98 3.4%
Russian Federation 44.60 44.65 25.2%
Iran 27.58 27.80 15.7%
Qatar 25.64 25.60 14.4%
Saudi Arabia 7.07 7.17 4.0%
Total Middle East 72.95 73.21 41.3%
Total Africa 14.46 14.58 8.2%
Australia 2.49 2.51 1.4%
Indonesia 2.63 3.00 1.7%
Malaysia 2.48 2.48 1.4%
China 1.68 1.88 1.1%
India 1.08 1.06 0.6%
TOTAL WORLD 176.22 177.36 100.0%
(Source: BP Statistical Review 2008)
Commercial production of natural gas has grown in line with the demand growth over the last five
decades. Due to the difficulties in transporting natural gas, a large amount of associated gas, i.e.
natural gas produced along with crude oil, were flared in the initial years before pipeline and LNG
systems were developed. The major gas producing nations are outlined in the following table.
Table 17 : Major Gas Producing Nations (bcm)

Change in 2007 2007, share

Country / Region 2004 2005 2006 2007 over 2006 (%) of total (%)
USA 526.4 511.1 523.2 545.9 4.3% 18.8%
Total North America 747.9 737.4 754.4 775.8 2.9% 26.6%
Russian Federation 591.0 598.0 612.1 607.4 -0.8% 20.6%
Iran 91.8 100.9 108.6 111.9 3.0% 3.8%
Algeria 82.0 88.2 84.5 83.0 -1.7% 2.8%
Qatar 39.2 45.8 50.7 59.8 17.9% 2.0%
Saudi Arabia 65.7 71.2 73.5 75.9 3.3% 2.6%
Australia 35.3 37.1 38.9 40.0 2.8% 1.4%
China 41.5 49.3 58.6 69.3 18.4% 2.4%
India 29.2 29.6 29.3 30.2 2.8% 1.0%
Total Asia Pacific 332.5 355.8 373.7 391.5 4.8% 13.3%
TOTAL WORLD 2703.7 2775.5 2872.2 2940.0 2.4% 100.0%
(Source: BP Statistical Review of World Energy 2008)
5.3. Indian Natural Gas Industry
India accounts for 3.6% of the total primary energy consumption worldwide and 1.4% of the global
natural gas consumption in 2007. Domestically, the share of natural gas in total energy consumption
stood at around 9 % in 2007, with gas consumption rising at around 6% through 1997 to 2007.
Though coal, which accounts for 52% of the primary energy consumption dominates as the major
energy source, gas is rapidly emerging as an alternative to crude and coal. The share of gas in
consumption pattern, in the Indian context, is also likely to increase gradually in the days to come,
as infrastructure for gas transport develops in the country. Low share of natural gas as compared to
world average is primarily on account of low availability of natural gas in the country and
inadequately developed gas transportation infrastructure. With the new large gas discoveries on the
east coast of country and expansions of LNG terminals at Dahej and Hazira, availability of gas is
expected to increase, leading to an increase in gas consumption.
5.3.1. Domestic Gas Demand
Demand for gas in India arises primarily from the power and fertilizer sectors. These two sectors
together account for around 65% of the total domestic gas demand. The share of natural gas in the
basket is expected to increase from the current 9% to 20% by 2025. Projected gas demand from
different sectors is illustrated in the following table.
Table 18: Projected Sector Wise Gas Demand (MMSCMD)

Demand/Years 2007-08 2008-09 2009-10 2010-11 2011-12

Power 79.70 91.20 102.70 114.20 126.57
Fertilizer 41.02 42.89 55.90 76.26 76.26
City gas 12.08 12.93 13.83 14.80 15.83
Industrial 15.00 16.05 17.17 18.38 19.66
Petrochem/ Refineries 25.37 27.15 29.05 31.08 33.25
Sponge iron/Steel 6.00 6.42 6.87 7.35 7.86
Total 179.17 196.64 225.52 262.07 279.43
(Source: 11th Five year plan, Infraline report)
5.3.2. Domestic Gas Supply
The average indigenous production of natural gas in the country in 2007-08 was around 89
mmscmd. Out of this, around 68 mmscmd was produced by the National Oil Companies, viz.,
ONGC and OIL, from their nominated blocks. Natural gas is also supplied from two LNG terminals
currently operating in the country. PLL's LNG terminal at Dahej and Shell's LNG terminal at Hazira
are being used to source LNG. PLL has a long term contract with RasGas, Qatar for LNG. Both
PLL and Shell source spot LNG also. The details of gas supply in FY 2008 are as under.
Table 19: Domestic Gas supply

(mmscmd)
Location 2005-06 2006-07 2007-08*
Gujarat 10.50 9.02 8.03
NE States 8.05 8.44 8.66
Tamilnadu 2.48 3.10 3.20
Andhra Pradesh 4.56 4.18 4.29
Rajasthan 0.66 0.66 0.70
Total Onshore 26.24 25.40 24.89
ONGC (Bombay High) 46.09 45.39 44.74
JVC/Pvt 15.89 16.19 18.80
Total Offshore 61.98 61.58 63.53
Total Production 88.22 86.98 88.42
(Source: MoPNG), * Provisional Data
The present total gas supply in India stands at 120 MMSCMD which is likely to go upto 202
mmscmd by 2011-12, following the recent discoveries made in the KG Basin by majors like
Reliance Industries Limited, GSPC and ONGC. In-spite of an expected huge leap in gas supply,
India is expected to remain a gas deficit market due to a greater increase in demand.
Table 20: Projected Demand Supply Scenario for Natural Gas

(mmscmd)
FY Ending 31st March, 2009 2010 2011 2012
Domestic Supply (ONGC + OIL)* 58.42 55.69 54.67 51.08
Existing Pvt/JV’s 61.56 60.28 58.42 57.22
New Domestic Discoveries - 74.00 84.00 94.00
Total Supply 119.98 189.97 197.09 202.30
* MoPNG Data for revised XIth five year plan; production from existing Pvt/JV’s kept at same level
The total gas from LNG expected by 2012 is expected to be around 15 MMTPA, as indicated in the
following table.
Table 21: Projected LNG Capacity in India

Sl. No. Company / Consortium Location Capacity Status in 2009
(MMTPA)
1. Petronet LNG Ltd. Dahej, Gujarat 10.0 Operational
2 Petronet LNG Ltd. Kochi, Kerala 2.5 Under implementation
3 Royal Dutch Shell Hazira, Gujarat 2.5 Operational
Even after considering all the discoveries, the natural gas availability from domestic fields and
existing LNG terminals will be around 220-240 mmscmd in 2014-15. With an increase in
availability of gas, consumption and demand are also expected to grow substantially as demand for
gas has been constrained by supply. Further, the development of infrastructure like cross- country
pipelines and local state-wide network by companies like GAIL, RIL and GSPL will increase the
availability of gas, fulfilling large potential demand for gas. The development of city gas
distribution networks, which is driven by availability of gas and development of allied
infrastructure like transmission pipelines will also further increase consumption levels.
5.3.3. Natural Gas Market in Gujarat
Gujarat is the most developed natural gas market in the country. After Bombay High offshore fields,
Gujarat is also the largest gas producing state of the country. The state is home to both the operating
LNG terminals of the country at Dahej and Hazira. The State government has a major role to play
in the development of Gujarat in line with cleaner and economical fuel based economy. Gujarat has
the largest natural gas pipeline network among all the Indian states. The pipeline network in Gujarat
comprises of the network of GAIL, a part of the HBJ pipeline network, the ex-Hazira network of
GAIL, a part of the DVPL pipeline network, the pipeline network of GSPC Gas and pipeline
network of GSPL. GSPL has planned a state-wise gas grid of about 1370 km and these trunk
pipelines have been helpful in bringing natural gas to the consumers.

Industrialization, proximity to supply sources and developed natural gas transportation

infrastructure have resulted in Gujarat emerging as the largest natural gas consuming state in the
country, with more than 42% of India’s total natural gas consumed in Gujarat. Gas demand in
Gujarat is expected to grow at a CAGR of 6% from the existing 56 mmscmd in FY08 to 140
mmscmd in FY 2022. Due to early discoveries in the region, natural gas made its foray in Gujarat
earlier than other states. Fuel requirement is high in the state because of intense industrialization,
Encouraging policies of state government and availability have made natural gas a popular fuel in
Gujarat. Gujarat Gas Company has distribution network in Surat, Ankaleshwar and Bharuch and
they get natural gas from PMT fields. HBJ pipeline established by GAIL was also instrumental in
development of natural gas in the adjoining regions. There are various satellite fields in the state
which cater to the industries located in their vicinity. Lately, huge capital expenditures by GSPC,
GSPC Gas, GSPL and Sabarmati Gas Ltd. have made natural gas available to many areas of the
state. The following table shows the gas demand build-up in Gujarat till FY2022.
Table 22: Projected Gas Demand Scenario in Gujarat

(mmscmd)
FY Ending 31st March, 2008 2012 2017 2022
Power 17 31 41 41
Fertilizer 10 12 12 12
Industrial 23 49 57 66
City Gas Distribution/Others 6 10 16 21
Total 56 102 126 140
Source: CRISIL Study
5.4. Gas Infrastructure
Gas transportation and infrastructure is set to increase with a number of cross country pipeline
networks being setup by GAIL and Reliance. Reliance has recently completed a 1386 KM long gas
transportation pipeline from Kakinada at East coast to Bharuch at West Coast to transport 80
MMSCMD of gas. Reliance is also planning to setup two more gas pipelines in South India from
Kakinada to Coimbatore and Bangalore in the South and from Kakinada to Haldia in the East. As a
result, gas demand from various manufacturing industries, process industries and CGD networks is
also expected to grow, mainly on account of latent demand realization and substitution of traditional
fuels like fuel oils. The gas transportation infrastructure in India is illustrated in the following
figure.
Figure 3: Gas Transportation Network in India

Source: GAIL
5.5. City Gas Distribution in India
City Gas Distribution in India evolved in the eighties when GAIL initiated techno-economic
feasibility studies for gas distribution in the metro cities of Mumbai and Delhi through Sofragaz &
British Gas respectively. Based on the encouraging recommendations of these studies, the
Government of India approved gas allocation for Mumbai and Delhi. Gas distribution and
marketing was largely monopolized by state owned enterprises with GAIL controlling 95% of the
market. CGDs supply gas either as Compressed Natural Gas (CNG) which is used as a fuel for
transportation or as Piped Natural Gas (PNG) which refers to gas supplied to domestic, industrial
and commercial establishments through pipelines.
The initial growth of CGDs was sluggish due to lack of sufficient demand from the transportation
sector. Following a Supreme Court directive, all public transport vehicles in Delhi shifted from
diesel and petrol to CNG. Further, the Supreme Court had identified 29 cities for setting up city gas
distribution networks. This provided a major impetus to the development of the CGD market in

India. Increasing economic activity has led to a greater demand from the commercial segment such
as hospitals and hotels which primarily depend on LPG as a gas fuel. A majority of gas demand
arises from the industrial segment that comprises manufacturing units, process industries and the
power sector.
5.6. Demand Drivers for CGD Networks
The Indian gas market has grown significantly over the past few years, primarily driven by gas
discoveries and imports. City gas distributions in India have been developing primarily in Gujarat,
Mumbai and Delhi in the past. However, the availability of gas and development of infrastructure
has led to the emergence of CGD as an important segment in the energy sector in India. Some of the
key drivers enabling the growth of CGDs are:
Price Competitiveness: Natural gas is cheaper as an alternate to existing fuels, making it

inherently competitive with alternate fuels like petrol, diesel, naphtha and LPG. Industrial units
primarily use naphtha/Fuel oil as a fuel for various process/manufacturing applications. Natural gas
offers a cheaper and a cleaner alternative to these fuels.
Infrastructure Development: Infrastructure is a critical driver in development of city gas

distributions. A well developed pipeline network beginning with evacuation of gas from the source
(Gas fields or LNG terminals) up to consumer’s location is essential to realize existing demand. In
India, this is evident in the way the gas market in Gujarat has developed, way ahead of other states.
With planned cross country pipelines and various CGD networks across India demand for gas is
expected to rise significantly in near future.
Growth in Vehicle Ownership: Growing per capita income has led to a huge increase in the
vehicular population in India which to a large extent uses petrol and diesel as fuels. CNG as an
Auto-fuel lower the operating cost as compared to petrol and diesel even after considering CNG
conversion costs. Further CNG is an eco friendly fuel. Above advantages are proving as incentives
for vehicle owner to switch to CNG.
Regulatory Provisions: Regulatory intervention by the Supreme Court, ordering conversion of

public transportation to CNG has also helped in increasing the demand for CNG. Further, demand
from vehicles such as taxis is also expected to increase demand for CNG. CNG offers other benefits
such as lower vibrations during vehicle running; lower wear and tear resulting in lower O&M
expenses and lesser odor compared to diesel.

5.7. Key Market Players
5.7.1. Gujarat Gas Company Limited
In 1988, Gujarat Gas Company Limited (GGCL) pioneered the private distribution of natural gas in
India, through the establishment of an independent network of pipelines to industrial, commercial &
domestic customers in Southern Gujarat. The GGCL pipeline network spans more than 1600
kilometers and the company is making further investments in expanding the basic pipeline
infrastructure. GGCL has established its base in the cities of Surat, Bharuch, and Ankaleshwar and
feeds 0.92 mmscmd natural gas to over 1,07,611 domestic households, 1,486 commercial and 372
industrial customers.
5.7.2. Mahanagar Gas Limited
Mahanagar Gas Limited (MGL), a Joint Venture (JV) company of Gas Authority of India Limited
(GAIL), British Gas and Government of Maharashtra is mainly engaged in supply and distribution
of natural gas to domestic, commercial, small industrial customers and CNG to transport sector in
Mumbai through its integrated gas pipeline network. MGL has received an allocation of 1.5
MMSCMD and an additional 0.5 MMSCMD for gas distribution in Mumbai and expansion into
Thane respectively.
5.7.3. Indraprastha Gas Limited
Indraprastha Gas Limited (IGL), a JV of GAIL and Bharat Petroleum Corporation Limited (BPCL)
was incorporated for developing a distribution network for the residential, transport and commercial
consumers in Delhi. It is the sole marketer of CNG in Delhi and operates 153 CNG outlets in Delhi.
Further, it has obtained permissions from the UP Government for setting up CNG stations in
Ghaziabad and from the Haryana Government for setting up CNG stations in Sonepat and Panipat.
5.7.4. Green Gas Limited
Green Gas Limited was setup as a joint venture company between IOCL and GAIL for city gas
distribution in Agra and Lucknow. It has already commenced CNG/PNG supplies in Agra and
Lucknow.

5.7.5. Sabarmati Gas Company Limited
Sabarmati Gas is a JV between GSPC and BPCL. The Company is developing CGD projects in the
districts of Gandhinagar, Mehsana and Sabarkantha in the state of Gujarat. The company has
already commenced operations in Gandhinagar.
5.7.6. Central UP Gas Limited
Central U.P. Gas Limited is a JV between BPCL and GAIL, for supplying gas to the household,
industrial and automobile sectors in Kanpur. This project is being implemented on the lines of IGL.
It has already commenced operation in Kanpur City and has a gas allocation of 0.1 MMSCMD.

6. MARKET STUDY FOR THE PROJECT
Mott-Mac Donald Ltd. was appointed by GSPC Gas to carry out a market assessment study of
Natural Gas in Gujarat. The study involved assessment of natural gas demand for four categories of
consumers in Industrial, Household, Commercial and Transportation sector in various districts and
the projections of the expected demand, increase in demand in these districts.
6.1. Industrial Demand
To assess the demand from industrial units, consumption of existing fuels such as fuel oil, diesel
etc. by industrial units was assessed. This has been considered as the potential market for natural
gas. Annual growth rates have been factored to arrive at the potential market for gas in future
years. Penetration rates have then been applied to estimate the market for GSPC Gas annually. The
growth rates assumed for projecting potential market are indicated in the following table.
Table 23: Industrial Demand Growth Rates

Fuel Demand Growth-Short Term 8% Up to 2013
Fuel Demand Growth-Medium Term 6% 2014-2022
Fuel Demand Growth-Long Term 4% 2023-2032
The projected demand by industrial sector in various districts is given below:
Table 24: Demand Projections for the Selected Locations (MMSCMD)

District 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Amreli 0.033 0.045 0.06 0.077 0.096 0.117 0.124 0.132 0.14 0.149 0.159 0.169
Anand 0.043 0.059 0.078 0.101 0.126 0.153 0.162 0.173 0.184 0.195 0.208 0.221
Banaskantha 0.014 0.02 0.026 0.034 0.042 0.051 0.054 0.058 0.061 0.065 0.069 0.074
Bhavnagar 0.033 0.046 0.06 0.078 0.097 0.118 0.125 0.133 0.141 0.15 0.16 0.17
Dahod 0.005 0.007 0.01 0.012 0.015 0.019 0.02 0.021 0.023 0.024 0.026 0.027
G'Nagar 0.014 0.018 0.021 0.026 0.031 0.036 0.038 0.041 0.043 0.046 0.049 0.052
Jamnagar 0.019 0.026 0.034 0.043 0.054 0.066 0.07 0.074 0.079 0.084 0.089 0.095
Junagadh 0.309 0.425 0.558 0.721 0.902 1.093 1.162 1.236 1.314 1.398 1.486 1.581
Kheda 0.257 0.354 0.465 0.6 0.75 0.909 0.967 1.028 1.093 1.163 1.237 1.315
Kutch 0.012 0.016 0.021 0.027 0.034 0.041 0.044 0.047 0.05 0.053 0.056 0.06
Mehasana 0.016 0.023 0.03 0.038 0.048 0.058 0.062 0.065 0.07 0.074 0.079 0.084
Navsari 0.093 0.125 0.162 0.207 0.257 0.31 0.329 0.35 0.372 0.396 0.421 0.447
Panchmahal 0.401 0.547 0.714 0.918 1.144 1.384 1.471 1.565 1.664 1.769 1.881 2.001
Patan 0.001 0.001 0.001 0.002 0.002 0.003 0.003 0.003 0.003 0.003 0.003 0.004
Porbandar 0.448 0.617 0.81 1.047 1.308 1.586 1.687 1.794 1.907 2.028 2.157 2.294
Rajkot 1.082 1.181 1.289 1.409 1.539 1.65 1.75 1.856 1.967 2.086 2.212 2.345
Sabarkantha 0.001 0.001 0.001 0.002 0.002 0.003 0.003 0.003 0.003 0.003 0.004 0.004
Surendranagar 0.141 0.165 0.192 0.223 0.258 0.293 0.311 0.33 0.35 0.372 0.395 0.419
The Dangs 0.023 0.032 0.042 0.054 0.068 0.083 0.088 0.093 0.099 0.106 0.112 0.119

District 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Valsad 0.468 0.523 0.584 0.653 0.73 0.8 0.849 0.9 0.955 1.013 1.075 1.14
Total 3.41 4.23 5.16 6.27 7.5 8.77 9.32 9.9 10.52 11.18 11.88 12.62
The demand projected by Mott-Mac Donald for industrial consumers is based on the assumption
that the Company will be implementing its Master Plan over the next 4-5 years. Hence, the
projected demand in 2016 is close to 8 MMSCMD. However, as part of the current Project, the
Company will be setting up infrastructure over the next 24 months and only this infrastructure has
been considered while assuming demand projections for the current financing. It has been assumed
that the infrastructure being setup through the Project will be operational in phases in next 2 years,
giving higher volume growth between 2011-2013. Thereafter, the volume growth has been assumed
to be nominal at 5% per annum. Sales volumes assumed for the projections are as under:
Table 25: Realizable Demand Projections - Industrial (SCMD)

Demand # 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Assumed for
2.17 2.83 3.67 4.04 4.24 4.45 4.68 4.91 5.16 5.41 5.68
Projections
It can be observed that the demand assumed for projections is lower than the demand estimated by
Mott-Mac Donald. It is expected that continuous capital expenditure would be required to target the
demand as projected by Mott-Mac Donald. .
6.2. Domestic Demand
Piped Natural Gas (PNG) is usually introduced in urban and rural/semi-urban areas and the target
segments are the consumers already using LPG. It is also expected that customers using kerosene
will also switch to gas. Hence, for estimating the market potential, consumers using LPG and
kerosene in urban and rural areas have been considered. This energy demand has been converted to
an equivalent gas demand and suitable penetration rates applied on the potential market to arrive at
a market for GSPC Gas. The demand has been computed considering the likely growth in
LPG/kerosene consumption, equivalent to the rate of population growth in these districts. The
following table gives the LPG demand (in equivalent Natural Gas quantity) for household segment
in these areas and the penetration rates assumed.
Table 26: Total Gas Demand from Household Segments (in MMSCMD)

District 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Amreli 0.001 0.002 0.003 0.004 0.005 0.006 0.008 0.009 0.010 0.011 0.011 0.011
Anand 0.002 0.005 0.007 0.010 0.012 0.015 0.017 0.020 0.023 0.026 0.026 0.026
Banaskantha 0.001 0.003 0.004 0.005 0.007 0.009 0.010 0.012 0.014 0.016 0.016 0.017
Bhavnagar 0.003 0.006 0.010 0.013 0.017 0.021 0.024 0.029 0.033 0.037 0.038 0.038
Dahod 0.000 0.001 0.002 0.002 0.003 0.003 0.004 0.005 0.006 0.006 0.006 0.007
Gandhinagar 0.002 0.005 0.007 0.010 0.013 0.016 0.019 0.022 0.025 0.028 0.029 0.030
Jamnagar 0.003 0.005 0.008 0.011 0.014 0.018 0.021 0.025 0.028 0.032 0.033 0.034
Junagadh 0.002 0.005 0.008 0.010 0.013 0.016 0.019 0.022 0.026 0.029 0.029 0.030
Kachchha 0.002 0.004 0.007 0.009 0.011 0.014 0.017 0.020 0.022 0.025 0.026 0.027
Kheda 0.002 0.003 0.005 0.007 0.009 0.011 0.012 0.014 0.016 0.018 0.019 0.019
Mehasana 0.002 0.005 0.007 0.009 0.012 0.015 0.017 0.020 0.023 0.026 0.026 0.026
Narmada 0.000 0.001 0.001 0.001 0.001 0.002 0.002 0.002 0.003 0.003 0.003 0.003
Navsari 0.002 0.004 0.005 0.007 0.009 0.011 0.013 0.015 0.017 0.019 0.019 0.019
Panchmahal 0.001 0.002 0.003 0.004 0.005 0.006 0.008 0.009 0.010 0.012 0.012 0.012
Patan 0.001 0.002 0.003 0.004 0.005 0.006 0.007 0.008 0.009 0.010 0.010 0.010
Porbandar 0.001 0.002 0.002 0.003 0.004 0.005 0.006 0.007 0.008 0.009 0.009 0.009
Rajkot 0.006 0.012 0.019 0.026 0.033 0.041 0.049 0.057 0.066 0.075 0.077 0.079
Sabarkantha 0.001 0.003 0.004 0.006 0.008 0.009 0.011 0.013 0.015 0.017 0.017 0.017
Surendranagar 0.001 0.003 0.004 0.006 0.007 0.009 0.011 0.013 0.015 0.017 0.017 0.018
Tapi 0.006 0.013 0.020 0.027 0.036 0.045 0.055 0.066 0.078 0.090 0.095 0.099
The Dangs 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.001 0.001 0.001
Valsad 0.002 0.005 0.007 0.010 0.013 0.016 0.019 0.022 0.026 0.029 0.030 0.031
Total Demand 0.043 0.089 0.136 0.186 0.238 0.292 0.349 0.409 0.471 0.537 0.550 0.564
However, for the purpose of projections, a lower demand from household customers has been
assumed which is given in the following table:
Table 27: Realizable Demand Projections - Domestic (MMSCMD)

Demand # 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Assumed for
0.03 0.04 0.06 0.06 0.07 0.07 0.07 0.08 0.08 0.09 0.09
Projections
6.3. Commercial Demand
Most commercial segments (hotels, malls, offices, etc.) predominantly use LPG for meeting their
fuel requirements. Demand in the commercial segment has been worked out considering that it is
likely to be in the region of 10% of the realizable household demand. As per Mott-Mac Donald
study the commercial demand projected over 10 years is as under:
Table 28: Total Demand Projections - Commercial (MMSCMD)

Demand # 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Demand 0.004 0.009 0.014 0.019 0.024 0.029 0.035 0.041 0.047 0.054 0.055 0.056
However, for the purpose of projections, a lower demand from household customers has been
assumed which is as under:
Table 29: Realizable Demand Projections - Commercial (MMSCMD)

Demand # 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total Demand 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
6.4. CNG Demand
Natural gas is used in the form of Compressed Natural Gas (CNG) in automobiles. Demand for
natural gas in the transport segment is estimated based upon vehicular population in each district
along with the average distance covered by each category of vehicle. Different vehicle categories
were studied to arrive at a potential market for CNG. The past growth trends per annum in the
vehicle population have been studied and future growth rates for vehicle population assumed, as
indicated in the following table. These vehicles comprise the total market that can be targeted for
CNG. However, suitable penetration rates, as shown in the following table have been assumed to
compute the CNG demand that GSPC Gas can target.
Table 30: Historical Growth Rates and Penetration Rates

Historical Growth Future Growth Penetration
Vehicle Type
(Gujarat) per Year per Year
Buses - Commercial 2.43% 1% 80%
Taxi (four wheelers) 3.34% 3.34% 60%
Goods Vehicles 2.37% 2.37% 0%
Heavy goods vehicles 2.37% 2.37% 0%
Auto-Rikshaws 5.80% 6% 80%
Two Wheeler 9.35% 9.35% 0%
Motor Car 9.69% 9.69% 8%
An average consumption per day for each category has been used to compute the potential market
for CNG. It can be observed that goods vehicles, heavy goods vehicles and two wheelers have not
been considered in arriving at the potential market as the conversion to CNG in these categories is
very small. The following table gives the total estimated demand of CNG in various districts.
Table 31: Total Gas Demand from Transport segment (in MMSCMD)

District 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Amreli 0.03 0.07 0.10 0.14 0.18 0.19 0.21 0.22 0.23 0.24 0.24 0.25
Anand 0.02 0.04 0.06 0.08 0.11 0.12 0.12 0.13 0.14 0.14 0.15 0.15
Banaskantha 0.06 0.13 0.20 0.27 0.35 0.37 0.39 0.41 0.43 0.44 0.46 0.48
Bhavnagar 0.02 0.04 0.06 0.08 0.10 0.11 0.12 0.13 0.13 0.14 0.14 0.15
Dahod 0.01 0.02 0.03 0.04 0.05 0.05 0.06 0.06 0.06 0.07 0.07 0.07
Gandhinagar 0.01 0.02 0.03 0.04 0.05 0.06 0.06 0.07 0.07 0.07 0.08 0.08
Jamnagar 0.01 0.01 0.02 0.03 0.03 0.04 0.04 0.04 0.04 0.05 0.05 0.05
Junagadh 0.02 0.04 0.06 0.08 0.10 0.11 0.12 0.14 0.14 0.15 0.15 0.15
Kheda 0.01 0.02 0.03 0.05 0.06 0.06 0.07 0.07 0.07 0.08 0.08 0.08
Kuchch 0.04 0.09 0.14 0.19 0.25 0.27 0.30 0.33 0.35 0.36 0.37 0.38
Mehasana 0.05 0.10 0.16 0.23 0.29 0.31 0.33 0.35 0.37 0.39 0.40 0.42
Narmada 0.04 0.09 0.14 0.19 0.24 0.26 0.27 0.28 0.30 0.31 0.32 0.34
Patan 0.08 0.16 0.25 0.34 0.43 0.50 0.57 0.65 0.66 0.67 0.68 0.70
Porbandar 0.01 0.01 0.02 0.03 0.04 0.04 0.05 0.05 0.06 0.06 0.06 0.06
Rajkot 0.03 0.06 0.10 0.13 0.17 0.18 0.19 0.20 0.21 0.21 0.22 0.23
Sabarkantha 0.00 0.01 0.01 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.03 0.03
Surendranagar 0.03 0.06 0.09 0.13 0.16 0.17 0.18 0.18 0.19 0.20 0.21 0.21
Tapi 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
The Dangs 0.00 0.01 0.01 0.02 0.02 0.03 0.03 0.03 0.03 0.04 0.04 0.04
Total 0.47 0.97 1.51 2.07 2.68 2.90 3.14 3.38 3.50 3.63 3.74 3.87
GSPC Gas is currently selling about 139384 SCMD gas through its network of 45 CNG stations, at
an average of about 3000 SCMD per station. The Company plans to increase this network to about
112 by installing 67 CNG stations through the current Project. Based on the current sales and
expected increase in capacity, the demand for CNG has been assumed as indicated in the following
table.
Table 32: Realizable Demand Projections - Transportation (MMSCMD)

District 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total 0.2 0.25 0.33 0.36 0.38 0.4 0.42 0.44 0.46 0.49 0.51
It can be observed that the average consumption per station in 2011 is about 2400 SCMD, which is
on a conservative side compared to the current throughput of 3000 SCMD per station. The average
throughput reaches 3000 SCMD in FY 2013 and thereafter, the demand has been assumed to grow
at a nominal rate of 5%.
The Summary of projected natural gas demand as per Mott-Mac Donald is given as under:
Table 33: Summary of Total Demand Projections (MMSCMD)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Industrial 3.41 4.23 5.16 6.27 7.50 8.77 9.32 9.90 10.52 11.18 11.88 12.62
Domestic 0.04 0.09 0.14 0.19 0.24 0.29 0.35 0.41 0.47 0.54 0.55 0.56
Commercial 0.00 0.01 0.01 0.02 0.02 0.03 0.04 0.04 0.05 0.05 0.06 0.06
Transport 0.47 0.97 1.51 2.07 2.68 2.90 3.14 3.38 3.50 3.63 3.74 3.87
Total 3.93 5.30 6.82 8.55 10.44 11.99 12.84 13.73 14.54 15.40 16.23 17.11
The summary of project natural gas demand which is taken for calculation of projected profitability
statement is given in the following table:
Table 34: Summary of Realisable Demand Projections (MMSCMD)

Quantity 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Domestic 0.02 0.03 0.04 0.06 0.06 0.07 0.07 0.07 0.08 0.08 0.09 0.09
Commercial 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
CNG 0.14 0.20 0.25 0.33 0.36 0.38 0.40 0.42 0.44 0.46 0.49 0.51
Industrial 1.55 2.17 2.83 3.67 4.04 4.24 4.45 4.68 4.91 5.16 5.41 5.68
Total 1.72 2.41 3.13 4.07 4.47 4.70 4.93 5.18 5.44 5.71 6.00 6.30
6.5. Supply of Natural Gas
At present, the Company sources natural gas from GSPC which is the second largest gas marketing
company in India and sources gas from various gas producers. GSPC in turn markets this gas to
various consumers, including city gas companies like GSPC Gas. The key sources of natural gas for
GSPC are:
 PLL supply: GSPC has a 15-year long-term gas supply agreement with PLL’s off-takers i.e.
GAIL, IOCL and BPCL for supplying up to 2.7 mmscmd of gas. In addition GSPC has directly
entered into contract with PLL for supply of spot R-LNG and is the forth off-taker of PLL. PLL
is currently planning a second jetty at Dahej LNG terminal which will increase its capacity to
12.5 MMTPA by March 2011 from present capacity of 10 MMTPA. GSPC has entered into a
heads of agreement with PLL for sourcing additional 1.25 MMTPA gas from the additional
capacity available.
 Hazira LNG: GSPC is the biggest off-taker of Hazira LNG terminal. GSPC has entered into a
gas purchase contract with Hazira terminal for purchase up to 4.0 mmscmd of LNG at spot-
rates.
 PMT fields: GSPC sources around 1 mmscmd of gas from PMT through GAIL.

 Niko Resources Limited: In addition GSPC has entered into a Gas Balancing Agreement
(GBA) with Niko Resources Limited, a 10% partner of RIL in its prolific KG-DWN-98/3
block. Under this agreement, Niko would be supplying about 2 mmscmd of gas from its share
of gas production till March 2014. The gas production from this field has already started.
 Cairn: GSPC has made arrangements with Cairn energy for supplying 0.2 mmscmd gas from
its CBX fields in Gujarat.
 ONGC, Olpad: GSPC receives 0.15 mmscmd gas from Olpad production field of ONGC
 Gas sourced from its own fields: GSPC has entered into arms’ length supply contracts with
its consortium partners in various fields for their share of gas.
 GSPC’s KG Block: GSPC has made a huge discovery in the KG Basin, and production is
expected to commence in 2011.
Apart from these huge sources, the Company may get gas from GSPC Hazira Fields and other
satellite fields located in Gujarat. Hence, the total supply to GSPC is expected to be around 25
MMSCMD, while the peak demand from GSPC Gas is expected to be around 3 MMSCMD over
the next 5 years, which can be fulfilled easily through the gas sources available to GSPC.
6.6. Transmission of Natural Gas
Gujarat State Petronet Limited (GSPL) is the only company in this region with trunk pipelines for
transmission of natural gas. The Company has already entered into Gas Transmission Agreement
with GSPL for transportation of natural gas to locations where it has already commenced
operations. The development of distribution network have been planned in such a way that the
targeted locations fall along the GSPL pipeline. Hence, connectivity from GSPL will be available at
various tap off points to GSPC Gas. The Company may not need to lay steel pipelines to distant
locations as the demand centers would be in the vicinity of trunk line.
6.7. Pricing of Natural Gas
Gas price for different segments are usually based upon various factors like volume of gas
purchased, cost of supplying gas, cost of alternate fuels, etc. Considering these factors, varying
tariffs have been proposed to be charged to industrial consumers. The price to domestic/commercial
customers is based on the prevailing LPG prices for households and commercial outlets. Currently,
an LPG cylinder costs around Rs 300 for the households due to the subsidy provided by the

government. Weight of this cylinder is 14.2 kg and usually, a cylinder lasts around 30 days in a
household. Equivalent price of natural gas can be determined as explained in the following table.
Table 35: Pricing of LPG equivalent PNG

S. No. Head Rate Remarks
The price is artificially kept lower by
1 Price of LPG Cylinder Rs 300/unit
providing subsidy
Out of this quantity, some amount always
2 Quantity of LPG in cylinder 14.2 kg
remains unused
3 Unit price of LPG Rs 21.13/kg --
Unit price of LPG Rs 1.78/million Calorific value of LPG is taken as
4
(energy terms) calorie 11834.3 kcal/kg
Calorific value of PNG is taken as 8350
5 Equivalent PNG price Rs 14.90/scm
kcal/scm
For the financial projections, selling price of PNG to households has been taken as Rs 12.5/scm.
Inclusive of VAT, the effective price of PNG would work out to around Rs. 14/scm. Assuming a
consumption of 0.5 SCMD per household, the monthly expenses for PNG would be around Rs 200
as compared to monthly expense of Rs 300 for LPG (assuming 30 days for one LPG cylinder). For
commercial outlets, the selling price has been taken as Rs 18/scm. This will be competitive vis-à-
vis LPG cylinders purchased by commercial users @ Rs.700-800 for the 19 kg cylinder which gives
an equivalent price of about Rs 27/scm.
The price for CNG is based on the prevailing CNG selling prices in Gujarat and it is also ensured
that CNG prices work out to be cheaper than the cost of petrol/diesel. Selling price of petrol is
usually in the range of Rs 45/litre and that of diesel is in the range of Rs 35/litre. The equivalent
price of natural gas for both these auto fuels is explained in the following table.
Table 36: Pricing of auto-fuel equivalent CNG

S. No. Alternate Transportation Fuel Petrol Diesel
1 Selling price Rs 45/litre Rs 35/litre
2 Calorific Value (million calorie/scm) 8478.68 8900.33
3 Unit Price (energy terms) Rs 5.31/mmcal Rs 3.93/mmcal
4 Equivalent price for Natural Gas Rs 44.31/scm Rs 32.83/scm
5 Equivalent price for CNG Rs 53.62/kg Rs 41/kg
6 CNG Price, inclusive of VAT and Excise Duty Rs. 27/kg Rs. 27/kg
7 Savings Rs. 26.62/kg Rs. 14/kg
It can be observed that the price of petrol equivalent CNG is about Rs. 53.62/kg, which indicates
that if CNG were to replace petrol, then it can be competitive vis-à-vis petrol at prices below Rs.
53.62/kg of CNG. If the basic price of CNG is Rs. 21.27/kg, the effective price including excise

duty and VAT works out to about Rs. 27/kg. Hence, if a liter of petrol was to be replaced by CNG
priced at Rs. 27/kg, the savings to consumer would be Rs. 26.62 per kg. Similarly, the savings that
can be realized by replacing diesel with CNG will be in the range of Rs. 14/kg. Basic selling price
(exclusive of VAT and Excise Duty) of CNG for profitability projections has been taken as Rs
21.27/kg.
In case of industrial use, the competing alternate fuels are Furnace Oil (FO), Low Sulphur High
Stock (LSHS) and Light Diesel Oil (LDO). Among these FO is primarily used for heating
applications where as LSHS are used for power generation and heating applications. The following
table gives the equivalent price of natural gas based on the prevailing alternate fuel prices.
Table 37: Pricing of Fuel Oil on Energy Equivalence Basis

S. N. Alternate Fuel FO LSHS LDO
1 Selling price* Rs 27132/kl Rs 32,000/kl Rs 41173/kl
2 Calorific Value 10,100 Kcal/kl 9,700 kcal/kl 8800 Kcal/kg
3 Equivalent price for NG Rs 22.43/scm Rs 27.55/scm Rs 39.07/scm
* Landed Price, Ex Koyali
From above, for a consumer using FO, LSHS and LDO, based on energy equivalence, the
equivalent prices which could be charged would be Rs 22.43/scm, Rs 27.55/scm and Rs 39.07/scm
respectively. Thus the proposed selling price of Rs 15.75/scm for industrial consumers would be
competitive vis-à-vis alternate fuel prices. In addition the benefits arising from environmental
friendly nature of natural gas as compared to alternate fuels acts as an added incentive.
In addition Natural gas also competes with Naphtha. Naphtha is primarily used in power plants for
heating application and in fertilizer industry as feedstock as well as for heating applications.
Presently NG has substituted Naphtha due to high prices (About Rs 44500 per MT). Thus
considering calorific value of 10500 Kcal/kg, the equivalent prices of gas would be Rs 35.73/scm.
In view of above the gas would be able to substitute alternate fuels in the long term.

7. PROJECT
7.1. Master Plan Overview
GSPC Gas has prepared a Master Plan to facilitate orderly, flexible and ecologically friendly
development of City Gas Distribution Network in Gujarat. This Master Plan is expected to be
implemented over a period of 5 years and would involve setting up of 2680 km of steel grid, 425
DRS units, 300 CNG stations and 86500 km of PE network across Gujarat. This will enable the
Company to provide PNG connections to 2 million households and supply PNG to commercial and
industrial establishments. The Company has identified 22 districts out of the total 26 districts in
Gujarat where it plans to develop the CGD network. The planning of the gas distribution network is
carried out in such a way that all the cities are well connected with the optimum length and size of
network. The company plans to supply more than 10 mmscmd of natural gas as per the Master
Plan.
7.2. Project Synopsis
The proposed Project which is being implemented over next 24 months is a part of the Master Plan.
The Project constitutes expansion of the existing CGD network of the Company in the state of
Gujarat. The infrastructure will be developed in the most efficient manner around areas of major
demand concentration. The Company currently owns and operates 202 km of steel pipeline
network, 1893 km of PE pipeline network, 18 mother CNG station and 5 daughter CNG stations. It
is already supplying gas to 44170 domestic customers, 231 commercial customers and 491
industrial customers.
As part of the current Project, the Company will be laying 452 km of steel pipeline network, 3853
km of PE pipe network and install 70 district regulatory stations. The Company will also be setting
up 67 CNG stations - 22 mother CNG stations on own site or GSPC owned GSRTC sites while 5
mother CNG stations would be at co-located sites and 40 daughter CNG stations are being setup at
various locations in Gujarat. The CNG stations will be setup to cover the densely populated areas to
target intra-city vehicular demand and also along highways to capture inter-city vehicular demand.
Development of this network over the next 24 months will enable the Company to increase its
throughput from the current 1.7 MMSCMD to 4.5 MMSCMD in the next 4 years, supplying gas to
different customers in the Industrial, Domestic, Commercial and Transportation segments. As part

of this Project, the Company plans to connect more than 3 lakh domestic customers and set up CGD
network in different towns and cities.
GSPL has created a state-wide grid of trunk line for supply of gas in Gujarat. GSPC Gas will be
sourcing its gas through the gas grid of GSPL from various gas supply sources located in Gujarat or
reaching to Gujarat through cross country pipelines. Currently, GSPL has 1370 km long pipeline
network and will reach 2500 km network in next 3 years. The network of GSPC Gas will be
expanded in areas where it already has a presence, with proximity to transmission lines of GSPL or
in cities where transmission lines are planned in the immediate future. This would ensure easy
connectivity to the transmission networks of GSPL. The following map shows the gas transmission
grid of GSPL in Gujarat.
Figure 4: GSPL’s Gas Grid

GSPL network currently spans Vapi – Morai – Sajod – Baroda – Anand – Chotla – Rajkot – Morbi
– Gandhinagar – Kalol - Himmatnagar. GSPC Gas has taken tap off points from GSPL’s network at
different places i.e. Vapi, Morai, Bharuch in South Gujarat, Morbi, Rajkot in Saurashtra,
Gandhinagar, Bharuch for sourcing gas in these districts. GSPC Gas will also be connecting to
GSPL’s network and lay pipelines from these tap off points to various locations for onward supply
to end consumers.
The Company has applied to PNGRB for authorization of its city gas distribution network in 10
regions in Gujarat. Development of the gas distribution network has been planned in line with the
demand estimates of the identified locations. The Company is planning to develop the city gas
distribution network in 22 out of 26 districts of Gujarat in next five years time.
7.3. Capital Expenditure Plan
The Company is preparing a master plan to be implemented over next 5 years period to have pan
Gujarat presence of its network. The Company will be implementing the CGD network in phases,
taking into consideration market environment and demand-supply dynamics. Accordingly the capex
plan for current funding for next 24 months is part of the larger master plan of the company.
As part of the current Project, the Company will be laying 452 km of steel pipeline network, 3853
km of PE pipe network and install 70 district regulatory stations. The Company will also be setting
up 67 CNG stations - 22 mother CNG stations on own site or GSPC owned GSRTC sites while 5
mother CNG stations would be at co-located sites and 40 daughter CNG stations are being setup at
various locations in Gujarat.
The capital expenditure planned during the current financial year will be funded from debt and
equity/internal accruals in the ratio of 2.33:1. The Facilities to be set-up during the current financial
year are given in the following table.
Table 38: Project Facilities

Infrastructure Break-up Unit
Steel Network
Steel Pipes – Industrial (8”) 448 km
Steel Pipes - 4” 4 km
Total Steel Network 452 km
PE Network
PE Pipes 3,853 km

Infrastructure Break-up Unit

PE Network Valves 497 units
Other Infrastructure
DRS 70 units
Odorization Unit 4 units
Domestic PNG Connections 302,993
MRS 528 units
CNG Stations
Mother CNG Stations 27
Daughter CNG Stations 40
Total CNG Stations 67
7.3.1. City Gate Stations (CGS)
City Gate Stations are the interface between high pressure gas flowing from transmission lines and
the medium pressure local gas distribution networks. They offer the following functionality:
 Termination of high pressure up-stream pipeline
 Filtration
 Metering
 Pre-heating
 High integrity pressure reduction and control
 Dispatch in the down-stream network
Presently, the Company has installed City Gate Stations at 9 locations i.e. Chandrakheda,
Gandhinagar, Hazira, Morbi, Nadiad, Rajkot, Navsari, Valsad, Vapi. The CGS locations have been
decided in such a way that all the main demand centers are supported by at least one station i.e. one
city gate station at each Taluka Headquarter. However, the Company is not planning to setup
additional City Gate Station during the current capex plan as the existing CGS would be sufficient
to facilitate the expansion of the network envisaged in the current capex plan for the next 24
months.
7.3.2. Steel Network
7.3.2.1. Spur Lines
Spur Lines are used to connect tap-off points from GSPL’s trunk lines to the individual city gate
stations. GSPC Gas already has tap-off points from GSPL’s network for its existing operations. As

GSPC Gas’s network expands into new cities/regions, GSPC Gas will be able to take a tap-off from
GSPL’s network wherever GSPL’s network is present. Tap off points on the new transmission lines
are identified as per the location of the potential cities so that the distance between tap-off points
and city gate station is minimum. The routing of spur lines is carried out based on desk stop study
of the district wise maps to connect the city gate stations. The following criteria were adopted while
routing the spur line:
 Shortest length of the pipeline

 Minimum crossing of existing pipelines, transmission lines, parallel alignments, roads, rail,
river and canal crossings
 Easy and favorable terrain conditions
 Ground profile for pipeline hydraulics, avoidance of hills and valleys having sloping right
of way
 Environmental impact
However during the current capex plan for the Project, the Company will not be laying any spur
pipeline.
7.3.2.2. Steel Pipes
Steel pipelines can withstand high pressures and hence used wherever higher pressure of natural gas
is required in the distribution system. A steel grid is laid out in a city to connect city gate stations
with various demand clusters/large consumers. The connection to industrial and commercial
consumers is through a steel pipeline Based on the gas demand for each region; the diameter and
the length of the steel grid are calculated. Steel pipes of sizes 8” and 4” are being implemented in
the current Project. The pipelines and main valves are designed for a service life of 40 years. At
road, rail and water crossings, the steel pipelines have been designed to withstand superimposed
loads by using heavy wall pipe, concrete coating. The underground pipelines will be coated with a
high quality three layered PE coating and provided with a cathodic protection to ensure corrosion
protection. In the current Project, the Company plans to lay 452 km of steel pipelines 8” and 4”
diameters.
7.3.3. Polyethylene Network
The last mile connectivity to end users with low pressure requirements is made through a
polyethylene (PE) pipe network. The PE network and pipeline requirement is decided based on the
number of connections to end users in each region and the demand quantities. The Company
currently owns and operates a PE network of 1893 km spread across Sarigam, Vapi, Morai, Valsad,

Gundlav, Navsari, Hazira, Bhatpore in South Gujarat; Halol, Khambhat, Anand, Nadiad,
Chandkheda, Motera in Central Gujarat and Surandranagar, Morbi and Rajkot in Saurashtra.
Through the current Project, an additional PE network covering 3853 km will be implemented. The
proposed PE network will cover existing networked areas as well as new areas.
7.3.4. District Regulating Stations (DRS)
District Regulating Stations (DRS) reduce the pressure of gas flowing from steel grids into the PE
network. The PE network originates from the DRS. GSPC Gas has standardized the DRS capacities
based on the pressure requirements of different end users, into 5 categories in terms of capacity, i.e.,
250, 500, 1000, 2500, 5000 standard cubic meters per hour (SCMH). Based on the total load for
each region, the number of DRS modules required, the capacity of each DRS are calculated. The
company presently has 20 DRS and proposes to add another 70 DRS units through the Project.
Every DRS will have PE pipe network of different diameters coming out of the station to supply
gas to consumers. Each DRS will have two feeder modules to deliver gas – one for household
consumers and the other for one industrial user as well as commercial consumers. The feeder for
household consumers can cater to around 10,000 connections.
7.3.5. Domestic PNG Connections
The company propose to connect approx. 3,00,000 more customers during next 24 months. Gas
from the DRS flows to a unit known as Society Module, through the PE network. Each society
module in turn delivers gas to domestic consumers at the required pressure through a network of PE
pipes having smaller diameters. Each society module typically supplies natural gas to around 50
households. Meter Regulators and meters with adopters will be installed for each consumer
separately. After the meter regulator, piping inside the house will be done by the Company itself.
This piping inside the household will be of galvanized iron (GI).
7.3.6. Metering and Regulating Stations (MRS)
Meter Regulating Stations (MRS) modules are installed at the premises of a commercial/industrial
consumer to reduce the pressure of incoming gas to the desired pressure levels for each consumer.
One Meter Regulating Station would be installed in the premises of each individual customer. The
Company plans to install 528 MRS in next 2 years period and the proposed location for first 264
MRS are given in the following table. The locations for balance MRS would be decided in next few
months.

Table 39: Location of MRS

Region / Location No: of MRS
South Gujrat – Vapi, Sarigam, Gundlav, Morai, Nasari, Hazira 58
Saurashtra – Thamgadh, Morbi, Surendranagar 119
Dahej - 29
Halol 49
Nadiad 9
Total 264
7.3.7. CNG Stations
The Company will be setting up 67 CNG stations within the next 24 months. Based on the
capacities, CNG stations are classified as mother/online and daughter, co-located stations. The
Company will be setting up 16 mother CNG stations at GSPC Gas owned sites and 6 mother CNG
stations at GSRTC sites. 5 mother CNG stations will be located at the retail fuel outlets of oil
marketing companies like IOCL/BPCL/HPCL and are known as co-located stations. Additionally,
the Company will also be setting up 40 daughter CNG stations at various locations across Gujarat.
7.3.8. Other Facilities
7.3.8.1. Odorization
Natural gas which, by nature, is odorless makes detection of leaks impossible without special gas
detection tools. Hence, it is mandatory to add an odorant to gas before it enters the medium pressure
distribution system, through an odorization unit. Odorization of gas will be carried out through
injection of sulphur in adequate proportion into gas on the medium pressure side of the network.
The company proposes to install 4 odorization units as part of the Project.
7.3.8.2. SCADA
A SCADA (Supervisory Control and Data Acquisition) system refers to an industrial control system
with a computer system used for monitoring and controlling a process. A SCADA system is used to
monitor and control pipelines in a CGD network from a master control room. The SCADA system
shall accommodate both local and remote control functions as well as data storage and trending.
Additionally, the Company has two emergency control rooms and customer care centers each in all
the districts, which help the Company in proper monitoring of its operations. The Company will be
using the existing SCADA for monitoring and control.

8. PROJECT IMPLEMENTATION
GSPC Gas currently has operations in various areas in Gujarat, with gas sales of Rs.841 Crore for
FY 09. The Company presently operates in South Gujarat, Central Gujarat and Saurashtra regions.
In order to expand further in its current areas of operation and penetrate new areas, the Company
has prepared a Master Plan, to be implemented over a 5 year period. Since the nature of city gas
distribution business is such that operation and construction can take place simultaneously, the
Company plans to implement this Master Plan in phases. In the initial years, the penetration rate
will be relatively lower in new areas but the demand will grow significantly after two-three years of
continuous operation. As per the Master Plan, in the next 2 years the Company would be expanding
its existing areas of operation with aim to have a pan Gujarat presence.
8.1. Project Management
The Company is already in operation and is expanding its network on a continuous basis, for which
it relies on a dedicated team of professionals responsible for carrying out all the project
implementation activities. The Company carries out project implementation through reputed and
experienced contractors, project management consultants and third party agencies. The Company
has a well developed vendor network to procure various capital goods for the Project at very
competitive rates. All the permissions and approvals for the Project like RoU/RoW, statutory
clearances etc. will be secured by the Company, with the active support of its promoters - GSPC
and GSPL.
8.2. PNGRB Status
CGD networks are regulated by the PNGRB guidelines. New CGD network have to bid for setting
up and operating a network in a region and require PNGRB approval. CGD networks which have
been operating prior to establishment of the PNGRB need to notify PNGRB on their network,
physical progress and operations for authorization. GSPC Gas’s existing CGD network comprising
CNG stations, industrial supplies and PNG connections in various districts is as under:
Region / City / Town CNG PNG Industrial
Saurashtra
 Rajkot √ √
 Morbi √ √ √

 Chotila √
 Thangadh √ √
 Limdi √
Region / City / Town CNG PNG Industrial
 Surendranagar √
South Gujarat
 Navsari √ √
 Valsad √ √
 Vapi √ √
 Bharuch √
 Sarigam √ √
 Hazira √ √
Central Gujarat
 Nadiad √ √
 Anand √
 Khambhat √
North Gujarat
 Gandhinagar City √ √ √
 Chandkheda and
Motera √ √
 Pathapur √
 Rayson √
 Kalol √
The Company has divided various locations where it is presently operating and where it plans to
operate in Gujarat into 10 regions i.e. Valsad, Hazira, Navsari, Nadiad, Khambat, Gandhinagar,
Halol, Palej, Rajkot, and Surendernagar. Since, GSPC Gas had commenced CGD operations prior
to the establishment of PNGRB (“the Appointed Date”), as part of the approval process, GSPC Gas
has furnish details of its current status of operations to PNGRB and made the requisite filings and
has applied to the PNGRB for approval in above 10 regions. Since the Company has operations in
each of the 10 regions before the Appointed Date (October 2007), it does not envisage difficulties in
getting requisite permissions from PNGRB for its operations in these 10 regions.

9. PROJECT COST
9.1. Overview
The Core Cost of the Project has been estimated at Rs.1003.68 crore and the As-Built Cost,
including inflation adjustments, contingency and soft costs has been estimated at Rs.1,199.30
Crore. The Company has developed a detailed capex plan based upon the Tractebel Engineering
report, budgetary quotes and in-house data for the unit costs for all the major equipments. The
phasing of capital expenditure has been worked out based on the company’s demand estimate
which has been based upon Tractebel report and Mott Mcdonald market study. The break-up of the
Project cost is given in the following table.
Table 40: Project Cost Summary

Item Cost (Rs. Cr.)
Steel Pipes - 4" and 8" 349.85
PE Network 229.27
Service Regulators 14.88
DRS 11.67
Odorization Unit 1.15
Domestic PNG 219.65
MRS 31.68
CNG Stations 138.93
Central Pressure Regulating System (CPRS) 6.60
Core Cost 1,003.68
Contingency 50.18
Inflation Adjustment 75.30
Hard Costs 1,129.16
Margin Money 37.50
Financing Charges 2.78
IDC 29.86
Total Soft Costs 70.14
Total Project Cost 1,199.30
The As Built Cost of the Project estimated at Rs 1,199.30 crore comprises a Core Project Cost of
Rs. 1003.68 crore based on capital costs estimated by the Company and Tractebel. An annual
inflation factor of 5% and a contingency of 5% on the Total Core Cost have been factored in to
arrive at the hard cost estimate of Rs.1129.16 Crore. The soft cost of Rs.70.14 Crore includes
Margin Money for Working Capital (Rs.37.50 Crore), Interest during Construction (IDC) of Rs.
29.86 Crore and Financing Charges of Rs. 2.78 Crore. Hard cost and soft cost estimates together
give the Project Cost estimate of Rs. 1,199.30 Crore. The detailed break-up of the Project Cost is
given in subsequent sections.

9.2. Steel Network
The Steel Network cost of Rs.349.85 crore includes cost of steel pipe, taxes and duties, laying cost
and other supervisory & statutory charges. Based upon the steel pipeline network envisaged to be
set-up by the Company, the total cost for steel pipeline network has been estimated using the unit
cost /km as indicated in the table below.
Table 41: Unit cost of Steel Pipeline

(Rs. Crore)
S. No. Item Length (Km) Unit cost /Km Cost
1 Steel Pipes - 4" 4 0.1400 0.56
2 Steel Pipes - Industrial (8") 448 0.2797 125.29
3 Steel Network Cost 448 0.5000 224.00
Total 349.85
9.3. Polyethylene Network
The Polyethylene Network cost of Rs.229.27 crore include cost of PE pipes, taxes and duties,
laying cost and other supervisory and statutory charges. Based upon the PE network envisaged to be
set-up by the Company, the total cost for PE network has been estimated using the unit cost /km as
indicated in the table below.
Table 42: PE network cost

(Rs. Crore)
S. No. Item Length / Units Unit Cost Cost
1 PE Pipes & Laying Cost 3853 km 5.93 lakh/km 228.51
2 PE Network Valves 497 nos. 0.15 lakh/ unit 0.76
Total 229.27
9.4. Service Regulators
Cost of the service regulators of Rs.14.88 crore is based on estimated requirement of 917 units of
service regulators @ Rs.1.62 lakh/unit.
9.5. Odorisation Unit
The cost on account of Odorisation unit has been taken as Rs.1.15 crore based on an estimated
requirement of 4 odorisation units at a cost of Rs. 28.72 lakh each.

9.6. Domestic PNG Connection cost and MRS
The cost of Rs. 219.65 crore is on account of PNG connection cost and domestic MRS. The PNG
connection cost has been estimated to be Rs.181.8 crore, based upon cost of 302993 no. PNG
connection @ Rs.6000/connection. The cost on account of domestic meters & regulators has been
estimated at Rs.37.85 crore based upon cost of installation of 601308 units of domestic meters and
regulators at Rs.630/unit.
9.7. Pressure Regulating Systems
Pressure Regulating Systems cost of Rs.49.95 crore consists of cost of District Regulating Stations
(Rs.11.64 crore), Meter Regulating Stations (Rs.31.68 crore) and Central Pressure Regulating
System (Rs.6.60 crore). The details break up of the cost is given as under.
9.7.1. District Regulating Stations (DRS)
The cost of single District Regulatory Station is assumed to be Rs.16.67 lakh/unit. As such the total
cost of 70 DRS works out to Rs.11.67 crore.
9.7.2. Meter Regulating Station (MRS)
The size of MRS will depend upon the customer requirement and similarly the cost will also vary
for individual customers. However on an average, cost of a single MRS is taken as Rs.6 lakh/unit.
The total cost of Meter Regulating Station works out to Rs.31.68 crore for 528 MRS units.
9.7.3. Central Pressure Regulating System
Cost of Central Pressure Regulating System (CPRS) of Rs.6.60 crore is based on estimated
requirement of 15 no. of CPRS units @ Rs.44 lakh/unit.
9.8. CNG Stations
The Company will be installing 2 types of CNG stations i.e. Mother CNG Station and Daughter
CNG Station. Mother CNG stations (27 nos.) will be either at owned land or leased land (27 nos.
The company also proposes to set up 40 daughter stations are various location in Gujarat. The total
cost of CNG Station of Rs.138.93 crore includes cost of Mother CNG Station (Rs.114.93 crore) and
daughter CNG station (Rs.24.12 crore). The break-up of cost on account of CNG stations is given

Table 43: Cost Break-up of Mother CNG Stations

S. No. Item Description Qty Rs. Lakh / Unit (Rs. Crore
1 Mother CNG Stations at GSPC sites 16 522.75 83.64
2 Mother CNG Stations at GSRTC sites 6 373.99 22.44
3 Mother CNG stations at Co-located sites 5 177.00 8.85
4 Daughter CNG Stations 40 60.00 24.00
Total 138.93
9.9. Contingency
Provision on account of contingency of Rs.50.18 crore has been taken @5 % of the hard costs of
Project.
9.10. Inflation & Escalation
Provision on account of escalation and inflation has been assumed @ 5% p.a. based upon the capex
phasing schedule, amounting to Rs. 75.3 crore.
9.11. IDC & Financing Charges
Cost on account of Interest During Construction (IDC) and financing charges has been estimated to
be Rs.32.64 crore, base upon the proposed capex plan and financing plan of the Company.
9.12. Margin Money
The margin Money for Working Capital is estimated to be Rs.37.50 crore. The total working capital
has been computed based on the following norms.
Table 44: Cost Break-up of Mother CNG Stations

Item Norm Amount (Rs. Cr.)
21 days of sales, inclusive of excise duty and
Receivables 114.10
VAT
Inventory (Gas in line) 5 days 21.42
Cash Expenditure 15 days 1.12
Total Current Assets (A)
Creditors 21 days 72.83
Total Current Liabilities (B) 72.83
Net Working Capital (A) – (B) 63.81
Incremental Working Capital 37.50
Margin Money 37.50
The incremental working capital requirement of Rs.37.50 Crore in FY 2010 has been considered as
the margin money, to be funded through long term debt and equity. In subsequent years, the

increase in working capital requirements would be met through mix of internal generations and
bank borrowings.

10. MEANS OF FINANCE
10.1. Overview
The cost of Project, estimated at Rs.1,199.30 Crore is proposed to be financed at a debt-equity ratio
of 2.33:1 i.e. debt of Rs.839.15 crore and equity of Rs.360.15 crore. The equity of 360.15 Crore will
be brought in through internal accruals and/or by fresh equity infusion and/or initial public offer.
The debt requirement will be primarily financed through Rupee Term Loans (RTL). The proposed
funding pattern is indicated in the following table.
Table 45: Means of Finance

Source Amount (Rs. Crore)
Equity 360.15
Debt 839.15
Total 1,199.30
10.2. Equity Financing
The total equity requirement for the project has been estimated at Rs. 360.15 Crore. The Company
is expected to generate cash profits in the range of Rs.330 crores in next 24 months in addition to
cash accruals of Rs.105 crore in FY 2009. The Company is also planning to come out with an IPO
in near future. As such the equity contribution for the project would consist of contributions from
the promoters, internal generations and/or IPO proceeds.
10.3. Debt Financing
The debt requirement of Rs. 839.15 Crore is proposed to be met primarily through Rupee Term
Loans from banks and Financial Institutions. The long term debt would have a door to door tenor of
10 years with drawdown period of 2 years, moratorium period of 1 year and repayment period of 7
years. The RTL is proposed to carry interest which would be linked to respective bank PLR.

11. FINANCIAL ANALYSIS

Profitability projections of the Company have been made based on a certain set of assumptions.
These assumptions have been detailed in Annexure III. The sales volumes of gas are projected
based upon the current volumes, infrastructure being created as part of the projected and expected
growth in gas demand. The purchase and selling price of gas are based upon the current purchases
and selling prices as given in the following table.
Table 46: Gas Purchase and Sales Prices

Equivalent Price in
Purchases Price Rs/scm
US $/mmbtu
Gas Purchase Price 11.25 7.00
Equivalent Price in
Sales Price Rs/scm
US $/mmbtu
Domestic 12.50 7.78
Commercial 18.00 11.20
CNG 21.70 13.50
Industrial 15.75 9.80
Gas transportation costs are based upon the transportation charges payable to GSPL, while other
Operating expenses are based upon the actual for last financial year. The gas sales volumes assumed
for each segment of consumers is indicated in the following table.
Table 47: Sales Volumes

(MMSCMD)
FY ended March 31st, 2010 2011 2012 2013 2014 2015 2016
Domestic 0.03 0.04 0.06 0.06 0.07 0.07 0.07
Commercial 0.00 0.00 0.01 0.01 0.01 0.01 0.01
CNG 0.20 0.25 0.33 0.36 0.38 0.40 0.42
Industrial 2.17 2.83 3.67 4.04 4.24 4.45 4.68
Total 2.41 3.13 4.07 4.47 4.70 4.93 5.18
Profitability projections have been made based on the pricing and sales volume assumptions
indicated in the above two tables. A summary of profitability projections for next 7 years are given

Table 48: Profit & Loss Account

(Rs. Crore)
FY ended March 2010 2011 2012 2013 2014 2015
Sales 2.41 3.13 4.07 4.47 4.70 4.93
Revenues
Domestic 15.39 20.01 26.01 28.61 30.04 31.54
Commercial 2.33 3.02 3.93 4.32 4.54 4.77
CNG 98.80 128.44 166.97 183.66 192.85 202.49
Industrial 1,219.94 1,585.92 2,061.69 2,267.86 2,381.26 2,500.32
Total Income 1,336.45 1,737.38 2,258.60 2,484.46 2,608.68 2,739.11
Expenses
Gas Purchase Cost 984.46 1,279.80 1,663.73 1,830.11 1,921.61 2,017.69
Gas Transportation Charge 122.52 159.27 207.06 227.76 239.15 251.11
O&M Exp. 8.56 13.49 17.00 17.85 18.74 19.68
Salaries and Wages 14.52 17.46 21.36 23.80 25.78 27.95
Admin &Other Exp. 14.40 17.91 22.08 24.04 25.12 26.44
Total Expenses 1,144.45 1,487.93 1,931.22 2,123.56 2,230.41 2,342.87
EBIDTA 191.99 249.45 327.37 360.89 378.28 396.25
Total Interest 26.42 49.15 96.22 98.10 82.31 69.72
PBDT 165.57 200.30 231.15 262.79 295.97 326.52
Depreciation 26.85 48.94 73.36 82.32 83.33 85.97
PBT 138.72 151.35 157.79 180.48 212.63 240.55
Current Tax 23.57 25.72 26.82 30.67 36.14 40.88
Deferred Tax Liability 23.57 25.72 26.82 30.67 36.14 40.88
PAT 91.57 99.91 104.16 119.13 140.36 158.79
11.1. Profitability Parameters
The main profitability parameters of the project are given in following table.
Table 49: Profitability Parameters
S. No. Parameters Results
1 Project IRR 25.09%
2 Average DSCR 2.09
3 Minimum DSCR 1.46
Projected Profit & Loss Account, Cash Flow Statement and Balance Sheet are given in the
Annexure IV, V and VI.
11.2. Sensitivity Analysis
A sensitivity analysis has been carried out to assess the impact of changes in revenues, Project cost
and operating costs on the profitability parameters. A deviation in gas selling price, sales volume,

increase in the Project Cost and operating costs can affect the project cash flows. To analyze these
impacts, various scenarios, as detailed in the following sections have been considered.
 Scenario I: Cost Overrun
The Company is in the process of negotiating and issuing final purchase order for a majority of
equipment and pipelines. It is expected that the Company would be able to implement the Project as
per the estimated Project Cost. However, a sensitivity analysis has been carried out to assess the
impact of a 10% cost overrun on the Project.
 Scenario II: Increased Operating Expenditure
In the profitability projections, the operating expenditure has been estimated based upon various
costs associated with city gas distribution business. An escalation 5% p.a. has been applied on all
the components of operating cost. Sensitivity has been carried out with 10% increase in the
operating cost every year.
 Scenario III: Lower Margins by 5 %
In this sensitivity analysis, the purchase price of natural gas has been kept constant, while the
selling price for only industrial consumers have been lowered by 5%.
Results of these sensitive scenarios are given in the following table.
Table 50: Results of Sensitivity Analysis

S. No. Parameters Base Case Scenario I Scenario II Scenario III
1 Project IRR 25.96% 23.24% 24.50% 23.38%
2 Average DSCR 2.07 1.96 2.05 1.99
3 Minimum DSCR 1.52 1.39 1.44 1.39
It is evident from the sensitivity results that, the profitability parameters are comfortable for the
sensitivities related to Project cost and operating cost. It may be observed from the above analysis
that Project is sensitive to the reduction in the margin in gas business. However even at lower
margins, the average DSCR and Project IRR indicate that the Company will be able to meet its debt
service obligations comfortably.

12. SWOT ANALYSIS

The analysis of the strengths and weaknesses of the Project, potential opportunities and the threats
to the Project have been summarized in the following 4 sections.
12.1. Strengths
 The Promoters - GSPC and GSPL are leading Government of Gujarat entities having vast
experience in oil and gas sector, excellent track record in project implementation and
financial strength to support the Project.
 GSPC is supplying gas to the Company and has entered into a MoU for gas supply for the
same. GSPC is currently supplying 9 MMSCMD of gas in Gujarat. With large discoveries
of gas in KG basin, proposed LNG terminal at Mundra and existing gas tie ups with
Petronet LNG Ltd., Hazira LNG (Shell) and GAIL (PMT Fields), it will be comfortably
placed in terms of gas sourcing for onward supply to GSPC Gas.
 GSPC sources gas from various sources on a long term contractual basis and from the spot
markets. This gas is sold to consumers at a pooled price. This helps in minimizing the risk
of lower margins that would have arisen from single source for Gas.
 GSPL has an extensive network of trunk pipelines in Gujarat and GSPC Gas will be able to
develop its CGD network in places where GSPL’s trunk-line connectivity is available.
GSPC Gas is planning the expansion of its CGD network in tandem with GSPL’s network
expansion. This will help GSPC Gas to synergize its network with GSPL’s network,
minimize capex and achieve maximum coverage across Gujarat.
 GSPC Gas is in the CGD business for the past 4 years and has gained a significant
experience in setting up city gas distribution networks and an understanding of the local
market for gas distribution. It already owns and operates a gas distribution network
supplying 1.71 MMSCMD gas to domestic, commercial, transport and industrial
customers.
 The Company has a strong operating history over the past four years, with a sales turnover
of Rs.860 Crore and a PAT of Rs.75 Crore for FY 2009.
 The Project is located in Gujarat, which is one of the most developed gas markets in India
in terms of consumer demand and gas availability, with a share of more than 40 % of the

national gas demand. Proximity to major gas fields and India’s two LNG terminals at Dahej
and Hazira (with GS
 PL transporting 8 MMSCMD of the re-gasified-LNG), and access to the well developed

pipeline infrastructure of GSPL, which is connected to major cross-country gas pipelines of
GAIL and Reliance will enable GSPC Gas to expand its network and source gas.
12.2. Weaknesses
 The company has applied to PNGRB for operations in existing and new areas and is yet to
receive an approval. However, since the proposed capex for the Project is in areas where
the Company already has operations prior to the establishment of PNGRB, it is not
considered as major risk for current capex.
 PNG demand arises mainly from process industries which may shift to other fuels if the gas
prices are higher than alternate fuels. However since the gas is mostly cheaper than
alternate fuels switching of demand to alternate fuel is not perceived to be major risk.
12.3. Opportunities
 Gas demand in India is constrained by insufficient gas distribution infrastructure. In the

state of Gujarat, GSPL is putting up an extensive statewide network of trunk pipelines to
fulfill untapped demand for gas in Gujarat. GSPC Gas will be well placed to further expand
the retail gas distribution network to exploit the latent demand for gas.
 PNGRB may invite bids for developing CGD network in new cities across India where
GSPC Gas may able to participate on account of its financial strength and expertise in
setting up and operating CGD networks.
12.4. Threats
 The Government may permit entry of competing CGD Networks planned by other
companies in Gujarat in future. However since GSPC and GSPL are the Promoters of
GSPC Gas and have a large share in gas supply and trunk pipeline network in Gujarat,
GSPC Gas would be competitively placed in terms of executing and operating CGD
networks in Gujarat vis-à-vis other companies.

13. RISK ANALYSIS – ALLOCATION & MITIGATION

This chapter deals with the various risks that may have an impact on the cash flows of the Company
and their corresponding mitigation mechanisms, as outlined in the following table.
Risk Factor Allocated To Proposed Mitigation Mechanism
Management Risks
1.Promoters’ Experience GSPC Gas The Promoters, GSPC and GSPL have a vast
experience in implementing projects in the
hydrocarbon sector. GSPC Gas is expected to
benefit from the experience of its Promoters in
managing and completing the large scale projects.
The Company is already operating a CGD network
transporting a substantial amount of gas for the last
4 years.
Pre-Completion Risks
2.Cost Overrun GSPC Gas GSPC Gas is carrying out the development of the
CGD network and the cost estimates are based on
actual costs incurred and contracts awarded in the
recent past. The Project Cost also includes
provision for contingency at 5% on the capital
costs. A sensitivity analysis at a 10% cost overrun
also indicates that the Company will be able to
meet its debt service obligations. Further, the
Company is already operating and generating
profits and would be in a position to meet cost
overrun if any.

3.Delay in Completion GSPC Gas GSPC Gas would be taking adequate measures to
ensure the timely completion of the Project as
envisaged by engaging reputed contractors for
construction of the Project with time fixed
contracts. The company has already started
obtaining ROU/ROW for areas where it is planning
to lay the pipelines and no significant delays are
expected in obtaining the required approvals.
4.Regulatory Approvals GSPC Gas The company has already applied to PNGRB
authorization in 10 regions where it is already
operating and planning to expand in near future.
Further, most of the locations where the Company
is planning an expansion as part of the Project are
the areas where the Company is having its existing
operations.
Post-Completion Risks
5.Gas Sourcing GSPC Gas GSPC is the second largest gas marketing company
in India and has gas sourcing arrangements from
various sources, including both the LNG terminals
in Gujarat. GSPC’s gas production from the KG
Basin is also expected to start in FY 2012. GSPC
Gas is sourcing gas from GSPC and has entered
into a MoU with GSPC for the same. On account of
adequate gas supplies to GSPC, gas sourcing is not
perceived to be major risk for GSPC Gas.
6.Gas Transport Risk GSPL GSPC Gas has entered into a Gas Transportation
arrangement with GSPL (a Promoter of GSPC Gas
and a subsidiary of GSPC) which has a pipeline
network across the state covering all the existing as
well as planned business locations of GSPC Gas.

Hence, GSPC Gas will be able to get tap-off points

from GSPL’s network at various locations in
Gujarat.
7.Pipeline Operating Risks GSPC Gas The Company is in the business of CGD networks
for the past 4 years and has developed extensive
experience for operating and maintaining CGD
networks. GSPC Gas has team of dedicated experts
for operating the pipelines. The Company also has
SCADA systems to monitor the pipeline system
regularly. GSPC Gas will also obtain adequate
insurance cover to cover any disruptions in
operations.
8.Environmental / Safety GSPC Gas GSPC Gas is already operating the CGD network
Risks and has experience in managing environmental and
safety risks. GSPC Gas will lay its pipelines in
accordance with the safety norms specified by the
Regulator. Environmental hazards like gas leaks or
accidents can be mitigated through regular O&M
activities and selection of good equipment and
adhering to norms related to HSE guidelines.
Market Risks
9.Off-take Risk GSPC Gas Gujarat is the largest gas market in India,
accounting for close to 42% of the national
demand. The Company is expanding its network in
Gujarat to meet the growing demand for gas in
Gujarat. It is already supplying 1.71 MMSCMD gas
to customers, most of them in the industrial
segment through off take agreements with them and
it may enter into gas off take agreements with large
customers, wherever possible.

10. Pricing Risk GSPC Gas Tariff of gas to customers by GSPC Gas is affected
by the movements in prices of alternate fuels and
prices of gas supplies by other competitors,
exposing GSPC Gas to market risk due to price
volatility. However gas price and alternate fuel
price generally move in the same direction, thereby
enabling the Company to pass on the increase or
decrease in price of gas to the end consumer.
Additionally, gas is usually cheaper than alternate
fuel and GSPC has the ability source gas from
different resources and sell the gas at a pooled
price. Hence, such pricing risk is not perceived to
be high.
11. Competitive Position GSPC Gas GSPC Gas is the first company to setup CGD in the
risk proposed locations and would enjoy the benefit of
being the first mover. Further, it has the advantage
of using GSPL’s well developed pipeline network.
Any new player, in these areas would have to incur
significant capex to setup a pipeline network.
Financial Risks
12. Funding for the Project GSPC Gas The company had a PAT of Rs.75 Crore, cash
accruals of around Rs.105 Crore in FY 2009.
Further, the Company is also expected to generate
about Rs.330 Crore in FY 2010 and FY 2011. In
view of the above, no difficulty is envisaged in
meeting capital requirement for the Project.
Other Risks
13. Force Majeure Insurers GSPC Gas will be taking adequate insurance cover
to address force majeure risks like floods, fire and
storms that can potentially damage pipeline

networks and cause supply disruptions.

14. TERM SHEET FOR RUPEE TERM LOAN
1. Borrower GSPC Gas Ltd ("GSPC Gas" or the "Borrower" or “the Company”)
2. Promoters Gujarat State Petroleum Corporation Ltd (“GSPC”) and Gujarat State Petronet Limited
(“GSPL”)
3. Project Setting up of City Gas Distribution (“CGD”) network and CNG stations in Gujarat
4. Project Cost & The total estimated cost of the Project in the first phase is Rs.1199.30 Crore. The
Financing estimated cost will be funded through debt and equity in the ratio of 2.33:1
5. Facility Rupee Term Loan of Rs. 839.15 Crore on multi banking arrangement
6. Availability From the date of 1st disbursement till December 31, 2011
7. Disbursements The Facility shall be disbursed as per the disbursement schedule, subject to overall Debt
Equity Ratio of the Company not exceeding 2:33 at any point of time.
8. Interest Rate The rate of interest applicable for the Facility shall be floating linked to prevailing Bank
Prime Lending Rate (BPLR) of respective banks with a negative spread to have an
effective rate of interest of 10.0% p.a. The spread so arrived by respective bank as on
date shall remain fixed through out the tenor of the loan.
The Borrower shall pay the Lenders interest on the outstanding principal amount of the
RTL Facility at the end of every month.
The Borrower shall bear all taxes (including interest tax, if any), duties etc. in respect of
the Facility.
9. Tenor Door to Door 10 years (construction period of 2 years + moratorium period of 1 years +
repayment period of 7 years)
10. Additional The Borrower will have to perfect security as per the Security Stipulations of this term
Interest sheet within 3 months from the date of initial disbursement. If the borrower fails to
perfect the security within 3 months from date of first disbursement, the borrower shall
pay an additional interest of 1% p.a. on the entire outstanding from the 4th month till
perfection of security. Any further disbursements pending perfection of security shall be
at the sole discretion of the Lenders.
11. Up-Front Fee 0.1% plus applicable taxes
12. Principal and The Project Debt of Rs.839.15 Crore would be repaid in 28 quarterly installments with
Interest first principal repayment installment falling due on December 31, 2012 and last principal
Payments installment falling due in the quarter ending Sep 30, 2019. The principal repayment
would be as per the following schedule.

FY Ended No: of qtrs of repayment Debt Repayment for the FY

31-Mar-13 2 4.0%
31-Mar-14 4 8.0%
31-Mar-15 4 10.0%
31-Mar-16 4 12.0%
31-Mar-17 4 16.0%
31-Mar-18 4 20.0%
31-Mar-19 4 20.0%
31-Mar-20 2 10.0%
Total 28 100%
The interest would be payable on monthly basis at the end of every month, till the
outstanding Rupee Term Loan is reduced to nil.
13. Commitment 1.0% p.a. on the amount of shortfall in disbursements with respect to quarterly
Fees disbursement schedule provided by the Company prior to the start of each financial year
for the implementation period. Such disbursement schedules may be amended or
replaced with prior written notice before the beginning of respective quarter.
The commitment charges shall be calculated on the basis on shortfall in disbursements
with respect to the amended schedule, if any, for the number of days deviated from the
scheduled date.
14. Prepayments The Borrower shall at any time have the option to prepay the lenders on pro rata basis in
Premium part or in full the loan together with all interests, prepayment premium and other charges
and monies due and payable to the Lenders up to the date of such prepayment on
payment of prepayment premium equal to 1% of amount prepaid.
However, no prepayment premium shall be payable, if, the borrower :-
- seeks to prepay at the time of interest rate reset (i.e. in case of change in PLR) by
providing 60 days notice
or
- seeks to prepay from internal accruals of the company or proceeds of fresh Capital
Issue by providing 60 days notice
In case of partial prepayment, the prepayment amount shall be applied to the remaining
installments proportionately.
15. Default The Borrower shall pay penal interest at the rate of 1% p.a. on the total out standings in
Interest the event of non-payment of interest, principal, upfront fee or any other monies due on
their respective dates, for the period of such default., during the currency of the Facility
16. Security 1. First pari passu charge on the immoveable & moveable assets (present & future) of
Stipulations the Company.

2. Second charge on all current assets, both present and future, relating to the Project
and operations.
The above security for Lenders will rank pari-passu among all Term Lenders
participating in financing the Project and also with the existing lenders of the Company.
17. Ranking The above security for Lenders will rank pari-passu with charges created in favour of all
Term Lenders participating in the financing of the Project as also the existing lenders of
the Company.
B. Conditions Precedent to First Disbursement
Prior to first disbursement under the Facility, the Borrower shall, to the satisfaction of
the Lenders :
1. Agree that holding of the Promoters together with its subsidiaries/affiliates/group
companies / other GoG companies etc would be maintained at a minimum of 50%
equity shares of the Borrower during the currency of the Facility.
2. The Borrower has available with it the borrowing

power. It’s Memorandum of Association and Articles of Association, any provision
contained in any document by which the Borrower is bound, or any law, rule or
regulation directly or indirectly shall not restrict the Borrower’s borrowing power or
authority or ability to borrow the Loans from the Lenders.
3. Agree and undertake that the Borrower shall furnish to

the lenders such information and data as may be required by lenders to ensure that
the physical progress as well as the expenditure incurred is reasonable and in line
with schedule.
4. Agree that the disbursements shall be in the Debt-

Equity Ratio of 2:33: 1 and Debt–Equity ratio of the Company post disbursement
shall not exceed 2: 33:1.
5. Undertake that in the event of any cost savings a

proportionate reduction in debt and equity would take place. However, the Borrower
shall have the right to utilize the cost savings for any other unforeseen expenditure
relating to the project with the intimation to the lenders
Other Covenants The Borrower shall, to the satisfaction of the Lenders :
1. Agree to Furnish the auditor’s certificate for sources and utilisation of funds upto the
previous quarter

2. Agree to obtain all the necessary statutory and regulatory clearances required for the
project from time to time.
3. Agree to appoint one nominee director on behalf of the lenders in case of default in
payment of dues
4. Agree and undertake that the Borrower shall furnish to the Lenders such information
and data as may be required by Lenders to ensure that the physical progress as well
as the expenditure incurred on the project are reasonable in line with schedule.
5. Agree that the Lenders shall have access to the cost records of the Project at any
time during the implementation of the Project as also before final disbursement of
the Facility.
6. Agree that no dividend will be paid in the event of occurrence of an event of default
without the prior consent of the Lenders. In other circumstances, dividend can be
paid only after the repayment of principal, interest and other charges that have
become due and payable to the Lenders under the Facility.
7. Agree that in case the Borrower commits default in the repayment of the Facility or
in the repayment of interest or any of the agreed installment thereon on the due
dates, the Lenders and / or the Reserve Bank of India will have an unqualified right
to disclose or publish the name of the Borrower and its Directors as defaulters in
such manner and through such medium as the Lenders or the Reserve Bank of India
in their absolute discretion may think fit.
8. Agree that during the currency of Facility, any loans to the Promoters from the funds
of the Borrower shall be made only after approval of the Lenders.
9. Appoint technical, financial and executive personnel of proper qualification and
experience for the key posts and ensure that the organization set up is adequate
enough for smooth implementation and operation of the Project.
10. Agree that the Committee of Directors/ CEO of the Company shall be responsible
for supervising and monitoring the progress during the implementation /
construction of the Project.
11. Agree that the Committee of Directors shall be responsible for audit related matters
for close monitoring of the company’s operations.
12. Borrower shall permit the Lenders and their authorized officers or employees to
carry out technical, financial and legal inspections of the Project.

13. The Lenders may, if required by law, disclose to banks/RBI/government/Credit

Information Bureau of India Ltd. and any other statutory authorities information in
connection with the Facility granted to the Borrower.
14. The Borrower’s assets offered as security for the Facility should be kept fully
insured against fire and such other risks as may be required by the Lenders.
Insurance policies should contain the name of the Lenders as loss payees.
15. The Borrower shall furnish to the Lenders every year three copies of audited/
printed/ balance sheet and profit and loss account statements of the Borrower
immediately on these being finalized/ published.
16. The Borrower shall submit to the Lenders a quarterly progress report on the status of
the project during the implementation period and whenever desired by the Lenders
with a reasonable notice period.
17. During the currency of the Term Loan, the Borrower shall not, without prior
approval of the Lenders in writing and such approvals shall not be unreasonably
withheld :
 Effect any change in the capital structure other than as contemplated in this
arrangement which will result in the long term Debt Equity Ratio exceeding
2.33:1.
 Implement any scheme of amalgamation or reconstruction.
 Undertake any new project or expansion, which is not defined and included as
part of the business plan except for expansion in state of Gujarat.
 Enter into secured borrowing arrangements, , with any other bank or financial
institution, except for (i) those arranged as part of means of finance of the
Project (ii) towards expansion in the state of Gujarat (iii) towards refinancing
(iv) for meeting its working capital requirement (v) such additional financing
arranged to meet any cost overruns as discussed in this Term Sheet.
18. Agree that the Borrower shall not create, without prior written consent of the
Lenders, charges on any or all their assigned properties or assets during the currency
of the Facility unless otherwise expressly stated herein.
Event of Default The Lenders may reserve the right to call up the Facility by giving a notice of 30 days
upon the happening of any of the following event of Default (each an “Event of
Default”): –

 Any installment of principal amount of or interest on the Facility remaining

unpaid for a period exceeding thirty (30) days from their respective due dates.
 The Borrower committing any breach or default in the performance or
observance of the material covenants of the Facility Agreement and such breach
or default continues for a period of ninety (90) days after receipt of a notice
from the Lenders.
 Execution or distress being enforced or levied against the whole or any material
part of the Borrower’s property and any order relating thereto is not discharged
or stayed within a period of ninety (90) days from the date of enforcement or
levy.
 The Borrower ceasing or threatening to cease to carry on its business for a
continuous period exceeding ninety (90) days.
 A receiver being appointed in respect of the whole or any part of the property of
the Borrower and such appointment is not stayed, quashed or dismissed within
a period of ninety (90) days.
 The occurrence of any event or circumstance which is prejudicial to or imperils
or depreciates the security given to the Lenders and such event or circumstance
continues to have an effect for a period in excess of ninety (90) days.

15. ANNEXURES
15.1. Annexure I- P&L Account
GSPC Gas Ltd.

(Rs. Crore)
Sale of Natural Gas 32.73 323.57 841.13
Income from Operations 7.16 4.49 20.61
Initital Connection Charges 3.10 14.71 15.41
Other Income 1.44 2.48 1.71
Total Income 44.43 345.25 878.86
Purchase of NG / Petroleum Products 31.03 220.89 592.24

Gas Transportation Charges 2.31 36.99 93.87
O&M Expenses 2.10 6.06 13.56
Employee Expenses 1.57 2.55 5.50
Admin. & Other Expenses 3.80 7.48 23.14
Misc. Expenditure written off 0.10 0.40 0
Total Expenses 40.91 274.37 728.31
PBDIT 3.52 70.88 150.55
Depreciation & Amortisation 6.87 3.24 19.94
Prior Period Items 0.01 0.13 0.05
PBT (3.37) 56.14 111.11
Income Tax - 11.51 25.57
Deferred Tax 1.10 7.37 10.00
Other Taxes 0.07 0.06 0.10
PAT (4.54) 37.20 75.43
*Provisional

15.2. Annexure II- Balance Sheet
GSPC Gas Ltd.

(Rs. Crore)
As On March 31 2007 2008 2009*
Share Capital 1.09 59.21 59.21
Share Application Money 72.17 - 10.00
Share Premium - - 34.06
Reserves & Surplus - 61.18 105.69
Deferred Tax Liability 1.10 8.47 18.47
Net Worth 74.37 128.86 227.43
Unsecured Loans 0 0 20.00
Deposits from Customers 1.19 2.03 2.35
Total 137.93 270.39 530.95
Gross Block 110.32 209.83 377.25
Depreciation 13.70 16.91 36.85
Net Block 96.62 192.92 340.40
CWIP 35.61 100.41 159.26
Current Assets
- Inventories 0.09 6.40 6.40
- Sundry Debtors 6.84 31.57 48.06
- Cash & Bank Balances 4.98 0.98 4.81
- Loans & Advances 11.95 8.86 99.14
Total Current Assets 23.86 47.81 158.41
Current Liabilities
- Current Liabilities 25.33 57.47 100.65
- Provisions 0.06 13.46 26.65
Total Current Liabilities 25.39 70.93 127.30
Misc. Expenditure not w/o 0.40 - -
From P&L 6.65 - -
Total 137.93 270.39 530.95
* Provisional

15.3. Annexure III - Assumptions
1. Project Timelines
Project Completion Date September 30, 2011

2. Macroeconomic Assumption
Factor Per annum

Indian Inflation Rate 5%
Base INR-USD Exchange Rate ( as on 31st March, 2009) 48.50
3. Demand Assumptions
Supply of gas in the districts for the different segment is based on the market study carried
by Mott Macdonald. The sales of gas in various years are as given below:
Sales (in ‘000 scmd) Current Sales* 2009-10 2010-11 2011-12 2012-13
Domestic 25 35 45 58 64
Commercial 3 4 5 6 7
CNG 139 195 254 330 363
Industrial 1552 2173 2825 3673 4040
Total 1719 2407 3129 4067 4474
*As on April 2009
4. Pricing Assumptions
 Gas Purchase Pricing Assumptions
Purchase price of USD 7/mmbtu (equivalent to Rs. 11.25/scm) has been assumed, considering a
mix of domestic gas and imported RLNG purchase prices. The prices are exclusive of VAT @ 15%
as the same is a pass through to the customer.
 Sale Pricing Assumptions
Tariffs are usually based upon various factors i.e. – volume of gas purchased, cost of
supplying gas, cost of alternate fuels, etc. Selling price for the different segments is given
below:
Sales Price Rs/scm Inclusive of VAT and Excise Duty (Rs/scm)*

Domestic 12.50 14.38
Commercial 18.00 20.70
CNG (Rs/kg) 21.27 26.98
Industrial 15.75 18.11
*Excise Duty is applicable only on CNG sale

The above sale prices are for natural gas at net calorific value (NCV) of 8350 kcal/scm. In case of
supply of the gas with higher calorific value, the prices of the gas per SCM would be adjusted
accordingly. The gas sale will also attract VAT @15% which will be borne by the end consumer.
CNG sale will additionally attract excise duty @10.30% which also will be borne by the end
consumer.
5. Gas Transportation Charge
The Company paid gas transportation charges varying between Rs. 0.9/scm and Rs. 1.9/scm for FY
09, depending on the location of the consumer. For the purpose of projections, an average gas
transportation charge of Rs. 1.4/scm has been assumed.
6. Initial Connection Charges
Initial connection charges from customers (domestic) have been taken as Rs.5,000 for domestic
consumers. This deposit is refundable in nature and hence has been shown as a liability in the
Balance Sheet.
7. Working Capital Assumptions
Current Assets Days

Debtors 30
Gas in Line 10
Cash Expenses 15
Current Liabilities
Creditors 21
8. Operating Costs
The key operating costs that would be incurred by GSPC Gas are as indicated in the following
table.
Rate per unit Unit Escalation p.a

Salaries and Wages .
Agent Commission for CNG 0.50 Rs/scm 5%
Employee Salaries, Wages and Allowances 7.50 Rs. Crore/year 10%
Utilities
Power & Fuel 5%
Power Cost (per CNG) 24.00 Rs lakh/year
Power Cost (HO) 12.00 Rs lakh/year
Power Cost (other office) 1.20 Rs lakh/year
Communications 6.00 Rs lakh/year 5%
Repair & Maintenance 0.50% of P&M
O&M Expenses
O&M Contract (CNG) 5.00 Rs. Crore/year 5%

Rate per unit Unit Escalation p.a

O&M Contract (PNG) 5.00 Rs. Crore/year 5%
O&M Contract (Others) 5.00 Rs. Crore/year 5%
Consumables
Gas Odorization 1,000.00 Rs/mmscm
Spares 1.00 Rs Crore/year 5%
Insurance 0.50% of Net Assets
Admin Expenses (Advertisement, Promotion, 5.00 Rs. Crore/year 5%
Stationery, Conveyance, Rent)
 Number of operating days has been assumed as 360 days / year
 Gas transmission tariff will attract Service Tax @ 10.3 %
9. Financing Assumptions
 Existing Debt
The Company has a sanctioned facility of Rs. 341 Crore from a consortium of banks, as indicated in
(Rs. Crore)
No. Bank Sanctioned Availed O/S Interest Rate
1 SBI (Lead) 100 87.55 80.86 10.75%
2 Axis Bank 50 43.43 40.43 12.25%
3 Dena Bank 50 43.43 40.42 10.50%
4 State Bank of Mysore 50 43.43 40.42 11.00%
5 IDBI Bank 40 34.74 32.33 11.50%
6 Bank of India 26 22.61 21.04 10.50%
7 KCCB 25 25 25.00 10.90%
Total 341 300.19 280.50
The un-availed balance facility of Rs. 41 Crore will be drawn in the quarter ended June 30 th 2009 to
meet ongoing capex requirements. All the loans will be repaid in equal quarterly installments upto
December 31st 2013.
10. Project Debt

The Project Debt of Rs.839.15 Crore would be repaid 28 quarterly installments with first principal
repayment installment falling due on December 31 2012 and last principal installment falling due in
the quarter ending September 30, 2019. The principal repayment in each year will be as indicated in
FY Ended No: of qtrs of repayment Debt Repayment for the FY
31-Mar-13 2 4.0%
31-Mar-14 4 8.0%
31-Mar-15 4 10.0%

31-Mar-16 4 12.0%
31-Mar-17 4 16.0%
31-Mar-18 4 20.0%
31-Mar-19 4 20.0%
31-Mar-20 2 10.0%
Total 28 100%
11. Transmission & Distribution Losses
Transmission and distribution loss on account of technical and commercial losses is assumed to be
1% of the total throughput. This loss is reflected in the purchase and transmission cost, with
purchased quantity being higher than the supplied quantity
12. Depreciation Assumptions
Item Max. Depreciation Depreciation Rate

SLM-Book Depreciation
Plant & Machinery 95% 5.28%
Pipelines 95% 5.28%
Misc. Assets 95% 5.28%
Building 95% 3.34%
WDV-Tax Depreciation
Plant & Machinery 100% 15%
Pipelines 100% 60%
Misc. Assets 100% 15%
Building 100% 10%
13. Tax assumptions
MAT rate 16.995 %

Income Tax rate 33.99%
VAT 15.00 %

15.4. Annexure IV – Projected Financials
15.4.1. Projected Profit and Loss Account
(Rs. Crore)

15.4.2. Projected Cash Flow Statement
(Rs. Crore)
FY ended 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cash Inflows
PAT 91.57 99.91 104.16 119.13 140.36 158.79 175.59 194.30 214.65 236.17 257.04
Depreciation 26.85 48.94 73.36 82.32 83.33 85.97 88.61 91.25 93.89 96.53 99.17
Equity infusion by Promoters 58.95 131.09 80.08 - - - - - - - -
Project Debt infusion 183.13 407.25 248.77 - - - - - - - -
Bank Borrowings for WC - 9.54 12.32 5.33 2.95 3.10 3.25 3.41 3.58 3.76 3.95
CENVAT Credit - - 5.68 5.68 - - - - - - -
Deferred tax liability 23.57 25.72 26.82 30.67 36.14 40.88 45.21 50.02 5.01 (4.70) (7.32)
Total 455.85 798.19 596.63 243.13 262.78 288.74 312.66 338.99 317.14 331.76 352.85
Cash Outflows
Capex 265.70 582.03 355.54 - - - - - - - -
Incremental NWC 37.50 19.07 24.64 10.65 5.90 6.19 6.50 6.82 7.17 7.52 7.90
Project Debt Repayment - 11.16 30.07 58.99 86.56 85.67 99.36 122.76 137.83 137.83 68.91
Total 347.49 679.61 480.36 139.76 212.57 141.86 155.86 179.59 195.00 195.35 126.82
Opening Cash 4.81 113.16 231.75 348.03 451.40 501.61 648.49 805.29 964.69 1,086.83 1,223.24
Additions 108.36 118.59 116.28 103.37 50.21 146.88 156.80 159.40 122.14 136.41 226.03
Closing Cash 113.16 231.75 348.03 451.40 501.61 648.49 805.29 964.69 1,086.83 1,223.24 1,449.28

15.4.3. Projected Balance Sheet
(Rs. Crore)
As On 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Liabilities
Total Equity 162.22 293.30 373.38 373.38 373.38 373.38 373.38 373.38 373.38 373.38 373.38
Reserves & Surplus 197.26 297.17 401.33 520.46 660.82 819.61 995.20 1,189.50 1,404.15 1,640.31 1,897.35
Long term Debt 461.49 790.23 938.82 809.72 653.04 567.37 468.01 345.24 207.41 69.58 0.67
WC Borrowings 20.00 29.54 41.85 47.18 50.13 53.22 56.47 59.89 63.47 67.23 71.18
Current Liability 72.8 94.7 123.1 135.4 142.2 149.3 156.7 164.6 172.8 181.4 190.5
Deferred tax liability 42.0 67.8 94.6 125.3 161.4 202.3 247.5 297.5 302.5 297.8 290.5
Total Liabilities 988.5 1,681.1 2,126.9 2,165.2 2,194.8 2,319.0 2,451.1 2,583.9 2,677.6 2,783.6 2,977.5
Assets
Gross Fixed Assets 802.21 1,384.25 1,734.10 1,728.42 1,778.42 1,828.42 1,878.42 1,928.42 1,978.42 2,028.42 2,078.42
Accumulated Depreciation 63.70 112.65 186.00 268.32 351.65 437.63 526.24 617.50 711.39 807.93 907.10
Net Fixed Assets 738.51 1,271.60 1,548.10 1,460.10 1,426.76 1,390.79 1,352.17 1,310.92 1,267.02 1,220.49 1,171.31
Current Assets 136.6 177.6 230.6 253.6 266.2 279.5 293.5 308.1 323.5 339.7 356.7
Investments 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Cash Balance 113.2 231.8 348.0 451.4 501.6 648.5 805.3 964.7 1,086.8 1,223.2 1,449.3
Total Assets 988.5 1681.1 2126.9 2165.2 2194.8 2319.0 2451.1 2583.9 2677.6 2783.6 2977.4

15.4.4. DSCR Calculations
(Rs. Crore)
DSCR 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cash Flows Available
PAT 91.57 99.91 104.16 119.13 140.36 158.79 175.59 194.30 214.65 236.17 257.04
Depreciation 26.85 48.94 73.36 82.31 83.33 85.97 88.61 91.25 93.89 96.53 99.17
Def. Tax 23.57 25.72 26.82 30.67 36.14 40.88 45.21 50.02 5.01 (4.70) (7.32)
Interest on Long Term Debt 26.42 49.15 96.22 98.10 82.31 69.72 60.36 48.90 35.77 21.70 9.46
CENVAT Credit - - 5.68 5.68 - - - - - - -
Total Cash Flows Available 168.42 223.73 306.24 335.91 342.14 355.36 369.77 384.48 349.32 349.70 358.36
Cash Flows to be Serviced
Long Term Debt 44.29 78.50 100.18 129.11 156.67 85.67 99.36 122.76 137.83 137.83 68.91
Interest on Long Term Debt 24.27 45.98 91.72 93.03 76.92 64.00 54.29 42.46 28.94 14.00 2.00
Total Cash Flows to be Serviced 68.56 124.48 191.90 222.14 233.59 149.67 153.65 165.22 166.77 151.83 70.91
DSCR 2.46 1.80 1.60 1.51 1.46 2.37 2.41 2.33 2.09 2.30 5.05
Average DSCR 2.09

Minimum DSCR 1.46

Financial Information Memorandum GSPC Gas Company Limited: (Strictly Private & Confidential)

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FINANCIAL INFORMATION MEMORANDUM

(Strictly Private & Confidential)

GSPC GAS COMPANY LIMITED

SBI CAPITAL MARKETS LIMITED

Financial Information Memorandum – GSPC Gas Limited ii

Financial Information Memorandum – GSPC Gas Limited iii

Requests may be addressed to:

SBI CAPITAL MARKETS LIMITED

For the attention of:

Mr. Saiprasad Modi

Mr. Sumit Snghvi

Mr. Aditya Godbole

Financial Information Memorandum – GSPC Gas Limited iv

Financial Information Memorandum – GSPC Gas Limited v

5.4. GAS INFRASTRUCTURE......................................................................................32

Financial Information Memorandum – GSPC Gas Limited vi

10. MEANS OF FINANCE......................................................................................60

Financial Information Memorandum – GSPC Gas Limited vii

Financial Information Memorandum – GSPC Gas Limited viii

FIGURE 1: GSPC GAS – ORGANIZATION STRUCTURE...............................................................18

Financial Information Memorandum – GSPC Gas Limited ix

Financial Information Memorandum – GSPC Gas Limited x

ONGC Oil and Natural Gas Corporation

Financial Information Memorandum – GSPC Gas Limited xi

1.2. The Company

Financial Information Memorandum – GSPC Gas Limited 1

1.2.1. Past Financials

Financial Information Memorandum – GSPC Gas Limited 2

1.3. The Promoters

1.3.1. Gujarat State Petroleum Corporation Limited

Financial Information Memorandum – GSPC Gas Limited 3

Summary of P&L Account

Gross Block 895.49 966.49 1,067.42

1.3.2. Gujarat State Petronet Limited

Financial Information Memorandum – GSPC Gas Limited 4

Summary of P&L Account

1.4. The Project

Financial Information Memorandum – GSPC Gas Limited 5

1.5. Project Cost

Item Cost (Rs. Cr.)

Financial Information Memorandum – GSPC Gas Limited 6

1.6. Means of Finance

1.7. Profitability Projections

 Gas purchase price: Rs 11.25/scm (USD 7/ mmbtu)

 Gas Sale Price

Customer Segment Selling Price - Rs/scm

Financial Information Memorandum – GSPC Gas Limited 7

 In addition the gas transportation charges are based on existing transportation

Based on above key financial projections, a summary of profitability projection is as follows :

S. No. Parameters Results

Financial Information Memorandum – GSPC Gas Limited 8

Scenario Avg. DSCR Min DSCR Project IRR

Financial Information Memorandum – GSPC Gas Limited 9

Financial Information Memorandum – GSPC Gas Limited 10

Financial Information Memorandum – GSPC Gas Limited 11

Table 1: Company Details

3.2. Capital Structure

Table 2: Capital Structure as on March 31, 2009

Financial Information Memorandum – GSPC Gas Limited 12

3.3. Shareholding Pattern

Table 3: GSPC Gas - Shareholding Pattern

3.4. Past Financials

3.4.1. Summary of Profit & Loss Accounts