NEW DELHI/MUMBAI (Reuters) - State-run gas utility GAIL India (GAIL.NS) plans to spend around 75 billion rupees this financial year on expanding its pipeline network to meet rising demand for gas, it said on Wednesday, as it reported a drop in quarterly profit.
GAIL said fourth-quarter net profit fell 38 percent, missing analysts’ forecasts, due to an increase in discounts given to state-run refining companies to compensate for a shortfall from government-set retail prices of cooking gas.
The planned capital spending for the current financial year is roughly similar to 2011-12 and will be funded by raising 45 billion rupees through debt.
GAIL will launch a local bond issue of up to 7.5 billion rupees by next week, and plans to raise another $300 million through external commercial borrowings, chairman B.C. Tripathi told reporters.
A growing number of power plants, industries, and city gas projects have pushed up natural gas demand in Asia’s third largest economy, but problems at Reliance Industries’s (RELI.NS) gas blocks, off India’s east coast, have forced higher imports of expensive liquefied natural gas (LNG).
To cater for the rising demand, GAIL is adding 5,500 kilometres of pipelines to its existing 9,000 kms network.
The company, which is gradually branching out from its primarily gas transmission business into a major petrochemicals and LNG player, has outlined plans to spend nearly $5.5 billion on capacity expansion over the next four years.
GAIL plans to import around 30 spot cargoes of LNG, Tripathi said.
GAIL reported net profit of 4.83 billion rupees for its fiscal fourth quarter ended March 31, down from 7.83 billion rupees a year earlier. Net sales, however, rose 17 percent to 104.54 billion rupees.
Analysts, on average, had expected a net profit of 8.8 billion rupees, according to Thomson Reuters I/B/E/S.
GAIL provided discounts of 13.98 billion rupees during the quarter, compared to 9.01 billion rupees a year earlier.
India caps prices of petroleum products such as diesel, cooking gas and kerosene and producers such as ONGC (ONGC.NS) and GAIL share the cost of subsidising refineries by selling oil and gas to them at a discount.
State oil companies last week raised retail gasoline prices by 7.54 rupees/litre, but the government, faced with street protests, is yet to take a decision on diesel, cooking gas an d kerosene.
Shares in GAIL, valued by the market at $7.6 billion, closed 1.4 percent lower at 325.20 rupees ahead of the results in a weak Mumbai market. The stock is down 15 percent so far in 2012, sharply underperforming a 5.5 percent rise in the BSE Sensex.
Additional Reporting by David Lalmalsawma in NEW DELHI; Editing by Malini Menon and Mark Potter