It may be noted that the company had provided for Rs 17.50 crore towards contingency liabilities, depreciation of investments, etc, in financial year 1997-98. There is unlikely to be any further provisions on these accounts, which means higher bottomline growth.

British Gas which now holds 65 per cent of the equity of Gujarat Gas has been the driving force in the sudden interest in the stock. Not only has the company improved operationally, but it has become more transparent, which justifies the improved discounting on the bourses.

After picking up a stake in thecompany, the multinational has transformed the company into a more focussed venture. The slow growing LPG division of the company has been sold to Reliance Industries for a net consideration of Rs 1.31 crore. The company is also planning to sell its stake in the loss-making subsidiary Petroleum Infrastructure Limited.

It is also contemplating merging its wholly-owned subsidiary Gujarat Gas Financial Services. This subsidiary provides funds for gas connection to the consumers.

More important is the fact that the company is planning to integrate backwards into picking up equity in small oil and gas fields. Gujarat Gas currently purchases gas from GAIL and Gujarat State Petroleum Corporation (GSPCL). However, there are some supply side problems and it continues to face pressure on the demand side. Having its own gas fields will help in improving the quality of supply to the customer. But these acquisitions may take time to materialise.

An immediate benefit to the company, which will be visible from thisyear's result is the commissioning of the 73 km Hazira-Ankleshwar pipeline, which was set up at a cost of Rs 120 crore. This pipeline is currently delivering one lakh cubic meters of gas per day to its customers in Ankleshwar.

Gujarat Gas has improved its distribution base and currently supplies to 1.02 lakh domestic users and 1,756 commercial and industrial customers. The company has the advantage of operating in an area which is the most concentrated industrial belt in the country. It has a pipeline network of nearly 1200 kms in Gujarat, which will now be fed through the newly constructed pipeline.

Considering the huge potential for natural gas the parent company of Gujarat Gas is also setting up an LNG terminal at Pipavav, with a pipeline connection between Saurashtra and Hazira. Gujarat Gas has signed an MoU with Gujarat Pipavav Port Limited and a subsidiary of British Gas to receive about 3.6 million SCMD of gas by 2002-03, which is almost three times more than the gas volume presently committed tothe company.

In other words, Gujarat Gas is playing the game very tactfully, by steadily increasing its supply side as demand for the fuel increases.

However, in the previous year, the company had signed a new gas supply contract for the supply of an additional volume of 600,000 SCMD (to be supplied in a phased manner over the next three years) by GSPCL, which is over and above the 100,000 SCMD already committed and supplied by the latter. The drawback is that the new supplies are more expensive than those recieved from GAIL. This will lead to pressure on the company's margin.

However, in order to overcome this problem the company is looking at increasing volumes. It is planning transportation and supply of gas to areas north and west of Ankleshwar such as Dahej, Jhagadia, etc, which if implemented would call for further expansion of the pipeline network from Ankleshwar involving substantial investments.

It is apparent that in order to meet its capex, the company will have to look out for funds.However, the pipeline network to be set up in Gujarat will be undertaken by the Gujarat Government, through a company Gujarat Gas Net Ltd, which has GSPCL, financial intitutions, British Gas, Gujarat Gas among others as its equity partners. Thus the share of fund required will not be much.

The company has also tied up with Thermax for supply of gas for its gas fired vapour absorption and refrigeration units. These units though priced at the same level as the conventional units are 30 per cent cheaper to operate. However, volume contribution from this venture is not likely to be much.

But considering the growing demand for natural gas and the company's strategy of meeting this demand, the future looks bright for Gujarat Gas.