After a weak performance in the June quarter, the petrochemicals business of GAIL (India) Ltd has done well in the September quarter, boosting overall performance to that extent.

The Ebit (earnings before interest and tax) margin of the petrochemicals business improved by 542 basis points to 43.1% from the same period last year. Obviously, that looks better than the 642 basis points decline in the June quarter to 38.2%. One basis point is one-hundredth of a percentage point. One of the reasons for the better performance of the petrochemicals business is an improvement in sales volume.

A file photo of a GAIL gas terminal at Hazira, Gujrat

But profitability of the gas transmission business was weak, despite a robust performance on the volume front. The company improved its natural gas transmission volumes to 118.62 million standard cubic metres per day (mscmd), from 117 mscmd in the June quarter and 114.89 mscmd in the corresponding period a year ago.

Broadly, analysts were expecting transmission volumes to remain more or less at the same level sequentially. The fact that GAIL was able to improve transmission volumes a bit, sequentially, is encouraging. However, the Ebit of the transmission business declined by 22%, which analysts attribute to higher depreciation costs.

On an overall basis, the company’s total operating revenue rose 19.6% to 9,726.4 crore and net profit rose 18.5% to 1,094.4 crore. Profitability was helped by a 7% decline in tax expenses.

GAIL shares under-recoveries, or losses on selling fuel below cost, of oil marketing companies. For the September quarter, the company’s subsidy share stood at 566 crore, lower than that of the June quarter.

Meanwhile, GAIL’s shares have fallen 8.5% to 425 apiece since the beginning of the fiscal. From a medium-term perspective, under-utilization of the firm’s newly expanded transmission network because of weak outlook on domestic gas supply is a key concern.