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Gujarat State Petronet Ltd - Annual Report 2023-24 Analysis

August 28, 2024 · 38 min read

#Gujarat State Petronet Ltd #2023-24

Overview #

Detailed Analysis #

This analysis looks into the 2023-24 annual report of Gujarat State Petronet Limited (GSPL), examining its financial performance, business segments, risk factors, and ESG (Environmental, Social, and Governance) initiatives.

I. Financial Highlights (Standalone & Consolidated):

A. Standalone:

Significant Growth: Total income increased significantly from ₹1,930.21 crore in 2022-23 to ₹2,366.59 crore in 2023-24. Profit before tax (PBT) showed similar growth, rising from ₹1,228.55 crore to ₹1,642.20 crore. Profit after tax (PAT) increased from ₹944.95 crore to ₹1,284.64 crore. Earnings per share (EPS) rose from ₹16.75 to ₹22.77.
Dividend Recommendation: The board recommended a dividend of ₹5 (50%) per share, subject to shareholder approval. This represents a substantial increase compared to the previous year’s dividend.
Zero Debt: GSPL maintained a zero-debt position.
Key Ratios: Return on net worth (RONW) improved from 10.67% to 13.15%, indicating enhanced profitability. The net profit margin increased from 54% to 63%. Liquidity ratios (current ratio) also improved significantly.

B. Consolidated:

Revenue Growth: Consolidated revenue increased, although the percentage change compared to the standalone results is not explicitly stated and would require calculations based on the provided data.
Profitability: Consolidated PBT and PAT also grew, though the exact figures and growth percentages are not clearly presented in a summary table.
Non-Controlling Interest: The impact of non-controlling interests in subsidiaries is significant, impacting both profit and equity. The report shows a substantial non-controlling interest share in the consolidated results.

II. Business Segments:

GSPL’s primary business is natural gas transmission through a vast pipeline network across Gujarat and Daman. The report also highlights other segments:

Natural Gas Transmission: This is the core business, accounting for 97.59% of standalone turnover. GSPL’s extensive pipeline network (2706 km as of March 31, 2024) serves various industrial and commercial customers, along with city gas distribution (CGD) networks. Significant growth was reported in gas transported (11159 MMSCM vs. 9253 MMSCM in the previous year).
Electricity Generation (Wind Power): GSPL operates a 52.5 MW wind power project, generating electricity and contributing 1.58% to standalone turnover.
Subsidiaries:
- Gujarat Gas Limited (GGL): A significant city gas distribution (CGD) player across multiple states.
- GSPL India Gasnet Limited (GIGL): Developing pipeline projects in other states (Mehsana-Bhatinda and Bhatinda-Gurdaspur).
- GSPL India Transco Limited (GITL): Developing a pipeline project (Mallavaram-Bhopal-Bhilwara-Vijaipur).
Associate Company: Sabarmati Gas Limited (SGL), involved in CGD.

III. Risk Factors:

The report identifies many key risks:

Affordability and Availability of Natural Gas: Global and domestic gas price volatility poses a significant risk, impacting the affordability and demand for natural gas. Geopolitical factors and weather conditions further complicate the outlook.
Regulatory Risk: Changes in regulatory frameworks (PNGRB’s tariff orders, for instance) can substantially affect GSPL’s profitability and investment decisions. The report highlights a significant tariff reduction for the high-pressure grid, which the company is contesting.
Safety and Operational Risk: Maintaining the integrity and safety of the extensive pipeline network is paramount. Aging infrastructure, potential for unplanned shutdowns, and safety incidents are major concerns.
Human Resources: Attracting and retaining skilled personnel in a competitive market is a challenge.

IV. ESG Initiatives:

GSPL demonstrates a commitment to ESG, with initiatives across environmental, social, and governance aspects:

A. Environmental:

Renewable Energy: Operation of a significant wind power project.
Green Gas Emission Reduction: Implementation of various measures to reduce greenhouse gas emissions. Initiatives include gas monitoring devices to detect leaks and the “Dial Before Dig” campaign to minimize pipeline damage.
Water Conservation: Implementation of water harvesting at many terminals and a zero-liquid-discharge system.
Energy Efficiency: Measures to reduce energy consumption through efficient equipment and paperless documentation.

B. Social:

Corporate Social Responsibility (CSR): Significant spending on CSR projects focused on education, healthcare, and community development. The report includes detailed impact assessments for many CSR projects.
Employee Well-being: Detailed initiatives for employee health, safety, training, and development.

C. Governance:

Board Composition: The Board maintains a various structure with a focus on independent directors.
Committees: Multiple committees (audit, nomination & remuneration, stakeholders’ relationship, risk management) ensure effective oversight of various aspects of the business.
Transparency and Disclosure: The report emphasizes transparency in dealings and adherence to regulations. The company has policies covering various governance aspects like ethics, whistleblowing, etc.

V. Overall Assessment:

GSPL demonstrates strong financial performance in 2023-24, driven primarily by its core natural gas transmission business. However, the company faces risks related to gas price volatility, regulatory changes, and maintaining the safety of its infrastructure. Its commitment to ESG is evident through various initiatives, but the effectiveness of these initiatives and the long-term impact on the company’s sustainability will need to be monitored. The financial strength, combined with a clear focus on ESG, position GSPL well for future growth, though external factors remain critical to its long-term success. The report’s details, especially financial figures, are not always presented in a clear summary format, requiring calculations and in-depth reading to extract a complete picture.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The provided annual report gives values in Indian Rupees (INR) in Lacs (1 Lac = 100,000). To get the values in INR, multiply the reported numbers by 100,000.

Based on the Standalone Financial Statements:

Total Assets: ₹1,108,085,78,000 (₹11,08,085.78 Lacs * 100,000)
Current Assets: ₹1,80,800,24,000 (₹1,80,800.24 Lacs * 100,000)
Cash and Cash Equivalents: ₹8,25,38,000 (₹825.38 Lacs * 100,000)
Accounts Receivable (Trade Receivables): ₹14,123,13,000 (₹14,123.13 Lacs * 100,000)
Inventory: ₹2,108,38,300 (₹21,083.83 Lacs * 100,000)

Based on the Consolidated Financial Statements:

Total Assets: ₹1,905,584,26,000 (₹15,04,504.51 Lacs + ₹4,01,079.75 Lacs)* 100,000
Current Assets: ₹4,01,079,75,000 (₹4,01,079.75 Lacs * 100,000)
Cash and Cash Equivalents: ₹92,423,45,000 (₹92,423.45 Lacs * 100,000)
Accounts Receivable (Trade Receivables): ₹1,14,810,62,000 (₹1,14,810.62 Lacs * 100,000)
Inventory: ₹2,694,938,000 (₹26,949.38 Lacs * 100,000)

Important Note: The Consolidated Total Assets calculation above adds the Non-Current and Current Assets. The Consolidated figures are significantly higher than the standalone figures due to the inclusion of subsidiaries, joint ventures, and associates in the consolidated statements.

Liability Analysis #

The annual report provides values in Indian Rupees (INR) in Lacs (1 Lac = 100,000). Remember to multiply the reported numbers by 100,000 to obtain the values in INR.

Based on the Standalone Financial Statements:

Total Liabilities: ₹81,078,79,000 (₹81,078.79 Lacs * 100,000)
Current Liabilities: ₹24,091,31,000 (₹24,091.31 Lacs * 100,000)
Long-Term Debt: ₹0 (The company reports zero debt)
Accounts Payable (Trade Payables): ₹3,753,74,000 (₹3,753.74 Lacs * 100,000). Note that this figure only includes current trade payables.

Based on the Consolidated Financial Statements:

Total Liabilities: ₹4,67,320,40,000 (₹4,67,320.40 Lacs * 100,000)
Current Liabilities: ₹3,02,514,37,000 (₹3,02,514.37 Lacs * 100,000)
Long-Term Debt: ₹0 (The Group also reports zero long-term debt)
Accounts Payable (Trade Payables): ₹71,407,49,000 (₹71,407.49 Lacs * 100,000). This is current trade payables only.

Important Note: Consolidated figures are higher than standalone figures because they include the liabilities of subsidiaries, joint ventures, and associates. The standalone figures represent only GSPL’s own liabilities. Also note that the term “Long-Term Debt” is used here to refer to debt with maturity beyond one year. The report does not always explicitly categorize all items as current or non-current, requiring careful review of the detailed notes.

Equity Analysis #

The annual report presents values in Indian Rupees (INR) in Lacs (1 Lac = 100,000). To obtain values in INR, multiply the reported figures by 100,000.

Based on the Standalone Financial Statements:

Shareholders’ Equity: ₹1,027,006,99,000 (₹10,27,006.99 Lacs * 100,000)
Retained Earnings: ₹9,27,848,21,000 (₹9,27,848.21 Lacs * 100,000)
Share Capital: ₹5,642,11,400 (₹56,421.14 Lacs * 100,000)

Based on the Consolidated Financial Statements:

Shareholders’ Equity: ₹14,38,263,86,000 (₹14,38,263.86 Lacs * 100,000). This includes equity attributable to owners of the parent company and non-controlling interests.
Retained Earnings: The consolidated retained earnings are not explicitly stated as a single figure but are embedded within the “Other Equity” section and require detailed calculations from the Statement of Changes in Equity.
Share Capital: ₹5,642,11,400 (₹56,421.14 Lacs * 100,000) This value remains the same as the standalone share capital because share capital is a parent-company item.

Important Note: The consolidated shareholders’ equity is significantly higher than the standalone equity because it includes the equity of subsidiaries, joint ventures, and associates. Extracting the precise consolidated retained earnings figure would necessitate a detailed calculation from the provided Statement of Changes in Equity. The consolidated share capital is the same as the standalone share capital, indicating that there were no changes to the Company’s own equity shares during the year.

Income Statement #

Operating Performance #

The annual report provides values in Indian Rupees (INR) in Lacs (1 Lac = 100,000). Remember to multiply the reported Lacs figures by 100,000 to get the values in INR.

Based on the Standalone Financial Statements:

Revenue: ₹2,03,153,90,000 (₹2,03,153.90 Lacs * 100,000)
Cost of Revenue: The standalone report doesn’t explicitly separate cost of revenue (direct costs specifically attributable to generating revenue) from other operating expenses. The “Gas Transmission Expenses” and “Cost of Material Consumed” figures are presented but might not fully capture all direct costs. A precise Cost of Revenue figure cannot be definitively determined from the given information.
Gross Profit: Cannot be calculated precisely without a clearly defined Cost of Revenue figure.
Operating Expenses: ₹72,439,17,000 (₹72,439.17 Lacs * 100,000). Note that this includes items that might not be strictly considered “operating expenses” under all accounting definitions.
Operating Income (Profit Before Tax): ₹1,64,220,15,000 (₹1,64,220.15 Lacs * 100,000). This figure represents profit before accounting for interest and taxes.

Based on the Consolidated Financial Statements:

Revenue: ₹17,89,762,12,000 (₹17,89,762.12 Lacs * 100,000)
Cost of Revenue: ₹12,14,483,36,000 (₹12,14,483.36 Lacs * 100,000). This includes cost of materials consumed, gas transportation charges and changes in natural gas inventory for CGD.
Gross Profit: Cannot be directly determined from the available summary tables. It would require detailed calculations subtracting Cost of Revenue from Total Revenue.
Operating Expenses: ₹15,21,052,57,000 (₹15,21,052.57 Lacs * 100,000). Similar to standalone, some expenses included here might not fit the strict definition of “operating expenses” in all accounting frameworks.
Operating Income: ₹2,87,357,64,000 (₹2,87,357.64 Lacs * 100,000) before considering exceptional items and share of profit/loss from joint ventures.

Important Note: The consolidated figures are far larger than standalone values because of the inclusion of results from subsidiaries, associates, and joint ventures. Precise calculation of Gross Profit in both standalone and consolidated scenarios demands a more detailed breakdown of the cost components. The report should ideally provide a clear income statement outlining the standard revenue and expense categories.

Bottom Line Metrics #

The annual report provides values in Indian Rupees (INR) and in Lacs (1 Lac = 100,000). Remember to multiply the Lacs figures by 100,000 to obtain the values in INR.

Based on the Standalone Financial Statements:

Net Income (Profit After Tax): ₹1,28,464,06,000 (₹1,28,464.06 Lacs * 100,000)
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): This is not explicitly stated in a summary table but can be calculated by adding back Depreciation & Amortization Expenses (₹19,200.72 Lacs) and Finance Costs (₹492.99 Lacs) to the Profit Before Tax (₹1,64,220.15 Lacs). Therefore, EBITDA ≈ ₹1,83,913,86,000.
Basic EPS: ₹22.77
Diluted EPS: ₹22.77 (The report shows the basic and diluted EPS are the same).

Based on the Consolidated Financial Statements:

Net Income (Profit After Tax): ₹2,18,373,03,000 (₹2,18,373.03 Lacs * 100,000)
EBITDA: This requires a calculation by adding back Depreciation & Amortization (₹66,381.98 Lacs), Interest (₹3,208.19 Lacs) and Taxes (₹75,100.04 Lacs) to the Profit Before Tax and Exceptional Items (₹2,87,904.47 Lacs). Therefore, EBITDA ≈ ₹4,22,674,68,000.
Basic EPS: ₹29.41
Diluted EPS: ₹29.09

Important Note: The consolidated figures are much larger than the standalone figures due to the inclusion of the results from subsidiaries, joint ventures, and associates. Also, the EBITDA calculation is an approximation as the precise components of the “other expenses” lines are not fully transparent in the report for a precise calculation. The report should ideally provide a clear and concise summary of key financial metrics.

Cash Flow #

Cash Flow Components #

The annual report provides cash flow data in Indian Rupees (INR) in Lacs (1 Lac = 100,000). Remember to multiply the Lacs figures by 100,000 to get the values in INR.

Based on the Standalone Statement of Cash Flows:

Cash Flow from Operating Activities: ₹1,17,242,47,000 (₹1,17,242.47 Lacs * 100,000)
Cash Flow from Investing Activities: ₹(1,01,559,18,000) (₹(1,01,559.18) Lacs * 100,000). The negative sign indicates a net outflow of cash.
Cash Flow from Financing Activities: ₹(28,425,39,000) (₹(28,425.39) Lacs * 100,000). The negative sign indicates a net outflow of cash.

Based on the Consolidated Statement of Cash Flows:

Cash Flow from Operating Activities: ₹2,80,339,53,000 (₹2,80,339.53 Lacs * 100,000)
Cash Flow from Investing Activities: ₹(2,14,219,67,000) (₹(2,14,219.67) Lacs * 100,000). The negative sign indicates a net outflow of cash.
Cash Flow from Financing Activities: ₹(54,733,26,000) (₹(54,733.26) Lacs * 100,000). The negative sign indicates a net outflow of cash.

Important Note: The consolidated cash flow figures are substantially different from the standalone figures due to the inclusion of cash flows from subsidiaries, joint ventures, and associates. The negative figures for investing and financing activities in both standalone and consolidated statements reflect net cash outflows during the year. The considerable difference between the standalone and consolidated cash flows emphasizes the impact of the Group’s subsidiaries on the overall financial position.

Cash Flow Metrics #

The annual report provides values in Indian Rupees (INR) in Lacs (1 Lac = 100,000). Remember to multiply the Lacs figures by 100,000 to obtain values in INR. Calculating Free Cash Flow requires careful interpretation of the report’s data.

Based on the Standalone Statement of Cash Flows:

Capital Expenditure (CAPEX): This isn’t directly stated as a single figure but can be approximated from the investing activities section. The major component of cash outflow in investing activities is related to “Acquisition of Property, Plant, and Equipment and Change in Capital Work in Progress” which is ₹41,636.10 Lacs. This is a reasonable approximation of CAPEX, though other smaller investing activities might slightly alter the precise figure. Therefore, CAPEX ≈ ₹4,16,36,10,000.
Dividends Paid: ₹28,210,57,000 (₹28,210.57 Lacs * 100,000)
Free Cash Flow (FCF): FCF calculation requires subtracting CAPEX from Cash Flow from Operating Activities. Therefore, FCF ≈ ₹1,17,242,47,000 - ₹4,16,36,10,000 = ₹75,606,37,000. This is an approximation because the CAPEX figure is an estimate based on the largest component of cash outflows from investing activities.

Based on the Consolidated Statement of Cash Flows:

Capital Expenditure (CAPEX): Similar to the standalone, a precise consolidated CAPEX value requires a detailed summation of all cash outflows related to capital asset acquisitions from all entities within the Group’s consolidated accounts. The provided information doesn’t offer this in a single value. A reasonable approximation of CAPEX can be derived from the consolidated investing activities section (₹1,25,348.61 Lacs) giving a figure of ₹1,25,34,861,000. This is likely an underestimate as it does not account for CAPEX from other entities within the group.
Dividends Paid: ₹49,163,14,000 (₹49,163.14 Lacs * 100,000)
Free Cash Flow (FCF): Using the approximated CAPEX, Consolidated FCF ≈ ₹2,80,339,53,000 - ₹1,25,34,861,000 = ₹1,54,994,670,000. However, this is a rough estimate given the lack of a fully detailed CAPEX figure and the potential inclusion of capital expenditures by subsidiaries, joint ventures, and associates that may not be entirely captured in the summarized consolidated cash flows.

Important Note: The calculations for CAPEX and FCF above are approximations, relying on estimations from the cash flow statements. A more precise calculation requires a complete breakdown of all investing activities across all entities within the Group’s reporting structure and a clear definition of what constitutes CAPEX within the Company’s accounting practices. The significant differences between standalone and consolidated figures once again reflect the impact of including other entities in the consolidated statements.

Financial Ratios #

Profitability Ratios #

Calculating profitability ratios accurately requires a precise cost of revenue figure, which is not explicitly provided in the summary tables of the annual report. Therefore, the gross profit margin cannot be precisely computed. However, we can calculate the other profitability ratios using the available data. Remember that all figures are in Indian Rupees (INR). The standalone figures are for GSPL alone, while the consolidated figures include all subsidiaries, joint ventures, and associates. All values are approximate due to the lack of a precisely defined standalone cost of goods sold.

Based on the Standalone Financial Statements:

Gross Profit Margin: Cannot be calculated precisely due to insufficient data on direct costs.
Operating Margin: (Operating Income / Revenue) * 100 ≈ (₹1,64,220,15,000 / ₹2,03,153,90,000) * 100 ≈ 80.8%
Net Profit Margin: (Net Income / Revenue) * 100 ≈ (₹1,28,464,06,000 / ₹2,03,153,90,000) * 100 ≈ 63.2%
Return on Equity (ROE): (Net Income / Average Shareholders’ Equity) * 100 ≈ (₹1,28,464,06,000 / [(₹9,27,318,34,000 + ₹10,27,006,99,000)/2]) * 100 ≈ 13.1%
Return on Assets (ROA): (Net Income / Average Total Assets) * 100 ≈ (₹1,28,464,06,000 / [(₹10,08,827,93,000 + ₹11,08,085,78,000)/2]) * 100 ≈ 11.6%

Based on the Consolidated Financial Statements:

Gross Profit Margin: Cannot be calculated precisely due to insufficient data on direct costs.
Operating Margin: (Operating Income / Revenue) * 100 ≈ (₹2,87,904,47,000 / ₹17,89,762,12,000) * 100 ≈ 16.1%
Net Profit Margin: (Net Income / Revenue) * 100 ≈ (₹2,18,373,03,000 / ₹17,89,762,12,000) * 100 ≈ 12.2%
Return on Equity (ROE): (Net Income Attributable to Owners / Average Shareholders’ Equity) * 100 ≈ (₹1,65,807,20,000 / [(₹9,44,890,43,000 + ₹14,38,263,86,000)/2]) * 100 ≈ 12.2%
Return on Assets (ROA): (Net Income / Average Total Assets) * 100 ≈ (₹2,18,373,03,000 / [(₹17,31,590,56,000 + ₹19,05,584,26,000)/2]) * 100 ≈ 11.5%

Important Notes:

Approximations: These calculations are approximations due to the limitations of the data presented in the report. A more precise calculation of gross profit margin and other ratios would require a detailed income statement separating various cost components.
Consolidated vs. Standalone: The consolidated ratios are significantly lower than the standalone ratios because the consolidated results encompass the performance of less profitable subsidiaries and joint ventures. The consolidated ROE calculation uses only equity attributable to the parent company’s owners (excluding non-controlling interests), similar to the way ROE is frequently reported.
Data Limitations: The lack of a standardized income statement format in the provided report makes a complete and precise ratio analysis challenging.

Liquidity Ratios #

To calculate liquidity ratios, we need the values for current assets, current liabilities, inventory, and prepaid expenses from the Standalone and Consolidated Balance Sheets. All figures are in Indian Rupees (INR), obtained by multiplying the Lacs figures in the report by 100,000. The calculations below are approximations due to rounding differences and interpretations of certain line items within current assets and liabilities.

Standalone Financial Statements:

Current Ratio: Current Assets / Current Liabilities = ₹1,80,800,24,000 / ₹24,091,31,000 ≈ 7.50
Quick Ratio: (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities ≈ (₹1,80,800,24,000 - ₹2,108,38,300 - ₹673,95,000) / ₹24,091,31,000 ≈ 6.82
Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹8,25,38,000 / ₹24,091,31,000 ≈ 0.03

Consolidated Financial Statements:

Current Ratio: Current Assets / Current Liabilities = ₹4,01,079,75,000 / ₹3,02,514,37,000 ≈ 1.33
Quick Ratio: (Current Assets - Inventory - Prepaid Expenses) / Current Liabilities ≈ (₹4,01,079,75,000 - ₹26,949,38,000 - ₹20,281,93,000) / ₹3,02,514,37,000 ≈ 0.95
Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities = ₹92,423,45,000 / ₹3,02,514,37,000 ≈ 0.31

Important Notes:

Approximations: These calculations are approximate due to rounding in the reported figures and variations in the precise definition of certain components within current assets (e.g., the inclusion of other receivables in the quick ratio calculation).
Consolidated vs. Standalone: The consolidated current ratio is significantly lower than the standalone current ratio because the consolidated figures include the current assets and liabilities of all subsidiaries, associates, and joint ventures which could lead to a lower liquidity position in the consolidated figures. This difference highlights the significance of integrating other entities in the consolidated accounts.
Prepaid Expenses: The precise classification of prepaid expenses is not fully transparent from the given financial summaries.

To perform a more precise ratio analysis, one needs access to the full detailed balance sheet that provides a complete breakdown of each line item within the current assets and liabilities. The summaries provided only give aggregate figures.

Efficiency Ratios #

To calculate efficiency ratios, we need the values for revenue, average total assets, average inventory, and average accounts receivable. The calculations below are approximations due to rounding differences and the use of simple averages for calculating average asset, inventory, and receivable balances. All figures are in Indian Rupees (INR), obtained by multiplying the Lacs figures from the report by 100,000.

Standalone Financial Statements:

Average Total Assets: (₹10,08,827,93,000 + ₹11,08,085,78,000) / 2 ≈ ₹10,58,456,85,500
Average Inventory: (₹21,209,20,000 + ₹21,083,83,000) / 2 ≈ ₹21,146,51,500
Average Accounts Receivable: (₹14,404,76,000 + ₹14,123,13,000) / 2 ≈ ₹14,263,94,500
Asset Turnover: Revenue / Average Total Assets = ₹2,03,153,90,000 / ₹10,58,456,85,500 ≈ 0.19
Inventory Turnover: Cost of Goods Sold / Average Inventory ≈ (₹1,651,17,000) / ₹21,146,51,500 ≈ 0.08
Receivables Turnover: Revenue / Average Accounts Receivable = ₹2,03,153,90,000 / ₹14,263,94,500 ≈ 14.24

Consolidated Financial Statements:

Average Total Assets: (₹17,31,590,56,000 + ₹19,05,584,26,000) / 2 ≈ ₹18,18,587,41,000
Average Inventory: (₹27,327,12,000 + ₹26,949,38,000) / 2 ≈ ₹27,138,25,000
Average Accounts Receivable: (₹1,14,138,44,000 + ₹1,14,810,62,000) / 2 ≈ ₹1,14,474,53,000
Asset Turnover: Revenue / Average Total Assets = ₹17,89,762,12,000 / ₹18,18,587,41,000 ≈ 0.98
Inventory Turnover: Cost of Goods Sold / Average Inventory = ₹12,14,483,36,000 / ₹27,138,25,000 ≈ 4.48
Receivables Turnover: Revenue / Average Accounts Receivable = ₹17,89,762,12,000 / ₹1,14,474,53,000 ≈ 15.64

Important Notes:

Approximations: These are approximations due to the use of simple averages and rounding differences in the reported financial data. More precise calculations would require a more detailed breakdown of the balance sheet items.
Cost of Goods Sold: The standalone inventory turnover ratio is calculated using the standalone cost of materials consumed. The consolidated inventory turnover uses the consolidated cost of materials consumed.
Consolidated vs. Standalone: Consolidated ratios significantly differ from standalone ratios due to the inclusion of subsidiary, joint venture, and associate company data in the consolidated figures. The size and nature of operations of different entities within the Group could contribute to these varying efficiency ratios. The consolidated figures provide a broader picture of the Group’s overall efficiency.
Data Limitations: e available summaries lack detail, especially for some component of costs in the calculation of Cost of Goods Sold, potentially affecting the precision of the inventory turnover ratio.

For a more detailed and precise ratio analysis, access to the complete and detailed financial statements with a full breakdown of the balance sheet items is essential. The presented data only provide aggregated summaries.

Leverage Ratios #

The annual report indicates that GSPL has zero debt. Therefore, the debt-to-equity and debt-to-asset ratios are both zero for both the standalone and consolidated financial statements.

The interest coverage ratio, however, can still be calculated, although it will only represent the ability to cover interest expenses relative to the earnings before interest and taxes (EBIT). In the case of GSPL, its zero-debt position implies that the interest expense is primarily attributable to lease liabilities (and potentially other financing items if they exist but are not explicitly stated as debt).

Standalone Financial Statements:

Debt-to-Equity Ratio: 0
Debt-to-Asset Ratio: 0
Interest Coverage Ratio: EBIT / Interest Expense. EBIT (Earnings Before Interest and Taxes) can be calculated as Profit Before Tax + Interest Expense = ₹1,64,220.15 Lacs + ₹492.99 Lacs = ₹1,64,713.14 Lacs. Therefore, Interest Coverage Ratio ≈ ₹1,64,713.14 Lacs / ₹492.99 Lacs ≈ 334.1

Consolidated Financial Statements:

Debt-to-Equity Ratio: 0
Debt-to-Asset Ratio: 0
Interest Coverage Ratio: EBIT / Interest Expense. Again, a precise EBIT figure for the consolidated statements is needed to calculate the consolidated interest coverage ratio, but using the profit before tax and exceptional items and adding back interest expenses, EBIT ≈ ₹2,87,904.47 Lacs + ₹3,208.19 Lacs = ₹2,91,112.66 Lacs. Therefore, the consolidated Interest Coverage Ratio ≈ ₹2,91,112.66 Lacs / ₹3,208.19 Lacs ≈ 90.7

Important Notes:

Zero Debt: The zero debt significantly impacts the use ratios. These ratios are essentially meaningless in the context of a zero-debt company.
Interest Coverage Approximation: The interest coverage ratio calculation is approximate because the report might contain other interest-bearing items not explicitly identified as debt. A complete income statement would allow for a more precise calculation.
Consolidated vs. Standalone: Consolidated figures may reflect the interest coverage of other entities within the group, influencing the overall ratio. The standalone ratio purely relates to GSPL’s own operations and financial structure.

In summary, while the use ratios are trivially zero due to the absence of debt, the interest coverage ratio indicates a strong ability to cover interest expenses relative to earnings. However, more precise analysis would be possible with a fully transparent income statement.

Market Analysis #

Market Metrics #

Calculating these market-based ratios requires information beyond what’s directly in the annual report. We need the current market price per share and the total number of outstanding shares to determine the market capitalization. The report provides the number of outstanding shares but not the current market price. Therefore, the calculations below will be illustrative only, using hypothetical market price values. Assume the current market price per share for GSPL is ₹350. Remember that all values will be in Indian Rupees (INR).

Hypothetical Calculations (assuming ₹350 market price per share):

Market Capitalization: Number of Outstanding Shares * Market Price per Share = 56,42,11,376 * ₹350 ≈ ₹19,747,397,760.
Price-to-Earnings Ratio (PE Ratio): Market Price per Share / Earnings Per Share (EPS). Using the Standalone EPS of ₹22.77: PE Ratio (Standalone) ≈ ₹350 / ₹22.77 ≈ 15.38. Using the Consolidated Basic EPS of ₹29.41: PE Ratio (Consolidated Basic) ≈ ₹350 / ₹29.41 ≈ 11.9. Using the Consolidated Diluted EPS of ₹29.09: PE Ratio (Consolidated Diluted) ≈ ₹350 / ₹29.09 ≈ 12.0.
Price-to-Book Ratio (PB Ratio): Market Price per Share / Book Value per Share. To calculate Book Value per Share, we need the total shareholders’ equity and the number of outstanding shares. Using Standalone values, Book Value per Share ≈ ₹10,27,006,99,000 / 56,42,11,376 ≈ ₹182.0. Therefore, PB Ratio (Standalone) ≈ ₹350 / ₹182.0 ≈ 1.92. Consolidated calculations would require the same process using the consolidated equity and outstanding shares.
Dividend Yield: (Annual Dividend per Share / Market Price per Share) * 100. The recommended dividend is ₹5 per share. Therefore, Dividend Yield ≈ (₹5 / ₹350) * 100 ≈ 1.43%.
Dividend Payout Ratio: (Dividends Paid / Net Income) * 100. Using Standalone figures, Dividend Payout Ratio ≈ (₹28,210,57,000 / ₹1,28,464,06,000) * 100 ≈ 22%. Consolidated calculations would use consolidated dividend paid and net income values.

Important Notes:

Hypothetical Market Price: e calculations above are based on a hypothetical market price of ₹350 per share. The actual market price at any given time will determine the actual market cap, PE, PB, and dividend yield.
Data Limitations: Precise calculation of the PB ratio requires considering the definition of book value used (whether to consider only the parent company’s equity or include the entire consolidated equity).
Dividend Recommendation: The dividend yield and payout ratio are based on the recommended dividend. The actual dividend paid might differ depending on shareholder approval.
Time Sensitivity: Market-based ratios are dynamic and change constantly with fluctuations in market prices and company performance. The values calculated are a snapshot based on a specified hypothetical market price at a particular time and are subject to change.

To obtain the actual values for these market-based ratios, one must refer to real-time financial data sources such as financial news websites or stock market data providers that provide live share price information for GSPL.

Business Analysis #

Segment Analysis #

Precise data for all requested metrics (especially market share) is not fully available within the provided annual report. The report provides some revenue figures but lacks a complete breakdown of segmental operating margins and precise market shares. Therefore, the analysis below will combine information from different sections of the report and will include some estimations. All financial values are in Indian Rupees (INR).

I. Business Segments:

GSPL’s primary business revolves around natural gas transmission and distribution, covering many interconnected segments:

A. Natural Gas Transmission:

Name: Natural Gas Transmission (High and Low Pressure Grids)
Revenue (Standalone 2023-24): ₹1,97,929,00,000 (approx. 97.59% of standalone revenue)
Revenue Growth: Approximately 21% year-over-year (based on the increase in gas transported). Precise revenue growth for only the transmission segment needs to be determined from a more detailed income statement breakdown.
Operating Margin: Not explicitly given; this requires a detailed segmental income statement which is not provided. However, this segment is likely the most profitable.
Market Share: Not specified in the report but it is implied that GSPL holds a dominant market share in Gujarat’s natural gas transmission.
Key Products/Services: Natural gas transmission services via its extensive pipeline network.
Geographic Presence: Primarily Gujarat and the Union Territory of Daman.

B. Electricity Generation (Wind Power):

Name: Renewable Energy (Wind Power)
Revenue (Standalone 2023-24): ₹3,210,82,000 (approx. 1.58% of standalone revenue)
Revenue Growth: Not specified, requiring a detailed breakdown from the report to determine precise figures.
Operating Margin: Not specified.
Market Share: Not provided. This would require external market data on Gujarat’s wind power generation sector.
Key Products/Services: Electricity generated from windmills.
Geographic Presence: Maliya Miyana (Rajkot district) and Gorsar & Adodar (Porbandar district), Gujarat.

C. Natural Gas Trading:

Name: Natural Gas Trading
Revenue (Standalone 2023-24): ₹1,679,56,000 (approx. 0.83% of standalone revenue)
Revenue Growth: Not specified; needs a more detailed breakdown for precise calculation.
Operating Margin: Not specified.
Market Share: Not provided. This would require external market data on Gujarat’s natural gas trading sector.
Key Products/Services: Trading of natural gas.
Geographic Presence: Gujarat and possibly extending to neighboring states (details not specified).

D. City Gas Distribution (CGD) – Through Subsidiaries:

Name: City Gas Distribution (CGD)
Revenue: The report does not provide a direct revenue breakdown for the CGD segment (through GGL and SGL). It states that GGL contributed to approximately 22% of GSPL’s transmission revenues in 2023-24, but this is not the same as GGL’s overall revenue. SGL’s contribution was about 3% of GSPL’s total transmission revenues. To get an accurate revenue value for CGD requires a consolidated income statement.
Revenue Growth: Not directly specified in this format. Needs detailed segmental reporting and potentially external data to calculate growth accurately.
Operating Margin: Not specified. Would require segment-specific data from each subsidiary.
Market Share: Not explicitly stated. GGL is stated to be India’s largest CGD player in terms of geographical area, but the precise market share is not stated. Requires external market data.
Key Products/Services: Piped natural gas (PNG) and compressed natural gas (CNG).
Geographic Presence: GGL operates across many states (Gujarat, Punjab, Rajasthan, Haryana, Madhya Pradesh, Maharashtra) and one Union territory. SGL operates in Gandhinagar, Mehsana, Patan districts of Gujarat.

E. Other Operations and Services:

Name: Other Operations and Services
Revenue: A small portion of total revenue, not individually broken down in detail.
Operating Margin: Not specified.
Market Share: Not applicable.
Key Products/Services: This encompasses miscellaneous activities not explicitly detailed.

Overall Assessment:

GSPL’s revenue is heavily concentrated in natural gas transmission, highlighting its core competency and dependence on this sector. Detailed analysis of growth rates and operating margins for each segment is severely hindered by the limited financial data provided in the report’s summary sections. Obtaining precise market share figures would require accessing external market research and analysis reports for the relevant Indian energy sectors.

Risk Management #

Risk Assessment #

The annual report identifies many key risk factors, but it doesn’t provide a structured assessment of impact severity, likelihood, or mitigation strategies in a consistent matrix. Therefore, the analysis below will categorize the risks based on their nature and offer a qualitative assessment of their potential impact and likelihood, drawing upon information scattered across the report.

I. Key Risk Factors:

The report’s discussion identifies many key risk categories:

A. Market Risks:

Category: Market Risks
Description: Fluctuations in natural gas prices (both domestic and international), changes in demand from various sectors (power, fertilizer, industrial), and competition from alternative energy sources. The risk of oversupply is also noted.
Impact Severity: High. Price volatility directly impacts revenue and profitability. Shifts in demand and competition affect long-term growth prospects.
Likelihood: High. Global energy markets are inherently volatile, influenced by geopolitical factors and technological advancements.
Mitigation Strategies: The report mentions exploring new markets, diversifying customer base, and pursuing long-term supply contracts. However, no details about the effectiveness of these strategies are provided.
Trends: Increasing focus on renewable energy sources and energy transition pose both a threat and an opportunity.

B. Regulatory Risks:

Category: Regulatory Risks
Description: Changes in government policies, regulatory approvals, and tariff revisions by PNGRB (Petroleum and Natural Gas Regulatory Board). The company’s challenge to a recent tariff reduction order highlights this risk.
Impact Severity: High. Regulatory changes can dramatically impact revenue, profitability, and investment planning.
Likelihood: Moderate to High. Regulatory frameworks in the energy sector are subject to revisions and adjustments based on policy shifts.
Mitigation Strategies: Active engagement with regulatory bodies, legal challenges to unfavorable decisions, and proactive advocacy for supportive policies.
Trends: Increased regulatory scrutiny and a push for market liberalization could introduce further uncertainty.

C. Operational Risks:

Category: Operational Risks
Description: Maintaining the integrity of the extensive pipeline network, managing safety and environmental risks, preventing operational disruptions (e.g., due to equipment failure, natural disasters, or third-party interference), and ensuring pipeline security.
Impact Severity: High. Disruptions can lead to significant financial losses, reputational damage, and safety concerns.
Likelihood: Moderate to High. The extensive pipeline network increases the potential for incidents. Aging infrastructure also enhances the risk.
Mitigation Strategies: Regular maintenance, robust safety protocols, advanced technology (Pipeline Integrity Management Systems), preventive maintenance, emergency response plans.
Trends: Increasing complexity of the network, climate change impacts, and the need for continuous technological upgrades.

D. Financial Risks:

Category: Financial Risks
Description: Credit risk related to outstanding receivables (particularly from government entities), managing liquidity (although the company currently reports zero debt, the risk of needing future financing exists), and potential financial losses from disputes and litigations.
Impact Severity: Moderate to High. Non-payment by customers could impact cash flow; liquidity issues could restrict future investments. Legal battles can have significant financial consequences.
Likelihood: Moderate. The company’s diversified customer base and financial planning appear to reduce the likelihood of major liquidity problems. The occurrence of litigations and disputes in the sector, is a regular event.
Mitigation Strategies: Credit risk mitigation measures, financial planning to secure adequate liquidity, and efficient management of legal issues and dispute resolution mechanisms.
Trends: Growing number of cases of litigations and disputes in the sector, in particular related to the tariff, revenue recovery etc.

E. Human Resources Risks:

Category: Human Resources Risks
Description: Attracting and retaining skilled personnel in a competitive labor market, ensuring employee well-being, and maintaining a positive work environment.
Impact Severity: Moderate. Skill shortages could hamper operational efficiency and project execution.
Likelihood: Moderate. Competition for talent in the energy sector is a consistent challenge.
Mitigation Strategies: Competitive compensation and benefits, investment in training and development, and fostering a positive work culture.
Trends: Changing workforce demographics and evolving employee expectations.

II. Overall Risk Assessment:

GSPL’s business is exposed to a range of risks. Market and regulatory risks have a high potential impact on profitability. Operational and financial risks can lead to significant disruptions. Human resources risks, while potentially less severe in financial terms, can still affect operational efficiency. The provided report highlights the risks but lacks a detailed quantitative analysis of their likelihood and potential severity. The effectiveness of current mitigation strategies also requires more detailed assessment. The report itself suggests that the management will soon incorporate ESG risk analysis into its risk management framework which might give a more detailed view of risk facing GSPL.

Strategic Overview #

Management Assessment #

The annual report provides insights into GSPL’s strategies, competitive advantages, market conditions, challenges, and opportunities, although not always in a clearly structured or consistently detailed manner. The information is scattered across the report’s various sections.

I. Key Strategies:

GSPL’s strategies appear to focus on many interconnected elements:

Expanding the Gas Grid Network: Continuously expanding its pipeline network to connect new supply sources (LNG terminals, domestic gas fields) and serve a wider range of customers (industrial, commercial, CGD). This strategy is fundamental to GSPL’s growth.
Capturing New Markets: Extending its reach beyond Gujarat to other states through its subsidiary companies (GIGL and GITL).
Diversification: Expanding into renewable energy generation (wind power) to diversify revenue streams and reduce reliance solely on gas transmission.
Focus on Efficiency: Employing a lean manpower model and leveraging technology to optimize operations and reduce costs.
Customer Relationship Management: Improving customer relationships through better communication, efficient services, and understanding customer needs.

II. Competitive Advantages:

The report implicitly highlights many competitive advantages:

First-Mover Advantage: GSPL established Gujarat’s first statewide gas grid, giving it an early mover advantage and a significant head start in infrastructure development.
Extensive Pipeline Network: The already established large pipeline network provides significant cost advantages and connectivity to existing supply sources and customers.
Established Relationships: Strong relationships with government entities and industrial clients provide stable long-term contracts and support.
Technological Expertise: Investment in technology enhances operational efficiency and safety, improving competitiveness.

III. Market Conditions:

The report describes the global and Indian natural gas market as having experienced resilience in 2023, after the significant shocks of the previous years. Key aspects:

Global Rebalancing: Gas markets are rebalancing after the disruption caused by reduced Russian supplies to Europe. Prices moderated in 2023, but remain susceptible to geopolitical events and weather patterns.
Increased Focus on Security of Supply: This is a significant trend globally and in India, with greater emphasis on domestic production and various supply sources.
Indian Market Growth: India’s natural gas consumption is projected to grow significantly in coming years, driven by increasing industrialization and energy transition efforts. This market provides a significant growth opportunity.
Competition: The report implicitly highlights increasing competition in the Indian gas market from new entrants and evolving energy sources (renewables).

IV. Challenges:

Management implicitly recognizes many challenges:

Tariff Regulations: The recent PNGRB tariff order exemplifies the risk of regulatory intervention impacting profitability.
Competition: Growing competition from alternative energy sources and new players in the gas market poses a threat to market share.
Affordability of Gas: Maintaining the competitiveness of natural gas prices against other fuels remains a concern.
Infrastructure Development Costs: Significant investments in expanding the pipeline network require substantial capital expenditure.
Safety and Environmental Concerns: Maintaining safety standards and minimizing environmental impact are crucial.

V. Opportunities:

The report highlights many opportunities:

Growth in Indian Gas Demand: The projected growth in India’s natural gas demand offers significant potential for expansion and increased revenue.
New Pipeline Projects: Development of new pipeline projects (by subsidiaries) offers opportunities to expand the reach and market penetration beyond Gujarat.
CGD Expansion: Growth in the CGD sector (through GGL and SGL) provides further growth prospects.
Renewable Energy Integration: The wind power project showcases the opportunity to diversify into clean energy.
Hydrogen Blending: Future opportunities might exist in hydrogen transmission and blending with natural gas in pipeline networks.

VI. Overall Assessment:

GSPL’s strategy centers on leveraging its existing infrastructure and expanding into new markets while diversifying its revenue base. Its first-mover advantage and extensive network create a strong competitive position in Gujarat, but navigating regulatory changes, managing operational risks, and facing competition remain essential challenges. The considerable projected growth in India’s gas demand presents a major opportunity for expansion and improved profitability. A detailed and structured analysis of these challenges and opportunities along with effective mitigation strategies would benefit the shareholders significantly. The report itself does not provide the level of detailed strategic analysis that would allow a more quantitative and specific assessment.

ESG Ratings #

The provided annual report does not include ESG ratings from any specific rating agencies. While the report details various ESG initiatives undertaken by GSPL, it does not mention any external ESG ratings or scores from organizations like MSCI, Sustainalytics, Refinitiv, etc. To find ESG ratings for GSPL, you would need to consult independent ESG rating providers’ websites directly.

ESG Initiatives #

GSPL’s annual report highlights various ESG initiatives, although not always with precise quantitative data or clearly defined targets. The information is presented across different sections of the report.

I. Environmental Initiatives:

Renewable Energy: GSPL operates a 52.5 MW wind power project, contributing to clean energy generation and reducing reliance on fossil fuels. The report states that 9,12,88,306 KWH of electricity was sold from this project.
Gas Leak Detection: The company uses gas monitoring devices at its terminals to detect and address potential gas leaks, minimizing greenhouse gas emissions.
Dial Before Dig Campaign: This initiative aims to educate stakeholders about the environmental risks of damaging pipelines during digging activities, preventing accidental gas releases.
Water Conservation: The report mentions the implementation of water harvesting at some terminals, indicating efforts to conserve water resources. The company also claims to have a zero-liquid-discharge system, although details regarding the system’s coverage and effectiveness are lacking.
Energy Efficiency: Measures for improving energy efficiency include paperless documentation and procurement of energy-efficient equipment.

II. Carbon Footprint:

The report provides some greenhouse gas (GHG) emission data but lacks a detailed carbon footprint accounting:

Scope 1 and 2 Emissions: The report provides some data on Scope 1 (direct emissions) and Scope 2 (indirect emissions from energy consumption) GHG emissions, but not for all GHGs. More details would be needed to calculate a more detailed carbon footprint. The provided data is presented in metric tonnes of CO2 equivalent, but a complete and verifiable carbon footprint would need to follow a standardized accounting framework.
Scope 3 Emissions: Data on Scope 3 emissions (value chain emissions) is also provided but remains quite limited. A complete assessment of Scope 3 emissions is essential for a thorough carbon footprint.

III. Social Initiatives:

Corporate Social Responsibility (CSR): GSPL undertakes various CSR activities, mainly focused on promoting healthcare (including free medical services), supporting education initiatives, and contributing to environmental sustainability. The report includes detailed impact assessments for many of these projects.
Employee Well-being: The report highlights initiatives related to employee health, safety, training, and development. This includes robust safety programs, health insurance, and other benefits.
Community Engagement: The report mentions community engagement efforts but lacks detailed descriptions of their scope and outcomes.

IV. Governance Practices:

Board Composition and Committees: GSPL has a structured Board of Directors with a focus on independent directors and multiple committees (audit, nomination and remuneration, stakeholders’ relationship, risk management) ensuring oversight of key aspects of the company.
Code of Conduct: The report mentions adherence to a Code of Conduct for Directors and Senior Management and emphasis on ethical behavior.
Vigil Mechanism: A system for reporting unethical behavior, fraud, and violation of the Code of Conduct.
Transparency and Disclosure: The report emphasizes transparency and the provision of information to stakeholders.

V. Sustainability Goals:

The annual report does not explicitly lay out specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals. While various environmental and social initiatives are outlined, there’s a lack of clarity on quantitative targets and timelines for reducing carbon emissions, improving resource efficiency, enhancing social impact, or strengthening governance. The document indicates that the management is committed to strengthen its reporting in relation to ESG performance indicators in future.

Overall Assessment:

GSPL demonstrates a commitment to ESG through various initiatives. However, the report needs to be strengthened by the introduction of clearer, more measurable, and time-bound sustainability goals and a more detailed reporting of its carbon footprint and other environmental metrics. While efforts regarding health, safety and security of operations are commendable, a more detailed and consistent reporting framework would improve the transparency and effectiveness of the ESG strategy.

Additional Information #

Operational Metrics #

Based on the provided annual report:

R&D Expenditure: The report states that the expenditure incurred on Research and Development is NIL for the year.
Employee Count: As of March 31, 2024, GSPL employed 254 permanent employees and 153 other employees (total 407 employees). The report does not separately provide the number of workers employed through third-party contractors.

Key Events #

The Gujarat State Petronet Limited (GSPL) annual report doesn’t explicitly list “significant events” in a dedicated section. However, many significant events and developments can be inferred from the report:

Tariff Order Revision by PNGRB: The Petroleum and Natural Gas Regulatory Board (PNGRB) issued a tariff order significantly revising GSPL’s high-pressure gas grid transportation tariff downwards. This led to a legal challenge from GSPL. This is a highly significant event impacting the company’s financials.
Successful Pipeline Network Expansion: The company successfully extended its gas grid network, adding 11 new customer locations. This reflects operational success but also highlights the continuous capital expenditure requirements for maintaining the business.
Continued Growth in Gas Transportation: A significant increase in gas transported was reported.
Significant increase in profit and income: GSPL achieved substantial year-over-year growth in revenue, profit before tax, and profit after tax.
Dividend Increase Recommendation: The board recommended a significant increase in dividend compared to the previous year, reflecting profitability and confidence.
Changes in Board of Directors: Several changes occurred in the composition of the Board of Directors during the year, with some members leaving and others joining. This is a normal occurrence but may imply changes in future strategic direction.
Implementation of Unified Tariff: This industry-wide change impacted invoicing and revenue recognition for GSPL.
Continued Development of Wind Power Project: GSPL continued operating its wind power generation project, generating a significant amount of electricity.

While the report mentions these developments, a more structured presentation of “significant events” with more detailed information about each event would improve the report’s readability and usefulness to stakeholders.

Audit Information #

Auditor’s Opinion:

The auditor’s opinion, provided by B P Bang & Co. Chartered Accountants, is unqualified (unmodified). This means the auditors found the standalone and consolidated financial statements to present a true and fair view of the company’s and the group’s financial position and performance in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The opinion is expressed for both the standalone financial statements of GSPL and the consolidated financial statements that include the results of its subsidiaries, joint ventures, and associates.

Key Accounting Policies:

The annual report outlines many key accounting policies applied consistently across the periods presented. Key elements include:

Basis of Preparation: The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) and comply in all material aspects with the Companies Act, 2013. The statements follow the accrual basis and the historical cost convention, with some exceptions for financial instruments measured at fair value.
Property, Plant, and Equipment: Carried at cost less accumulated depreciation and impairment losses, using straight-line or written-down value methods depending on the asset’s nature.
Intangible Assets: Carried at cost less accumulated amortization and impairment losses. Items with indefinite useful lives (like Right-of-Use assets) are not amortized but are tested for impairment annually.
Investments: Investments in subsidiaries, joint ventures, and associates are accounted for using the cost method, equity method, or fair value through profit or loss method, as appropriate.
Financial Instruments: Financial assets and liabilities are classified and measured according to their business model and contractual cash flow characteristics (amortized cost, fair value through other detailed income (FVOCI), or fair value through profit or loss (FVTPL)). The Expected Credit Loss (ECL) model is used for impairment assessment.
Revenue Recognition: Revenue from contracts with customers is recognized when control of goods or services is transferred, using the principles of Ind AS 115. Revenue is recognized over time for services performed, and at a point in time for goods sold.
Taxation: Current and deferred tax are recognized in accordance with applicable tax laws and accounting standards.
Impairment of Non-Financial Assets: The group assesses impairment annually using the recoverable amount (higher of net selling price and value in use).
Provisions: Recognized when a present obligation exists, an outflow of resources is probable, and a reliable estimate can be made.
Leases: The Group accounts for leases according to Ind AS 116, classifying them as finance or operating leases, and recognizing right-of-use assets and lease liabilities for most leases.
Foreign Currency Transactions: Transactions are initially recorded at the exchange rate on the transaction date. Monetary items are re-translated at the year-end exchange rate.

The annual report explicitly states that the accompanying notes to the financial statements are an essential part of the financial reporting. A detailed understanding of the accounting policies requires reviewing those detailed notes.