GUJARAT GAS COMPANY LIMITED
ANNUAL REPORT 2011
ANNUAL REPORT 2010-2011
DEAR SHAREHOLDERS,
Your Directors have pleasure in presenting the 32nd Annual Report and the
audited accounts for the year ended on 31 December 2011.
1. FINANCIAL RESULTS
(Rs. in Millions)
Particulars Consolidated Stand-alone
Financials Financials
Current Previous Current Previous
Year Year Year Year
Total income 24,750.78 18,717.25 24,704.43 18,676.94
Gross profit before interest,
depreciation and tax 4,534.24 4,380.06 4,496.63 4,346.37
Less: Interest 1.49 4.62 1.49 4.62
Depreciation 602.04 542.05 593.33 530.66
Profit before tax 3,930.71 3,833.39 3,901.81 3,811.09
Tax expenses 1,182.46 1,243.24 1,163.00 1,223.80
Net Profit 2,748.25 2,590.15 2,738.81 2,587.29
Minority Interest 13.48 12.69 - -
Profit attributable to Group 2,734.77 2,577.46 2,738.81 2,587.29
Add: Undistributed profit of
earlier years 5,967.67 5,462.26 5,842.33 5,315.26
Balance available for
Appropriation 8,702.44 8,039.72 8,581.14 7,902.55
Less: Appropriations:
Transfer to general reserve 277.13 261.94 274.00 259.00
Special reserve as stipulated
by RBI - 8.43 - -
Preference dividend 10.80 10.80 10.80 10.80
Proposed Equity dividend 1,539.00 1,539.00 1,539.00 1,539.00
Corporate dividend tax on
proposed dividend 252.08 251.88 251.42 251.42
Interim Dividend 1,282.50 - 1,282.50 -
Corporate dividend tax on
interim dividend 208.05 - 208.05 -
Surplus retained 5,132.88 5,967.67 5,015.37 5,842.33
Earning per Share (Rs.) 21.23 20.00 21.26 20.08
2. DIVIDEND
During CY 2011, your Company paid on 22 November 2011, the Interim Dividend
of Rs. 10/- per share of the face value of Rs. 2/- each and the Board of
Directors have further recommended a final dividend of Rs. 12/-per share
of the face value of Rs. 2/- each, on the paid up equity share capital,
subject to approval of shareholders, thus paying a total dividend of Rs.
22/-per share of the face value of Rs. 2/- on the paid up equity share
capital for the CY 2011. A sum of Rs. 274 million is proposed to be
transferred to the General Reserve during the year.
Your Directors further recommend for consideration of the shareholders at
the Annual General Meeting, the payment of 7.50% dividend i.e. Rs. 0.75
per Redeemable Cumulative Non-convertible Preference Share of Rs. 10 each.
The total payout on account of above dividends is of Rs. 1788.66 Million,
including corporate dividend tax of Rs. 249.66 Million.
Your Directors have made this recommendation after careful consideration of
the Company`s performance and its reserves and an assessment of the fund
requirements of the Company for its capital programme in line with its
growth strategy as well as the projected earnings from operations.
3. MANAGEMENT DISCUSSION AND ANALYSIS
3.1. Industry Outlook and Developments
The Oil and Gas sector in India has been instrumental in fuelling the
growth of the Indian economy and hence presents a significant opportunity
for investors in the years to come. The New Exploration Licensing Policy
(NELP), conceived to address the increasing demand supply gap of energy in
India, has attracted the interest of both domestic private sector players
and some foreign players during the nine rounds of bidding. Significant
investments are also planned in Refining, LNG regasification capacity
expansion and City Gas Distribution (CGD).
India`s consumption of natural gas has risen faster than any other fuel in
recent years. Natural gas contribution towards India`s primary energy
basket is forecast to grow from 11% currently to 20% of the primary energy
basket by the year 2025. On the supply side, for a brief period during
2009-10, it seemed like the gas supply fulfilled the demand mainly due to
significant increase in production from the prolific eastern offshore KG-
D6 fields. However, the current supplies from these fields have been fully
absorbed and the gas demand in the medium to long term is expected to be
significantly higher than supplies. Given that supply from indigenous
fields would not be adequate to meet demand over the medium to long term,
the country will have to rely significantly on import of Liquefied Natural
Gas (LNG). The consumption of regasified LNG (RLNG) in Indian markets
increased through the year, primarily due to the availability of spot
cargoes in addition to supplies under the longer term contracts.
The projected gas demand is likely to increase from 196 mmscmd in 2010 to
297 mmscmd in 2015 (CRISIL estimates) confirming a clear market preference
for this environmentally friendly source of energy. Demand for natural gas
in the CGD segment is expected to grow at a compounded annual growth rate
of 26% over the same period. The estimated growth in demand for the
natural gas industry and for the CGD sector is shown below:
The Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted in
2007, which has, among other mandates in the downstream hydrocarbon
sector, the mandate of regulating the CGD business. The PNGRB has outlined
its vision of expanding the CGD network to over 300 cities in India, a part
of which, bidding has been initiated through four rounds for 28 cities.
The demand for natural gas remains strong even with the changing economies
of gas cost as the product retains an overall benefit to alternate fuels on
several aspects.
3.2. Opportunities and Challenges
The CGD industry in India is at a nascent stage; currently accounting for
only about 8%-9% of the gas consumed in the country. The per capita for
natural gas consumption is 56 scm/year compared to the global average of
429 scm/year. While the per capita consumption in Gujarat at 398 scm/year
is significantly higher than the national average, the high rate of urban
and industrial growth in the state enables a steady increase in demand for
natural gas.
CGD projects in the state and in India present significant opportunities
for investment.
Natural gas is used in various applications and replaces different
alternate fuels. Your Company has been focusing on increasing penetration
in high value segments in its markets. This not only helps in increasing
value but also helps in mitigating the increasing cost of gas.
Your company continues to assess new geographical areas for expansion of
its pipeline network and will be deciding on bidding for new areas as and
when the PNGRB invites bids for new CGDs.
The Ministry of Petroleum & Natural Gas (MoPNG) is encouraging supply of
Compressed Natural Gas (CNG) for the transport segment and Piped Natural
Gas (PNG) for the residential segment. The MoPNG has finalised the
`Vision-2015` for the oil sector for `Consumer Satisfaction and Beyond`,
wherein 200 cities are to be provided CNG by the year 2015. CNG remains a
high value segment in your Company`s markets and is a significant driver
for growth. Your Company is focused on expanding the infrastructure of CNG
stations in its operational areas, which are located in the heart of
India`s only CNG Corridor, to sustain the growth momentum in this
business.
The continued focus on strong industrial growth in the state of Gujarat and
the conducive business cum sociopolitical environment attracts large
investments to the state. Recent announcements indicate plans for
significant additional investments in manufacturing and urban facilities.
It is expected that these investments will create an even stronger demand
for natural gas in the Gujarat state in the years to come.
The declining availability of gas from its indigenous sources will continue
to pose a challenge to the growth of this business. The supply shortfall
will largely be met with imported RLNG. Your Company has been procuring
RLNG since 2009 and has established strong credentials with various RLNG
suppliers for supply security; RLNG is now a significant portion of your
Company`s portfolio and is successfully sold in its markets.
Your Company is aware of the challenges in obtaining licenses for new
areas, in running its operations at a high level of safety & integrity and
in augmenting its gas supplies. Mitigation plans are in place to address
these challenges.
3.3 Operations and Market Performance
Your Company maintained its status as the largest private sector CGD
Company in India by volumes, despite the ongoing gas supply deficit
situation in the country.
Your Company met the challenges of gas sourcing through the year by
successfully procuring RLNG at competitive prices through medium term and
short term contracts with various suppliers to meet the gas requirements
of its customers, and will continue to make concerted efforts to secure
such supplies so as to maintain an efficient balance of medium and short
term RLNG in its gas sourcing portfolio. This will ensure supply security
for your Company`s customers and generate flexibility in managing the
variations in gas requirements of our various market segments.
Despite significant challenges like expensive gas supplies compared to
previous years, your Company was able to grow gas sales volumes by 3% over
the previous year. About 30,000 new household customers were connected on
natural gas during the year, taking the total number of domestic customers
of your Company to over 325,000. More than 165,000 vehicles now ply in
your Company`s operating areas on CNG. Your Company has c. 330,000
customers, including industrial and commercial units. Sales volumes grew by
12% in the residential segment and 14% in the CNG segment.
3.4. Future Outlook
Demand for natural gas is expected to grow as has been outlined above. It
will be critical for your Company to expand its network and CNG station
infrastructure in order to meet the growth in demand. Your Company plans
to continue extending its network to areas adjacent to its current
operations. Opportunities for expansion to new geographical areas will
continue to be assessed. Growth in new areas will be through the bidding
process set out by the PNGRB.
Your Company will endeavour to grow value by identifying and accessing high
value market segments.
Your Company will continue to invest in human resources and in systems and
processes which strengthen the integrity and safety of your Company`s
assets. This will be the bedrock for the sustenance and growth of your
Company`s business.
3.5. Internal Control System and Risk Management
Your Company has a strong internal control framework and an elaborate
internal control system to ensure protection of value, ensure adherence to
operating standards and to eliminate the risk of fraud.
Your Company follows a comprehensive management assurance process which
deals with the broad aspects of risks, compliances and assurances. The
Internal Control Framework has identified various areas where internal
controls are critical including Financial Control Assurance (FCA) processes
which clearly lay down the procedures to be followed for activities which
have a bearing on control risk. Various policies and operating procedures
have also been laid down to ensure internal control and compliance to
statutory requirements as to the company`s policies and standards.
Your Company believes in automating controls to the extent possible. The
Company has implemented various software solutions like SAP R3 and
Procurement, Gas Distribution Billing System (GDBS), Geographical
Information System (GIS), etc. A process of gaining assurance has been
implemented through the Letter of Assurance procedure, which is wide in
scope and includes internal control and risk management. The procedure
cascades the responsibilities for ensuring compliance to critical processes
through the levels of management.
The Company has implemented a comprehensive compliance matrix for various
groups and activities. Compliances by various groups are regularly
reviewed by the Internal Audit team with reference to the Compliance
Matrix. Review of the compliances made by various groups and periodic
update of the Compliance Matrix helps in sustaining a strong compliance
environment. The Internal Audit Team carries out reviews of internal
controls as a part of an approved audit plan. Regular reviews of audit non-
conformities and the findings of investigations carried out by the
internal audit team, provides the feedback to the management and the Audit
Committee on the status of internal controls in place, and helps in
ensuring corrective action.
Risk management is considered to be an effective tool in your Company to
deliver its business plan and annual objectives. A register is prepared to
capture the risks perceived for the business with inputs from various
groups. The same is reviewed by the group heads and by the Executive
Committee. The most critical risks are reviewed by the Audit Committee on
a quarterly basis.
Your Company follows the Value Assurance Framework (VAF) for assessing and
deciding on all major projects. This is a comprehensive system of
assessment, designed to address all relevant aspects of a project at the
earliest opportunity so as to ensure the most optimal decision and smooth
execution. Your Company also has a system of carrying out Post Investment
Appraisals for projects above a threshold value.
3.6 Health, Safety, Security and Environment (HSSE)
Duty of care for Health, Safety, Security and the Environment (HSSE) is a
core value of your Company. The management of your Company aims to protect
the health, safety and security of its people, to minimize the
environmental impact associated with its business and to assure the
integrity and safe operation of its assets.
Your Company believes that outstanding business performance requires
outstanding HSSE performance.
The safe delivery of projects and operation of its facilities is a critical
success factor for your Company`s business.
The management of your Company:
* believes that all injuries are preventable;
* provides healthy, safe and secure work environments;
* makes a positive contribution to the protection of the environment; and
* goes beyond compliance with local environmental regulation to meet
internationally accepted best practices.
The management sets HSSE goals, develops improvement plans, monitors
implementation of plans and regularly reviews HSSE performance using
leading and lagging indicators. Your Company has strong self assurance
process as well as independent audit process to ensure that controls are in
place to manage HSSE risks effectively. The learning culture in your
Company ensures the improvement in the HSSE performance through learning
from its own incidents including near miss incidents and significant
incidents of other organisations.
Total Recordable Case Frequency (TRCF) for 2011 was 0.13 against target of
Zero (0) which represents a significant improvement towards goal of "Zero
Injury" Several initiatives were taken up by your Company during the year
to further strengthen its HSSE culture. The senior management team led
such initiatives, conducted tours of work sites and focused on employee
engagement programs, such as campaigning for HSSE "Life Savers" such as
Working at Height, Electrical Safety and Excavation. An Industrial Hygiene
Survey was carried out for the Adajan Office in Surat in line with the
Health Risk Control plan. A Safety Culture Maturity Survey was carried out
across your Company`s offices and sites and workshops were conducted with
employees and contractors. The Company has progressed safety initiatives
like third party damage prevention, enhancing HSSE culture among
contractors, and driving safety. A thorough safety audit of the CNG
operations was also carried out by a third party and crisis management
capabilities of the business as a whole was strengthened through training
of responsible persons and crisis management exercises during the year.
Contribution to Environment
Det Norske Veritas (DNV) has carried out "EHSMS periodic audit" for OHSAS-
18001-2007 and Environment Management System (ISO 14001-2004) across your
Company`s installations and offices in December. Celebration of World
Environment Day on June 5 was done at all locations followed by events like
tree plantation activities, "Save Power" day, car pooling, "No Print" day
- all leading an effort to reduce the carbon foot print.
Your Company has undertaken or contributed indirectly in various
initiatives during the year, which include a significant contribution
towards reduction of 160.78 tones of CO2 through various Green House Gas
emissions reduction projects.
3.7 Contribution to Society
During the year, your Company continued working on the strategy that was
developed in 2009 for carrying out activities for Corporate Social
Responsibility (CSR), focusing on environmental education and skill
development. The strategy also addresses the need for supporting various
sustainable development projects to benefit the communities in which your
Company operates.
Your Company continued to support the Skill Development Project in 2011
also. This year, your Company supported extension of the programme to two
new NGOs- specifically Sewa Rural`s Vivekananda Gramin Tekniki Kendra
(Gumandev-Bharuch) and Vocational Training Center, Vaghaldhara. The
programme on gas plumbing aims to equip local unemployed youth with
technical and safety skills. Two batches totalling 83 trainees completed
this programme in the year.
Your Company supported operation of "Prakriti" - the environment bus. This
project was implemented by the Centre for Environmental Education,
Ahmedabad (CEE) and aimed to create interest on environmental issues
amongst school-going children. "Prakriti" covered 168 venues and was
visited by 26000 persons.
Your Company continued to support initiatives for education of children
from economically weak backgrounds.
Your Company has also supported improvements in living conditions of
excavation labour. More than 300 improved tents were issued to contractors
and health camps and creches covering camp residents were initiated.
4. SUBSIDIARIES
4.1 Gujaratgas Trading Company Limited (GTCL)
Gujaratgas Trading Company Limited (GTCL), a wholly-owned subsidiary of the
Company is engaged in the business of selling natural gas. During the year
under review, GTCL achieved sales of Rs. 1326.65 mn as against Rs. 1730.32
mn during the previous year. Total income for the year was Rs. 1336.38 mn
including other income of Rs. 9.73 mn as against total income of Rs.
1736.64 mn including other income of Rs. 6.33mn in the previous year.
Profit before tax (PBT) was Rs. 9.99 mn during the year as against Rs. 7.01
mn in the previous year.
The accounts for GTCL are a part of this Annual Report.
4.2 Gujarat Gas Financial Services Limited (GFSL)
Gujarat Gas Financial Services Limited (GFSL), another subsidiary of your
Company, carried out the job of installing gas connections for domestic
and commercial customers of the Company. While GFSL earlier had the status
of a certified Non Banking Financial Company (NBFC), it has surrendered its
NBFC status to the Reserve Bank of India as it has stopped providing lease
finance since April 2007.
During the year under review, the Net Total Income was Rs. 78.29 mn. as
compared to Rs. 73.59 mn. in the year 2010 and the profit after tax was
Rs. 44.75 mn. as compared to Rs. 42.14 mn. for the previous year.
The accounts of GFSL are a part of this Annual Report.
5. FINANCE
The net cash profits of your Company increased over the previous year.
Investments were made in extension of pipeline network and in
reinforcements and upgradation of existing network as required. Investments
were also made to upgrade the IT solutions and hardware of your Company to
enhance reliability and enable scalability. A portion of the cash profits
generated during the year has been paid out as interim dividend.
Appropriate provisions have been made in the accounts wherever necessary
for contingencies, bad debts and diminution in value of investments.
During the year under review, your Company has not invited any fixed
deposits within the meaning of Section 58A of the Companies Act, 1956.
6. STATUTORY INFORMATION
As required under Section 212 of the Companies Act, 1956, the audited
accounts for the year ended on 31 December 2011 and Auditors` Report
thereon, along with the Directors` Reports of Gujaratgas Trading Company
Limited and Gujarat Gas Financial Services Limited, the subsidiaries of
GGCL, are attached to GGCL`s balance sheet.
7.1 Energy, Technology and Foreign Exchange
Since the Company is not a scheduled industry, the details in respect of
Form A pursuant to Rule 2 of the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 are not required to be
furnished. However, the details in respect of Form B pursuant to Rule 2 are
submitted as Annexure-1 and forms part of this report.
7.2 Human Relations and Particulars of Employees
Your Company employed 604 employees as on 31December 2011. During the year,
your Company continued its focus on building capabilities and developing
competencies of its employees through a robust Annual Development Review
process. The Company also carried out an employee engagement survey
through M/s Towers Watson, wherein 91 % employees participated and the
engagement score is 86 % which is higher than the national average score.
To promote diversity and encouraging women employees, your Company has
introduced Women`s Network for all women employees. The Company has also
introduced Flexi pay empowering employees to decide on their pay
structure.
There was no strike or lock-out during the year under review.
There is no employee in receipt of remuneration exceeding the limits
prescribed under the provisions of Section 217 (2A) of the Companies Act,
1956 read with the Companies (Particulars of Employees) Rules, 1975 as
amended and so no details are required to be given.
7.3 Gujarat Gas Company Limited Employee Stock Option Plan 2008 ("the ESOP
2008")
The details of the Options granted up to 31December 2011 under the Gujarat
Gas Company Limited Employee Stock Option Plan 2008 ("the ESOP") and other
disclosures as required under Clause 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme) Guidelines, 1999, are set out in the Annexure - 2 to this Report.
The Company`s Auditors, Price Waterhouse, have certified to the effect
that the ESOP has been implemented in accordance with the Securities and
Exchange Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 and the resolutions passed by the
members in this regard.
The Company formed the Gujarat Gas Company Limited Employee Welfare Stock
Option Trust ("the Trust") in November 2008, which administers the ESOP of
the Company. IDBI Trusteeship Services Limited (ITSL), having its
registered office at Asian building, Ground Floor, 17, R. Kamani Marg,
Ballard Estate, Mumbai was appointed as an External Trustee of the Trust
w.e.f. 28 April 2011, for providing the trusteeship services to the Trust
for the agreed remuneration.
Under the ESOP, Options are granted, which provide the benefit or right but
not the obligation for exercising at a future date, equivalent number of
equity shares each of the face value of Rs. 2/- of Gujarat Gas Company
Limited against the Options that have vested under the ESOP. The ESOP
provides for graded vesting of Options granted, over a period of 4 years
from the date of grant. The Options are to be exercised within a maximum
period of 2 years from the date of Vesting. Within the Exercise Period, the
Option holder has the option to either purchase the shares from the Trust
at the Exercise Price or to give a Mandate of Sale of the shares ("the
Mandate") to the Trust in accordance with the terms and conditions of the
ESOP.
As per the terms and conditions of the ESOP, the Trust purchases out of the
funds advanced by the Company, shares from the open market at ruling
prices, at different points of time, equivalent to the number of options
granted to the employees. These shares purchased by the Trustee(s) are
held in their capacity as the Trustee(s) till the Options are exercised
upon Vesting by the Option holders as per the terms of ESOP. The Trust had
purchased from the secondary market 19, 48,000 equity shares of Rs. 2/-
each, as of 31 December 2011 in the name of the Trustee(s) of the Trust.
Under the ESOP, these Equity Shares are subsequently sold following the
Mandate from the Option holders or transferred to the Option holders, as
the case may be, at the time of the Exercise of the Options upon Vesting.
Accordingly, the Trustee(s) sold 7,14,250 equity shares till December 2011,
through open market and the difference between the sale price and the
Exercise Price, net of charges and taxes were given to the Option holders
as per the ESOP.
The Trustee(s) are authorized to execute the purchase and sale of shares of
the Company, on behalf of the Option holders, in accordance with the ESOP.
Your Company has not passed any resolution for buy-back of shares.
7.4 Directors` Responsibility Statement
Your Directors hereby state:
i. that in the preparation of the annual accounts, the applicable
Accounting Standards have been followed along with proper explanation
relating to material departures;
ii. that the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs of
the Company as on 31 December 2011 and of the profit of the Company for the
year ended on that date;
iii. that the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
iv. that the Directors have prepared the annual accounts on a going concern
basis.
7.5 Report on Corporate Governance
As stipulated by Clause 49 of the Listing Agreement, the Report on
Corporate Governance is given separately in this Annual Report and forms
part of this Report. The certificate of Price Waterhouse, Statutory
Auditors of the Company regarding compliance with the Corporate Governance
Code is enclosed.
8. AUDITORS AND AUDITORS` REPORT
Price Waterhouse, Statutory Auditors of the Company, retire at the ensuing
Annual General Meeting and are eligible for re-appointment.
The notes to the accounts referred to in the Auditors` Report are self-
explanatory and, therefore, do not call for any further comments.
9. DIRECTORS
Prof. Pradip Khandwalla and Mr. Jal Patel, the Directors retire by rotation
at the ensuing Annual General Meeting. Being eligible, they have offered
themselves for re-appointment.
For perusal of the shareholders, a brief resume of the Directors being
appointed or re-appointed, nature of their expertise, their shareholding
in the Company, the names of the companies in which they hold directorship
and the details of membership of the committees of the Board are given in
the Explanatory Statement to the Notice convening the Annual General
Meeting of the Company. The Board of Directors recommends their
appointment / re-appointment.
10. APPRECIATION
Your Directors appreciate the continued support received from the customers
and wish to acknowledge the support and assistance received from the
Central and the State Governments, gas suppliers and CNG franchisees.
Your directors place on record their appreciation for the employees for
their dedicated performance. Your Directors appreciate the contribution
made by the contractors and vendors of the company.
Your directors express their gratitude to its promoter viz. BG Group for
their valuable contribution throughout the year and also thank all the
shareholders for their continuing support to the Company.
For and on behalf of the Board
HASMUKH SHAH
CHAIRMAN
Date : 23 February 2012
Place: Ahmedabad
ANNEXURE-1
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988.
FORM - B
Particulars Action taken
1. Research and Development (R&D)
A. Specific areas in which R&D carried out by Nil
the Company
B. Benefits derived as a result of the above R&D NA
C. Future plan of action Nil
D. Expenditure on R&D
a. Capital Nil
b. Recurring Nil
c. Total Nil
d. Total R&D expenditure as a percentage of Nil
total turnover
2. Technology absorption, adaptation and innovation
A. Efforts in brief, made towards technology absorption, adaptation and
innovation:
Developed RFID Technology for validating CNG tank installations in vehicles
prior to CNG filing. Pilot trial successfully conducted for 500 vehicles
for a period of 3 months. Trial witnessed by representatives from other
City Gas Distribution companies and statutory authorities like PNGRB and
PESO.
B. Benefits derived as a result of the above efforts:
Enhance the safety of Natural Gas Vehicles, passengers & general public.
C. In case of imported technology (imported during the last 5 years
reckoned from the beginning of the financial year), following information
may be furnished:
a. Technology imported Nil
b. Year of import Nil
c. Has technology been fully absorbed? Nil
d. If not fully absorbed, areas where Nil
this has not taken place, reasons
therefore and future plans of action
3. Foreign Exchange Earnings & Outgo:
Current Year Previous Year
(Rs. in million) (Rs. in million)
Total Foreign Exchange earned Nil Nil
Total Foreign Exchange outgo 21.66 56.04
For and on behalf of the Board
HASMUKH SHAH
Date : 23 February 2012 CHAIRMAN
Place: Ahmedabad
ANNEXURE-2
Statement as at 31 December 2011 pursuant to clause 12 (Disclosures in the
Directors` Report) of the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
a) Total number of Options granted:
Gujarat Gas Company Limited Employee Stock Option Plan - 2008
14,80,000 Options (2008) 3,40,000 Options (2009)
4,03,000 Options (2010) 84,000 Options (2011)
b) (i) Pricing Formula:
The Pricing Formula as approved by the Shareholders of the Company provides
that the Exercise Price for Grants made in November, 2008, shall be
calculated at 10% discount of the latest available closing price of the
Shares on the Stock Exchange on which there was highest trading volumes on
the date of the Board Meeting in which the grant of Options is approved.
The Compensation Committee has decided the Exercise Price for all
subsequent grants. The Exercise Price has been calculated as rounded off to
the nearest integer.
(ii) Exercise Price:
Rs. 95.00, adjusted on allocation of bonus for 13,93,000 Options granted in
November, 2008, (Rs. 189.00, calculated at 10% discount of Rs. 210.00 being
the closing price of the Shares on the NSE having highest trading volumes
on 23 October 2008).
Rs. 115.00, adjusted on allocation of bonus for 2,89,000 Options granted in
May 2009, (Rs. 230.00, calculated at 10% discount of Rs. 255.00 being the
closing price of the Shares on the BSE having largest trading volumes on
29th April 2009).
Rs. 143.00, adjusted on allocation of bonus for 21,000 Options granted in
August 2009, (Rs. 286.00 calculated at 10% discount of Rs. 317.40 being
the closing price of the Shares on the BSE having largest trading volumes
on 27 July 2009).
Rs. 219.00, for 95,000 Options granted in March 2010, (Rs. 219.00
calculated at 10% discount of Rs. 242.95 being the closing price of the
Shares on the NSE having largest trading volumes on 3 March 2010).
Rs. 277.00, for 1,90,000 Options granted in 22 July 2010, (Rs. 277.00
calculated at 10% discount of Rs. 308.00 being the closing price of the
Shares on the NSE, having largest trading volumes on 23 July 2010).
Rs. 352.00, for 1,18,000 Options granted in October 2010, (Rs. 352.00
calculated at 10% discount of Rs. 391.00 being the closing price of the
Shares on the NSE having largest trading volumes on 27 October 2010).
Rs. 337.00, for 84,000 Options granted in April 2011, (Rs. 337.00
calculated at 10% discount of Rs. 374.45 being the closing price of the
Shares on the NSE having largest trading volumes on 27 April 2011).
c) Total number of Options vested:
3,38,750 numbers (2010)
7,24,500 numbers (2011)
d) Total number of Options exercised:
2,80,000 numbers (2010)
4,34,250 numbers (2011)
e) The total number of shares arising as a result of exercise of Options:
No new equity shares were issued on exercise of options.
The first Vesting Date under the ESOP was 1 November 2010 and accordingly,
Option holders had exercised their options for the shares vested in them.
As per the ESOP, the Options holders had given the "Mandate of Sale",
whereby the Trustees had to sell 2,70,000 equity shares in December 2010,
through open market and the difference between the sale price and the
exercise price, net of charges and taxes were given to the option holders
as per ESOP.
Also, as per the ESOP, one of the Option holders, upon vesting, had
exercised his right by opting to have 10,000 shares transferred in his
name instead of giving the Mandate of sale. Therefore, the Trustees had
transferred to the concerned Option holder, these 10,000 equity shares at
the pre-determined Exercise Price of Rs. 95.00 per share (at the time of
grant in November 2008, the Exercise Price was fixed at 10% discount to
the ruling market price).
Under the ESOP, further options vested on 11 May 2011, 1 August 2011 and 1
November 2011. Accordingly, the Option holders had exercised their options
for the shares vested in them. As per the ESOP, the Options holders had
given the "Mandate of Sale", whereby the Trustees had to sell 6,250 equity
shares in March 2011 , 91,500 equity shares in August 2011, 5,000 equity
shares in September 2011 and 3,31,500 equity shares in December 2011,
through open market and the difference between the sale price and the
exercise price, net of charges and taxes were given to the option holders
as per ESOP.
f) Total number of Options lapsed:
98,500 (till 31 December 2010)
1,07,000 (during CY 2011)
g) Variation of terms of Options:
NA
h) Money realised by exercise of Options:
Money realized by the GGCL ESOP Trust on exercise of options:
Rs. 26.60 Mn (2010) Rs. 42.90 Mn (2011)
i) Total number of Options in force:
1,786,000 (2010) 1,328,750 (2011)
j) Employee wise details of options granted to;-
(i) senior managerial personnel;
Himanshu Upadhyay - 65,000
(Vested and Exercised - 12,500) - (2010)
(Vested and Exercised - 3,750) - (2011)
Outstanding as on date - 48,750
Nitin Patil - 50,000
(Vested and Exercised - 12,500) - (2011)
Outstanding as on date - 37,500
(ii) any other employee who received a grant in any one year of Option
amounting to 5% or more of Option granted during that year:
Nil
(iii) identified employees who were granted option, during any one year,
equal to or exceeding 1% of the issued capital (excluding outstanding
warrants and conversions) of the Company at the time of grant:
Nil
k) Diluted Earnings Per Share (EPS) pursuant to issue of equity shares on
exercise of option calculated in accordance with Accounting Standard (AS)
20 `Earnings Per Share`:
NA
l) (i) Method of calculation of employee compensation cost:
The employee compensation cost has been calculated based on the Fair Value
method of accounting using the Black-Scholes Option Pricing Formula.
(ii) Where the company has calculated the employee compensation cost using
the intrinsic value of the stock options, the difference between the
employee compensation cost so computed and the employee compensation cost
that shall have been recognized if it had used the fair value of the
options, shall be disclosed:
NA
(iii) The impact of this difference on profits and on EPS of the company:
NA
m) Weighted-average exercise prices and weighted-average fair values of
options granted for options whose exercise price either equals or exceeds
or is less than the market price of the stock:
The weighted average exercise price per Option is Rs. 162/-of the
outstanding options as at 31-Dec-2011.
The weighted average fair value per Option at the grant date is Rs 60/- of
the outstanding options as at 31-Dec-2011.
n) A description of the method and significant assumptions used during the
year to estimate the fair values of options:
The fair value of each Option is calculated based on the Fair Value method
of accounting using the Black-Scholes Option Pricing Formula. The
significant assumptions for estimating the fair value of options:
For stock options granted on April 28, 2011:
(i) Risk-free interest rate 8.39%
(ii) Expected life 3 years
(iii) Expected volatility 34.32%
(iv) Expected dividends 2.50%
(v) The price of the underlying
share in market at the time of
Option grant - Rs.374.00 (closing
price on BSE on 27 April 2011)
Note: On 22 September 2009, Bonus Options were allocated on unvested
Options in the same ratio as bonus shares (i.e. in the ratio of 1 bonus
share for every one equity share) and the Exercise Price thereof was
halved, in accordance with the ESOP 2008 read with the Securities and
Exchange Board of India (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999.
For and on behalf of the Board
HASMUKH SHAH
CHAIRMAN
Date : 23 February 2012
Place: Ahmedabad |