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GAIL (India) Ltd.

BSE: 532155 Sector: Others
NSE: GAIL ISIN Code: INE129A01019
BSE 00:00 | 24 Apr 2020 GAIL (India) Ltd
NSE 05:30 | 01 Jan 1970 GAIL (India) Ltd

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OPEN 83.25
PREVIOUS CLOSE 83.30
VOLUME 1685134
52-Week high 182.50
52-Week low 65.70
P/E 7.27
Mkt Cap.(Rs cr) 36,735
Buy Price 81.50
Buy Qty 1985.00
Sell Price 82.60
Sell Qty 50.00
OPEN 83.25
CLOSE 83.30
VOLUME 1685134
52-Week high 182.50
52-Week low 65.70
P/E 7.27
Mkt Cap.(Rs cr) 36,735
Buy Price 81.50
Buy Qty 1985.00
Sell Price 82.60
Sell Qty 50.00

GAIL (India) Ltd. (GAIL) - Director Report


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Company director report

Dear Shareholders

On behalf of the Board of Directors of your Company I am delighted topresent the 35th Directors' Report of your Maharatna Company along with AuditedFinancial Statements for the nancial year 2018-19.

Performance Review

The important nancial highlights on standalone basis for the year2018-19 are as under:

Particulars 2018-19 2017-18
US $ Million (` in Crore) US $ Million (` in Crore)
Gross sales 10722 74808 8181 53690
Other income (including other operating income) 267 1864 171 1122
Cost of sales (excluding Finance cost and depreciation) 9398 65572 7038 46192
Net Exceptional Items (Impairment of Investments) 47 326 (4) (28)
Gross margin 1544 10774 1318 8649
Finance Cost 20 139 42 275
Depreciation 222 1550 216 1415
Profit Before Tax (PBT) 1302 9085 1060 6958
Provision for tax 438 3059 357 2340
Profit After Tax (PAT) 864 6026 704 4618
Appropriations
Final Dividend for previous year 47 325 70 457
Interim Dividend for current year 202 1409 197 1294
Corporate Dividend Tax 51 356 54 353
Net transfer to/from Bond 2 15 (42) (277)
Redemption Reserve
Transfer to CSR Reserve - - - -
Transfer to General Reserve 86 603 70 462
Net surplus after Appropriations 476 3318 355 2329
1 US $ in INR converted at the exchange rate as on 31st March of the respective nancial year 69.77 65.63

Key Ratios

Gross Sales

Gross sales increased by 39 % from ` 53690 crore during 2017-18 to `74808 crore in 2018-19.

Profit Before Tax (PBT)

PBT registered a jump of 31% from ` 6958 crore in 2017-18 to ` 9085crore during 2018-19.

Profit After Tax (PAT)

Profit after Tax increased by 30% from ` 4618 crore during 2017-18 toa record high of ` 6026crore in 2018-19.

Earnings Per Share (EPS)

In view of the increase in PAT EPS has gone up from ` 20.48 per shareas on st 2018 to st March 31 ` 26.72 per share as on March 31 2019.

Consolidated Financial Statements

Your Company has prepared the Consolidated Financial Statements inaccordance with the IND- AS consolidating its subsidiaries associates and joint ventureentities. The highlights of the Consolidated Financial Results are as follows:

` ( in Crore)
Particulars 2018-19 2017-18
Gross Sales 75912 54556
Profit Before Tax 9831 6936
Profit After Tax 6546 4799
Other comprehensive income (123) (321)

Business Overview

During the year under review the segment wise business performance ofyour Company is as under:

Natural Gas Marketing

Natural gas trading continues to be the focus area of your Company.During FY 2018-19 Natural Gas sales totalled 96.93 MMSCMD with sales within India being86.39 MMSCMD and overseas sales being 10.54 MMSCMD. Gross revenue of your Company fromNatural Gas Marketing in FY 2018-19 was ` 57024 crore as against ` 38021 crore in FY2017-18.

Transmission

Natural gas transmission

Your Company owns and operates a network of around 12200 km of naturalgas high pressure trunk pipeline. The average gas transmission during the year 2018-19increased to 107.43 MMSCMD as compared to 105.23 MMSCMD in the previous nancial year.Gross sales of your Company from Natural Gas Transmission in FY 2018-19 was

` 5194 crore as against ` 4446 crore in FY2017-18.

LPG transmission

Your company operates 2038 km of pipeline for LPG transmission.Jamnagar-Loni and the Vizag-Secunderabad pipeline networks achieved a throughput of 3.97MMTPA during the year against 3.72 MMTPA in the previous scal year thereby registering agrowth of more than 6%.Gross sales of your Company from LPG Transmission in FY 2018-19 was` 614 crore as against ` 558 crore in FY 2017-18.

Petrochemicals

During 2018-19 your Company's production increased by 13% to751KTA of polymers and sales increased by 9% to 735 KTA of polymers from the Pata plant.Additionally more than 289 KTA of polymer produced by BCPL was sold by GAIL. Gross salesof your Company from Petrochemicals in FY 2018-19 was ` 6631 crore as against ` 5788crore in FY 2017-18.

LPG and Other Liquid Hydrocarbon

Your Company has ve LPG plants at four locations in the country havinga production capacity of 1.4 Million MT. In 2018-19 total liquid hydrocarbon productionwas about 1.32 Million MT as against 1.28 Million MT in FY 2017-18 of which almost 90%constitutes LPG and Propane. Gross sales of your Company from Liquid Hydrocarbons in FY2018-19 was ` 4633 crore as against ` 4179 crore in FY2017-18.

GAIL Board approved revival of existing LPG plant at Usar Maharashtraand converting it into 500 KTA Polypropylene complex. This is rst of its kind project inIndia which would be using Propane Dehydrogenation technology for production of Propyleneintegrated with the downstream Polypropylene unit.

Exploration and Production (E&P)

Your Company has participating interest in 11 E&P blocks of which 9blocks are in India and 2 blocks in Myanmar. Out of these your Company is Operator in twoon-land blocks viz. CB-ONN-2010/11 and CB-ONHP-2017/12 in Cambay basin awarded duringNELP-IX and OALP-I bidding rounds respectively. Appraisal activities were continued in twoNELP-IX blocks namely GK-OSN-2010/1 (Operator: ONGC) and CB-ONN-2010/11 (Lead Operator:GAIL). Development activities were initiated in one NELP-IX blocks namely CB-ONN-2010/8(Lead Operator: Bharat Petro Resources Limited).

Phase-II Development activities in blocks A1 and A3 were initiatedduring FY 2018-19.

Exploratory activities are in progress in two blocks namely(i)AA-ONN-2010/2 of NELP-IX(Operator: OIL) and (ii) CB-ONHP-2017/12 (Operator: GAIL) ofOALP-I Revenue of ` 639 Crores has been generated from sale of hydrocarbons from 4producing blocks namely A-1 & A-3 Myanmar and CB-ONN-2000/1 and CB-ONN-2003/2 (Cambayonland) during the year 2018-19 as against ` 631 crore during the FY 2017-18.

Projects Execution

At present your Company is expanding the Natural Gas pipeline networkby executing more than 5700 Kms. of Major Pipeline projects out of which around 1050 Kmof pipeline projects has been completed during the FY 2018-19. The completed pipelineproject consists of 475 Km section from Varanasi-Dobhi-Patna/Barauni of prestigiousJagdishpur Haldia & Bokaro Dhamra Pipeline project popularly known as ‘PradhanMantri Urja Ganga' 315 Km of Auraiya-Phulpur pipeline and other last mile consumerconnectivities. Supply of Natural Gas also commenced in Patna City by commissioning of 2CNG station and PNG which was inaugurated by Hon'ble Prime Minister of India.Further supply of gas to CGD Cuttack & Bhubaneswar were started from new LCNG (Liqueed CNG) satellite terminal (First of its kind in India) commissioned in Bhubaneswar City.Supply of gas to these CGDs were earlier started last year through cascade mode.

Disinvestment by President of India

The government of India disinvested 11675668 shares in July 2018& 19843410 shares in February 2019 through CPSE Bharat 22 ETF. After disinvestmentthe President of India's shareholding is 1177029046 equity shares representing52.19% of paid-up share capital of GAIL.

Dividend

Your Company has a consistent track-record of dividend payment. TheBoard of Directors of your Company had earlier approved payment of an interim dividend @62.50% on equity share of ` 10 each (` 6.25 per equity share) amounting to

`1409.42 crore on the paid-up equity share capital of the Company (`2255.07 crores) which was paid in February 2019. Further the Board has recommendedpayment of nal dividend @17.70% on an equity share of `10 each (`1.77 per equity share)amounting to ` 399.16 crore. With this the total dividend for the FY 2018-19 will be 80.2%on equity share of ` 10 each amounting to ` 1808.57 crore on paid-up equity capital of `2255.07 crore (pre-bonus) which is 30% of PAT or 5.15% of Opening net-worth of ` 35142crore as per Companies Act 2013 and in compliance of DIPAM guidelines. Further duringthe year your company also paid Dividend Distribution tax of ` 356.46 crore.

Contribution to Exchequer

Your Company has contributed ` 8070 crore in 2018-19 to the exchequerthrough dividend duties taxes and others as compared to ` 6782 crore in 2017-18.

Credit Rating

Domestic rating

Your Company has been reaf rmed the highest domestic credit rating ofAAA from ICRA CARE and India Rating. This signi es the highest credit rating in Indiahence carries lower credit risk of the Company.

International Rating

The International rating agency Moody's International Singaporehas assigned the corporate issuer rating of Baa2 with stable outlook which is equal to thesovereign rating of India. Further Fitch Ratings has also assigned a long-term foreigncurrency issuer default rating of BBB- with a stable outlook which is also equivalent tothe sovereign rating of India. The agencies have indicated that your Company's ratingmay be upgraded once the sovereign rating of India improves.

Particulars of Loans Investments and Corporate Guarantees

Details of investments loan and guarantee covered under Section 186 ofthe Companies Act 2013 forms part of the nancial statement as a separate section in theAnnual Report FY 2018-19.

Related Parties - Subsidiaries/ Associates/ Joint Ventures

Your Company has formed subsidiaries/ associates/ joint venturecompanies for City Gas Distribution such as GAIL Gas Limited Indraprastha Gas LimitedMahanagar Gas Limited etc.; petrochemicals such as Brahmaputra Cracker and PolymerLimited ONGC Petro-addition Limited; LNG/ Re-gasi cation such as GAIL Global (USA) LNGLLC Petronet LNG Limited etc.; gas trading power generation and shale gas. All theContracts or arrangements/ transactions with related parties were carried on an arm'slength basis and in ordinary course of business.

In order to facilitate City Gas Distribution Projects in Kolkata yourCompany has formed a Joint Venture Company named “Bengal Gas Company Limited on

04.01.2019 “ and in order to lay down natural gas pipelines inNorth East India your Company has formed a Joint Venture named “Indradhanush GasGrid Limited on 10.08.2018 ”.

No subsidiary / joint venture company ceased to exist during the year.However GAIL China Gas Global Energy Holdings Limited ceased to exist w.e.f. 31st May2019. The subsidiaries/ associates/ joint venture companies of your Company havecontributed signi cantly to its business expansion activities. A statement containing thesalient features of the nancial statements of your Company's Subsidiaries AssociateCompanies and Joint Ventures as per rst proviso of section 129(3) of the Companies Act2013 including details of Individual contribution of all subsidiaries associates andjoint venture companies towards the overall performance of Company during the period isgiven under Consolidated Financial Statements.

Vigilance

Corporate Vigilance department of your Company is ISO-9001:2015 certied for having adopted Quality Management System in compliance with the requirements ofISO. A number of system improvements were affected in your company during the year foreffective utilization of its resources which in turn would help to prevent corruption andensure all round good governance. Some of these improvements are:

Award of contract through Board Purchase has been limited to for aperiod of 6 months quantity only.

In order to eliminate high and low rate items in routine/Maintenancecontract percentage rate bidding by contractors in the tenders has been adopted.

To avoid delay in bill processing provision has been made in BillWatch System to generate email alerts after regular intervals to EIC as well as to the OICand in case of extraordinary delay alerts will be sent to the concerned Director.

For the bene t of vendors and suppliers status of e-tenderinge-payments & receipts is monitored and reported to MoP&NG.

The Vigilance Awareness Week-2018 was observed on the theme“Eradicate Corruption Build a New India” at the corporate of ce and at all thework centers from 29th October 2018 to 3rd November 2018. The inauguration of VAW-2018commenced by taking the Integrity Pledge by GAIL Employees followed by release of GAIL“JAGROOK” Magazine by C&MD for spreading awareness on vigilance. CustomerInteractive Meets were organized at Delhi- NCR and Guwahati Marketing of ce for NaturalGas Petrochemicals & Liquid Hydrocarbon customers. Vendor Interactive Meet was alsoorganized at New Delhi where booklet containing compendium of the initiatives taken byGAIL to enhance ef ciency and transparency in Tendering/ Contracts was released. DuringVigilance Awareness Week various competitions such as debate/ elocution/ quiz/ essaywriting/ slogan/ cartoon/ poster competitions on moral values ethics good governancepractices etc. were conducted in 12 schools and 11 colleges in various Work centers ofGAIL wherein 1753 students participated. Gram Sabhas were organized in 2 villages tosensitized villagers against corruption related practices wherein 180 villagersparticipated.

Representation of Priority Section

Your Company has been complying with the Presidential Directives andother instructions/guidelines issued from time to time pertaining to Policies andProcedures of Government of India in regard to reservation relaxations concessions etc.for Scheduled Castes (SCs) Scheduled Tribes (STs) Other Backward Classes (OBCs) andPersons with Disabilities (PWDs) in Direct Recruitment.

Details with regard to group-wise total number of employees and therepresentation of Scheduled Castes Scheduled Tribes and Other Backward Classes and PWDsamongst them in your Company as on March 31 2019 are given in table below:

Group Employees on Roll SC ST OBC PWD
A 3280 521 212 622 50
B 459 79 50 104 8
C 730 130 24 246 36
D 54 13 6 17 0
C&MD DIRECTORS 6 0 1 0 0
Total 4529 743 293 989 94

A total of 154 new employees joined your Company during the FY 2018-19.Total Manpower of the Company as on March 31 2019 stood at 4529 (including Whole-timeDirectors) with 16.40 % of its employees belonging to the SC category 6.47 % to the STcategory 21.83 % to the OBC category 8.04 % to the Minorities and 2.08 % to the Personswith Disabilities (PWDs) category. Your Company's workforce includes 284 women employeesas on March 31 2019.

Of cial Language

The Of cial Language Implementation Committees at the Corporate andWork Centre level meet on a quarterly basis to monitor and review the progress made forachieving the targets xed in the Annual Program issued by the Of cial Language DepartmentMinistry of Home Affairs Govt. of India.

Hindi workshops/trainings are organized on regular basis at CorporateOf ce and all work centres including training centres at GTI Noida and GTI Jaipur. Hindicomputer training sessions are also integral part of these programs. As many as 126 Hindiworkshops were conducted during 2018-19 in which 2613 employees were provided training.Hindi Fortnight was observed across GAIL from September 14th to 28 2018 to propagatelinguistic harmony and to motivate the employees for the progressive usage of Hindi intheir day-to-day work. Several Competitions were organized to encourage the employees towork in Hindi and create a conducive atmosphere. Your Company also publishes its QuarterlyHindi magazine “Rajbhasha Sahyog” to promote Hindi language. During the year“Compilation of Bilingual Forms and standard drafts” has been prepared andhosted on GAIL intranet for the bene t of the employees.

The 19th ‘GAIL Rajbhasha Sammelan' was organized on 04January 2019 at Mysuru (Karnataka) chaired by Director (HR). The purpose was to spreadand propagate the essence of Hindi and simultaneously review the progress made on theimplementation of the of cial language in the Company. Your Company was awarded thirdPrize for the year 2018-19 by the Ministry of Petroleum & Natural Gas for Promoting& Implementing Of cial Language successfully.

The First Sub-Committee of Committee of Parliament on Of cial Languageinspected GAIL Khera Compressor Station and GAIL Corporate of ce to review the stepsundertaken to promote the of cial language and the efforts were appreciated by theParliamentary Committee. Vishwa Hindi Divas was celebrated across GAIL on 10th January2019. To mark the occasion a special workshop was organised indicating the importance ofOf cial Language. Hindi books were also distributed to employees.

Sexual Harassment of Women at Workplace

Your Company has in place a Policy on Prevention Prohibition andRedressal of Sexual Harassment of Women at Workplace in line with the requirements of theSexual Harassment of Women at the Workplace (Prevention Prohibition & Redressal) Act2013.The Internal Complaints Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment.

Disclosures in relation to the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013:

<td ALIGN=RIGHT>: Nil
a. number of complaints pending at the beginning of the nancial year : Nil
b. number of complaints led during the nancial year : Nil
c. number of complaints disposed of during the nancial year : NA
d. number of complaints pending as on end of the nancial year

Procurement from Micro and Small Enterprises (MSEs)

The Government of India has noti ed a Public Procurement Policy forMicro and Small Enterprises (MSEs) Order 2012 and its amendments thereof. In terms of thesaid policy out of the total eligible value of annual procurement of approx. ` 5677crore for GAIL towards goods produced and services rendered by MSEs (including MSEs ownedby SC/ST Entrepreneur) during the FY 2018-19 the value of total procurement made from MSEsby GAIL was ` 1662 crore which is approx. 29.27%. Further more than 16 VendorDevelopment Program for MSEs and 6 Special Vendor Development Program/ Hand HoldingSession especially for MSEs owned by SC/ST Entrepreneurs were conducted. GAIL is alreadyregistered on Trade Receivable e-Discounting System (TReDS) portal of all the threeservice providers (i.e. M/s Mynd Solutions M/s A TReDS and M/s RXIL) and also makingpayment to MSEs vendors through TReDS).

A. Initiatives taken for minimizing disputes

In order to develop Good stakeholder management practices w.r.t.vendors/contractors and establish a lasting buyer-seller relationship GAIL (India)Limited has implemented a series of industry rst measures:-

1.0 Samadhan mechanism:-

a) Health Monitoring of contracts (HMC): Measuring health ofcontract against certain parameters. The issues (including AHR items Extra Items TimeExtension Hindrance disputes etc.) identi ed during monthly health monitoring ofcontracts are reported and resolved by the Engineer-In-Charge (EIC). b) SAMADHANCommittee- The issues that are unresolved by the EIC are referred to a high powercommittee to resolve. The committee hears the view point of both contractor and EIC beforegiving a recommendation. c) Monitoring the closure of issues raised in exceptionalreporting on a quarterly basis via Quarterly Closure of Contracts

The Samadhan Mechanism has potential to prevent disputes escalate intoArbitration/Litigation and delayed execution.

2.0 Engineer-in-charge coaching programme

In order reduce the disputes it is important to make theEngineer-in-Charges (EICs) aware on various aspects of contract and its management so asto make them better equipped to deal with different situations that may arise during theexecution of the contracts. This internal capability enhancement programme is conducted inGAIL on a regular basis.

3.0 Vendor coaching programme

Vendor Coaching Program are being organized for vendors to make EICsaware about this mechanism along with other objective such as eliminate the gaps inunderstanding inform the consequences of Corrupt/ Fraudulent/ Collusive /CoercivePractices and reduce the disputes disagreements arbitrations etc.

4.0 Pre-tender conference (PTC)

In PTC all issues pertaining to scope speci cations designdetails/data speci c requirements if any etc. shall be open for discussion except forcommercial terms and conditions of tendering process which may of course be opened fordiscussions to some extent with prior approval. A dedicated portal showing details ofPre-Tender Conference has been hosted on GAIL tenders website

B. Initiatives for ease of doing business

GAIL endeavors to procure material or services following transparentprocedure and guidelines & policies of the company and Govt. of India. In order toprovide equal opportunities and generate competition and ease of doing business GAIL hastaken following steps:

1 Review of CPBG in Work Contracts & time period for submission ofCPBG

2 Review of Procedure for Vendor Performance Evaluation (Yellow/ RedCard)

3 Introduction of Percentage tendering in other Services/ Works

4 Revised Dispute Resolution Mechanism clause

5 Provision for submission of security deposit/ contract performanceguarantee & EMD through additional mode- online bank transaction

6 Relaxation of Prior Experience-Prior Turnover Criteria Norms forStartups

7 Policy guidelines to encourage development of indigenous sources oncontinuous basis

8 General Conditions of Contract for Services

9 Veri cation and certi cation of documents pertaining to bidevaluation criteria (BEC)

10 Rationalization of Mobilization Advance

11 Provision for Pradhan Mantri Suraksha BimaYojna (PMSBY) And PradhanMantriJeewan Jyoti BimaYojana

12 DO'S & DON'T'S: Do and Don't for Contractor publishedand circulated all sites.

13 Introduced a comprehensive policy to promote procurement fromGovernment e Marketplace (GeM) which is an online procurement portal providing access toa host of products and services.

14 Registration on the TReDS platform of all the three serviceproviders i.e. M/s RXIL M/s Mynd Solution and M/s Invoicemart.

MoU Performance

A Memorandum of Understanding (MoU) is signed every year between yourCompany and its administrative ministry i.e. MoP&NG through which performance targetsfor the year are set. Your Company achieved ‘Excellent' MoU rating forthe nancial year 2017-18 with a score of 92.76.

MoU for the year 2018-19 was signed between Chairman & ManagingDirector GAIL and Secretary (P&NG) Government of India on 5th June 2018.

In 2018-19 GAIL's MoU was majorly aligned towards achievingGOI's vision of making India a gas-based economy. The thrust while xing MoU targetswas on increasing the number of PNG connections and CNG stations while other criticalaspects of the MoU included key nancial parameters gas marketing gas transmissionproject implementation capital expenditure etc.

The evaluation of MoU 2018-19 is under progress and the nal evaluatedMoU score and rating is expected to be announced by December 2019.

Right to Information(RTI)

In order to promote transparency and accountability an appropriatemechanism has been set up across the Company in line with the provisions of the Right toInformation Act 2005. Your Company has nominated CPIO/ACPIOs/ Appellate Authorities atits units/of ces across the Company to provide information to citizens under theprovisions of the RTI Act. Your Company has hosted RTI Guidelines and related informationon its site and these may be accessed at http://www.gailonline.com/ nal_site/RTI.htmlBesides MIS Report on RTI Applications Record Retention Schedule and latest RTI AuditReport have also been hosted under the same link. Section 4(1) (b) of the RTI Act 2005lays down the information which should be disclosed by any Public Authorities on asuo-motu or proactive basis. Section 4(2) and Section 4(3) of the Act prescribes themethod of dissemination of this information. Accordingly keeping in view the purpose ofsuo-motu disclosures under Section-4 of the Act GAIL's Corporate RTI Cell has hosteda dedicated page on GAIL's website through which large amount of information in thepublic domain on proactive basis is placed. This is being done to make the functioning ofyour Company more transparent and reduce the need for ling individual RTI applications.Further your Company has been made ‘LIVE' on the Govt. of India's-DoPTOnline RTI Portal from July 2016 and ever since we are providing information Onlineapart from providing the requested information of ine. For the Financial Year 2018-19GAIL's Corporate RTI Cell has 100% disposal rate in respect of RTI Applicationsreceived. As on 31st March 2019 we had a pendency of 23 RTI Applications which weredisposed-off subsequently within time schedule/as per the provisions of the RTI Statute.Further your Company has received ‘NIL' penalty/adverse remarks from CentralInformation Commission for the year 2018-19 in respect of second Appeals led byAppellants.

Management's Discussion and Analysis

In terms of Regulation 34 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and clause 7.5 of DPE Guidelines on Corporate Governancethe detailed Management's Discussion and Analysis forms part of this report at Annexure-A.

Corporate Governance

Your Company believes that good corporate governance plays a criticalrole in establishing a positive organizational culture.It is evident by responsibilityaccountability consistency fairness and transparency towards our stakeholders. Pursuantto the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and DPEguidelines on Corporate Governance a report on Corporate Governance forms part of thisReport at Annexure- B.

The details of the meetings of the Board Company's policy onDirectors' appointment and their remuneration details of establishment of whistleblower mechanism and other matters etc. forms part of report on Corporate Governance.

There are no signi cant and material orders passed by the regulators orCourts or tribunals impacting the going concern status and the Company's operationsin future.

The statutory auditors of the Company have examined and certi ed yourCompany's compliance with respect to conditions enumerated in SEBI (LODR)Regulations 2015 and DPE guidelines on Corporate Governance. The certi cate forms a partof this Report at Annexure- C.

Auditors

Statutory Auditors

The statutory auditor of your Company is appointed by Comptroller &Auditor General of India (CAG). M/s O P Bagla & Co. LLP Chartered Accountants NewDelhi and M/s ASA Associates LLP Chartered Accountants New Delhi were appointed as JointStatutory Auditors of your Company for the FY 2018-19. Review and Comments of CAG if anyon the Company's Financial Statements for the nancial year ending March 31st 2019form part of Financial Statement. Notes on Financial Statement referred to in theAuditors' Report are self-explanatory.

There are no quali cations on the nancial statements by the statutoryauditors for FY 2018-19.

Cost Auditors

Your Company has appointed M/s Ramanath Iyer & Co. New Delhi forNorthern Region M/s Bandyopadhyaya Bhaumik & Co. Kolkata for Northern and EasternRegion M/s A C Dutta & Co. Kolkata for Southern Region M/s Musib& CompanyMumbai for Western Region Part-I M/s N.D Birla & Co. Ahmedabad for Western RegionPart-II and M/s Sanjay Gupta & Associates New Delhi for Central Region as costauditors for FY 2018-19. M/s Ramanath Iyer & Co. is the lead cost auditor. YourCompany is maintaining cost records as speci ed by the Central Government undersub-section (1) of section 148 of the Companies Act 2013 and Rule 8(5)(ix) of theCompanies (Accounts) Amendment Rules 2018.

Cost audit reports for the nancial year ended March 31st 2018 were ledwith Registrar of Companies on August 24th 2018.

Internal Auditor

Your Company has an in-house Internal Audit Department which is headedby Executive Director.

Secretarial Auditor

Your Company has appointed M/s Agarwal S. & Associates assecretarial auditors for 2018-19. Secretarial Audit Report con rming compliance byPracticing Company Secretary to the applicable provisions of the Companies Act 2013 SEBILODR Regulations 2015 and other applicable laws forms part of this Report at Annexure-D.Pursuant to SEBI Circular Number CIR/CFD/CMD1/27/2019 dated 08.02.2019 AnnualSecretarial Compliance Report is also attached as Annexure-E

The observation made by Secretarial Auditor and Company's responseto the observations is as under:- Observation No. 1 : Non-compliance of Regulation 17 (10)& 25 (4) of SEBI

(Listing Obligations & Disclosure Requirements) Regulations 2015the Company has not carried out the performance evaluation of the directors.

Company's Response: GAIL is a Government Company appointment/nomination of all the Directors including Independent Directors are being done by thePresident of India through the MoP&NG Government of India. Therefore performanceevaluation of individual Directors including Independent Directors is to be undertaken byGovernment of India being the appointing authority. In this regard MCA vide noti cationdated 5th June 2015 & 5th July 2017 has exempted Government Companies fromapplicability of the following provisions: Section 134 (3)(p) and 178 (2) of the CompaniesAct 2013 & Sub-Para (2) and (7) of Para II Para IV Para V clauses (a) and (b) ofsub- Para (3) of Para VII and Para VIII of Schedule IV (Code for Independent Directors)respectively. In this regard SEBI has been approached for similar exemption is awaitedfrom the provisions of SEBI LODR Regulations 2015 relating to Performance Evaluation ofBoard and its directors in line with exemptions granted to Government Companies in theCompanies Act 2013. Observation No. 2: In terms of Regulation 17(1) of SEBI (LODR) 2015the Company should have the requisite number of Independent Directors on the Board ofCompany during the period from 05.06.2018 to 05.08.2018.

Company's Response: During the year GAIL's Board had anoptimum combination of executive and non-executive directors on the Board from 01.04.2018to 04.06.2018 & 06.08.2018 to till date. However the position of an independentDirector on the Board of the Company was vacant from 05.06.2018 to 05.08.2018.

GAIL is a Government Company and falls under the administrative controlof the Ministry of Petroleum and Natural Gas Government of India. The Directors arenominated/appointed by the Government of India. The Company has continuously pursued withthe Government of India for the appointment of requisite number of Independent Directorson its Board during the vacant period in order to comply with the provisions of the SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015 & the CompaniesAct 2013. The vacant position was lled up on 06.08.2018 consequent upon the appointmentof Smt. Banto Devi Kataria as Independent Director.

Performance Evaluation

As per noti cation dated 5th June 2015 issued by the Ministry ofCorporate Affairs Government of India Government Companies are exempted from complyingwith the provisions of section 134(3)(p) of the Companies Act 2013 with respect toperformance evaluation of Board and its Committees.

Corporate Social Responsibility

Your Company rmly believes that the commitment towards playing a dening role in the development of its stakeholders extends to uplifting lives of themarginalised segments of the society living in and around its areas of operation. Theprinciples of Corporate Social Responsibility (CSR) are deeply imbibed in yourcompany's corporate culture. To amplify outreach efforts your Company has incurredan expenditure of 2.74% of the average net Profit of the preceding three years on CSRprojects/activities during FY 2018-19 (`119.29 Crore) exceeding the government mandated 2%(` 87.21 crores). Annual Report on CSR activities as required under Rule 8 of theCompanies (Corporate Social Responsibility Policy) Rules 2014 read with section 134(3)and 135(2) of the Companies Act 2013 is placed at Annexure-F.

Energy Conservation Technology Absorption and Foreign ExchangeEarnings & Outgo

As per requirement of 134 (3)(m) of the Companies Act 2013 read withRule 8(2) of the Companies (Accounts) Rules 2014 details of conservation of energy andtechnology absorption and foreign exchange earnings and outgo forms part of this report atAnnexure-G

Particulars of contracts or arrangements with related parties

As per requirement of 134 (3) (h) of the Companies Act 2013 read withRule 8(2) of the Companies (Accounts) Rules 2014 particulars of contracts or arrangementswith related parties as referred in section 188(1) of the Companies Act 2013 in theprescribed form AOC-2 is placed at Annexure-H.

Your Company has formulated the policy on dealing with Related PartyTransactions and the same is hosted on your Company's website athttp://gailonline.com/pdf/InvestorsZone/GAIL_Related_Party_Transaction_ Policy.pdf.

Particulars of Employees

As per provisions of section 197(12) of the Companies Act 2013 readwith the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 every listed Company is required to disclose the ratio of the remuneration ofeach director to the median employee's remuneration etc. in the Directors'Report. In terms of the provisions of section 197(12) of the Companies Act 2013 readwith the Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 every Company is required to give a statement showing the namesand other particulars of the employees drawing remuneration in excess of the limits setout in the said rules in the Annual Report.

However as per noti cation dated June 5 2015 issued by the Ministryof Corporate Affairs Government of India Government Companies are exempted fromcomplying with provisions of section 197 of the Companies Act 2013. As your Company is aGovernment Company such particulars have not been included as part of the Directors'Report.

Extract of Annual Return

Extract of Annual Return forms part of this Report at Annexure-I.The Extract of Annual Return for the Financial Year ended 31st March 2019 is alsoavailable on the Company's website www.gailonline.com

Dividend Distribution Policy

As per Regulation 43A of the SEBI LODR Regulation 2015 your Companyhas formulated a Dividend Distribution Policy. The dividend pay-out is in accordance withthe Company's Dividend Distribution Policy.

The Dividend Distribution Policy of the Company is available on theCompany's website at http://gailonline.com/pdf/InvestorsZone/GAIL%20Dividend%20Distribution%20Policy.pdf.

Issue of Shares and Fixed Deposits

In Financial Year 2018-19 there was no issue or buyback of shares.

However your company has issued bonus share in the ratio of one equityshare for every one equity share held in the month of July 2019. Consequent upon issue ofbonus shares share capital has increased to ` 4510.14 crore.

Your Company has not accepted any xed deposits during the nancial year2018-19 and as such no amount of principal or interest was outstanding as on the balancesheet date.

Fund Raising

During FY 2018-19 your Company has not raised funds throughpreferential allotment or quali ed institutions placement.

Foreign Exchange Earnings and Outgo

During FY 2018-19 Foreign exchange in ow was ` 14805 crore andforeign currency outgo was ` 29869 crore.

Key Managerial Personnel and Directors

The following Key Managerial Personnel (KMP) wereappointed/re-appointed on the Board of your Company: Shri Manoj Jain Director (BusinessDevelopment) was appointed w.e.f June 05th 2018.

Shri Anjani Kumar Tiwari Director (Finance) was appointed w.e.fDecember 01st 2018 (from the date of obtaining DIN).

The tenure of Dr. Ashutosh Karnatak as Director (Projects) was extendedfor a period beyond 01.03.2019 till 30.06.2020 i.e the date of his superannuation byMinistry of Petroleum & Natural Gas.

The following were appointed/re-appointed on the Board of your Companyas Director(s): Smt. Banto Devi Kataria Independent Director was appointed w.e.f August06th 2018 (from the date of obtaining DIN).

Shri Anupam Kulshreshta Shri Sanjay Tandon and Shri S.K. SrivastavaIndependent Directors were re-appointed w.e.f November 19 2018 for a period of one yearfrom the date of completion of their exiting tenure i.e. 19.11.2018 or until furtherorders whichever is earlier.

Shri Ashutosh Jindal Government Nominee Director was appointed w.e.f.May 27th 2019.

The Board placed on record its deep appreciation for the valuableservices rendered by Shri Subir Purkayastha and Smt. Indrani Kaushal during theirassociation with your Company.

Code of Conduct

Pursuant to the requirements of SEBI LODR Regulations 2015 and DPEGuidelines on Corporate Governance the Board Members and Senior Management Personnel haveaf rmed compliance with the Code of Conduct for the nancial year ending 31st March 2019.

Directors Responsibility Statement

Yours Directors con rm that they have: i) followed applicableaccounting standards alongwith proper explanation relating to material departures in thepreparation of the annual accounts for the nancial year ending March 31st 2019; ii)selected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent to give a true and fair view of the state ofaffairs of the Company at the end of the nancial year and of the Profit of the Company forthe year under review; iii) taken proper and suf cient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; iv) prepared the annual accounts for the nancial year ended March31st 2019 on a going concern basis; v) devised proper systems to ensure compliance withthe provisions of all applicable laws and such systems were adequate and operatingeffectively; and vi) laid down internal nancial controls to be followed by the Company andthat such internal nancial controls are adequate and are operating effectively.

Acknowledgment

Your Directors express their gratitude for help guidance and supportreceived from the Government of India especially the Ministry of Petroleum and NaturalGas various state governments regulatory and statutory authorities.

Your Directors acknowledge wise counsel received from StatutoryAuditors and CAG and are grateful for their consistent support and co-operation.

Your Directors also wish to thank all the shareowners businesspartners and members of the GAIL family for reposing their faith trust and con dence inyour Company.

On behalf of your Directors I would like to place on record our deepappreciation for the hard work dedication commitment and solidarity of yourCompany's employees.

Your Directors and employees look forward to the future with con denceand stand committed towards creating a mutually rewarding future for all stakeholders.

For and on behalf of the Board
B.C. Tripathi
Place: New Delhi Chairman & Managing Director
Dated: 08 July 2019 (DIN: 01657366)


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