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Indraprastha Gas + GAIL Analysis of Results

February 2, 2008

Indraprastha Gas: The company reported a strong set of 3QFY08 numbers, with net income growing 27% yoy to Rs450m, in line with our
estimate, driven by sustained volume growth in both CNG and PNG. This was in line with the run rate over the last few Qs. Underlying business remained strong with increasing
PNG penetration (volumes up 18% yoy) and robust growth in CNG sales.

Noida operations will provide a fillip to volume growth from FY09E, with c.5 stations likely to be operational by Mar-08. Though 3 years marketing exclusivity (from Oct-07) for incumbents is lower than expected, first-mover advantage and rapid network
expansion create sufficient entry barriers for potential new entrants.

GAIL:GAIL’s 3Q reported net income of Rs6.2bn was down 7% yoy and below our estimates. Core operating profits of Rs8.7bn were also significantly below estimates, driven primarily by lower than expected LPG and petrochemical production.

LPG production of 307KT during 3Q was significantly lower than recent trends (average 350KT for the last four quarters), impacted primarily by the 15-day annual shutdown at Gandhar and Vijaipur. Another 15-day shutdown at the Pata petrochem plant impacted petrochem sales, down 16% qoq and 14% yoy. The lower resulting petrochem and LPG EBITDAs drove the poor operating performance for the quarter, significantly below our estimates, despite stable transmission EBITDA.

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