Page 1 21 March 2019 IOCL and GAIL
Acquisition of GAIL by IOCL

Page 2 21 March 2019 IOCL and GAIL
Oil & Gas Sector in India

Page 3 21 March 2019 IOCL and GAIL
Overview of Oil and Gas Sector in India
 As of May 1, 2018, the oil refining capacity of India stood at 247.6 million tonnes, making it the second
largest refiner in Asia. Private companies own about 35.62 per cent of the total refining capacity.
Second largest refiner in
Asia
 India’s energy demand is expected to double to 1,516 MTOE by 2035 from 724 MTOE in 2016.
Moreover, the country’s share in global primary energy consumption is projected to increase by 2-folds
by 2035
World’s fourth-largest
energy consumer
 India’s consumption of petroleum products grew 5.31 per cent to 205 MMT in 2017-18 from 194.6 MMT
in FY17.
 India was 3rd largest consumer of crude oil and petroleum products in the world in 2016.
Fourth-largest
consumer of oil and
petroleum products
 LNG imports into the country accounted for about one-fourth of total gas demand, which is estimated to
further increase by two times, over next five years.
 India increasingly relies on imported LNG; the country is the fourth largest LNG importer and accounted for
5.68 per cent of global imports.
 India imported 18.05 MMT of LNG during 2017-18, in comparison to 18.63 MMT in 2016-17.
Fourth-largest LNG
importer in 2016
Source: Ministry of Petroleum and Natural Gas

Page 4 21 March 2019 IOCL and GAIL
Overview of Oil and Gas Sector in India

Page 5 21 March 2019 IOCL and GAIL
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Current Indian Oil market
► Oil consumption has expanded at a CAGR of 2.98
per cent during FY2008–17 to reach 4.43 MBPD in
2017.
► Rapid economic growth is leading to greater outputs,
which in turn is increasing the demand of oil for
production and transportation
► Due to the expected strong growth in demand, India’s
dependency on oil imports is likely to increase further.
► In FY18, total crude oil imports were valued at US$
87.37 billion as compared to US$ 70.71 billion in
FY17.
► In FY18, crude oil imports increased to 4.41 MBPD
from 4.27 MBPD in FY17.
2.74
2.94
3.08
3.24
3.32
3.49
3.69
3.73
3.85
4.33
4.43
4.00
5.00
4.50
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Oil consumption in India (2008-17) (MBPD)
3.92
Source: India Brand Equity Foundation, June 2018

Page 6 21 March 2019 IOCL and GAIL
Current Natural gas consumption in India
► India’s gas consumption has increased at a CAGR of 2.44
per cent between 2007 and 2016.
► Demand is not likely to simmer down anytime soon,
given strong economic growth and rising urbanization.
Gas consumption is projected to reach 216 BCM by
2021-22.
► India’s gas pipeline infrastructure is relatively under-
developed. It currently has a network of 17,421 km of
natural gas transmission pipelines with a design capacity
of around 464 MMSCMD (for major gas pipelines).
40.32
41.55
50.70
60.31
61.09
71.07
49.30
48.82
45.74
50.09
1,055.00
1,090.00
1,115.26
1,148.57
1,278.06
1,330.24
1,354.76
1,427.15
1,251.89
1,227.20
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1600.00
1400.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Gas Consumption Proven Gas Reserves
Proven reserves and total gas consumption in the country
(BCM)
Source: India Brand Equity Foundation, June 2018

Page 7 21 March 2019 IOCL and GAIL
LNG bridging gas supply deficit
► India is currently the world’s fourth-largest importer
of LNG, behind Japan, South Korea and China.
► LNG plays a critical role in partially bridging the
gas supply gap in the country.
► During FY10-FY15, Indian LNG imports increased
at a CAGR of 11.1% to 15.5 MMT, with LNG’s
share in the overall gas supplies rising from 20%
to 38% during the period.
► India has the infrastructure to annually import and
regassify 25 MMTPA of LNG through the four
terminals (Dahej, 10 MMTPA; Hazira, 5 MMTPA;
Dabhol, 5 MMTPA; and Kochi, 5 MMTPA)
established on the west coast.
32.42
32.85
47.49
52.22
46.48
39.79
34.64
32.79
31.24
30.92
31.83
10.84
10.46
11.72
12.78
17.44
17.19
17.05
21.6
22.7
24.48
26.11
0
10
20
30
40
50
60
70
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Gas Production Gas Imports
Domestic gas production and imports (BCM)
Source: India Brand Equity Foundation, June 2018

Page 8 21 March 2019 IOCL and GAIL
Reasons for Acquisitions
Sr.
No.
Factors/initiatives
Likely impact on gas
demand
How acquisition will help
1 Make in India
Radical shift in India’s GDP structure:
manufacturing sector’s share set to
increase from 16% currently to 25% by
2022
Multifold increase in energy demand
Requirement for more base and peak
power, and heat-cooling
Combined entity will have a better
distribution of infrastructure to meet the
demand.
2 Renewable power generation
Major shift in India’s power generation mix
with thrust on significant renewable
energy capacity additions: 175GW target
(non-hydro) by 2022 and 40% share of
non-fossil fuel in the overall generation
capacity by 2030
Requirement of grid stability as solar
and wind power are interruptible
sources of supply Inherent operational
flexibilities of gas based power
generation to help in grid balancing
It will help IOCL migrate from being an
oil based refiner to a more balanced
portfolio of products.
3 Intended Nationally Determined
Contributions (INDC)
Pledge to reduce the carbon emissions
intensity of India’s GDP by 33%-35% by
2030 from the 2005 level in its INDC
Inherent qualities of gas of being an
efficient and relatively clean burning
energy source
Improved supply landscape to meet the
rising demand for cleaner fuels.

Page 9 21 March 2019 IOCL and GAIL
Sr.
No.
Factors/initiatives Likely impact on gas demand How acquisition will help
4 Step up in agriculture
Requirement for significant increase in food
supplies and allied products to support growing
population and changing food consumption
habits (“second green revolution”)
Improvement in domestic fertilizer
production required to support increased
agricultural activities
Gas is the preferred feedstock for
production of nitrogenous fertilizers
Domestic gas fields with GAIL
will help IOCL provide raw
material to the agriculture based
manufacturers at a lower cost.
5 Urbanization and urban pollution
India’s urban population to grow significantly:
existing cities and towns to become bigger,
along with the emergence of new cities and
towns over the long term; many cities already
grappling with alarming pollution levels
Retail gas distribution can help manage
urban pollution, along with providing cost
competitive supplies to support growing
cooking and transportation needs
Expansion of city gas distribution network:
more than 100 cities expected to be
covered by 2022
Will help IOCL to migrate to
cleaner fuels to meet the clean
fuel standard set by Govt of
India.
Reasons for Acquisitions

Page 11 21 March 2019 IOCL and GAIL
About Indian Oil Company Limited (IOCL)
Acquirer Company
Financial
Capital
Manufacturing
Capital
Source: IOCL Annual Report, 2017-18

Page 12 21 March 2019 IOCL and GAIL
About Indian Oil Company Limited (IOCL)
Acquirer Company
Source: IOCL Annual Report, 2017-18

Page 13 21 March 2019 IOCL and GAIL
About Indian Oil Company Limited (IOCL)
Acquirer Company
Net worth Rs. 91,664 cr.
Debt/equity ratio 0.53:1
Current Ratio 0.76:1
Quick Ratio 0.28:1
Comfortable debt
level
Rs. 58,030 cr.
Contribution to
exchequers
Rs. 190,670 cr.
Share capital and
Reserve & Surplus
Rs. 1,10,171 cr.
Source: IOCL Annual Report, 2017-18

Page 15 21 March 2019 IOCL and GAIL
About Gas Authority of India Limited (GAIL)
Target Company
•Over 11,000 Km of network (206 MMSCMD)
•Pursuing for expansion, Participation in 5 MMTPA LNG Regasification Facility at
Dabhol
•Long-term Import Portfolio: 24 MMTPA
Petrochemicals
•Domestic market share ~ 15%
•Petrochemical Plant in Pata(UP) with capacity of 0.81 MMTPA + 0.28 MMTPA in
BCPL
•6 Gas Processing Plants producing LPG, Propane, Pentane, Naphtha etc. (1308 TMT)
•LPGTransportCapacity 3.8 MMTPA (2038 Km.)
•E&P-a part of vertical integration
•Participation in 10 blocks (operator-1 blocks)
•Presence in Myanmar & US
Natural Gas
LPG and Other Hydrocarbons
Exploration and Production
Source: GAIL Annual Report, 2017-18

Page 16 21 March 2019 IOCL and GAIL
Operates
3/4thof the total NG
transmission in India
Contributes 3/5th of
the natural gas sold
in India
Produces 1/6th of the
polyethylene
produced in India
Transmits 1/6th of
India’s totalLPG
Transmission
Producesevery
21th LPGCylinder
in India
Supplies gas for
about 3/4th of India’s
fertilizer produced
Supplies gas for
about 3/4th of India’s
gasbased power
Operating more
than 2/3rd of India’s
totalCNG stations
About Gas Authority of India Limited (GAIL)
Target Company
Source: GAIL Annual Report, 2017-18

Page 17 21 March 2019 IOCL and GAIL
The Deal
GAIL Shareholding Profile
Source: GAIL website

Page 18 21 March 2019 IOCL and GAIL
Possible Acquisitions
1 2 .
3
53.07% 53.07%
26.50%26.50%

Page 19 21 March 2019 IOCL and GAIL
Stake holding positions
Pre-acquisition and Post-Acquisition
Government
of India
GAILIOCL
53.07%56.75%
2.41%
Pre-Acquisition
Government
of India
GAILIOCL
56.75%
55.48%
Post-Acquisition

Page 20 21 March 2019 IOCL and GAIL
Product Portfolio
► Auto Gas (LPG)
► Indane Gas (LPG)
► Petrochemicals
► Natural Gas
► Crude Oil
► Petrol, Diesel
► Transmission of LPG and Natural
Gas
► Marketing of Natural gas including
LNG, PLNG, CNG, PNG
► LPG and other liquid Hydrocarbon
products
► Petrochemicals including LLDPE,
HDPE
► ATF/Jet Fuel
► Marine oils
► Special
Products
► SERVO
Lubricants
► Refining and
Pipelining
Consultancy

Page 21 21 March 2019 IOCL and GAIL
Government’s Side
► Proposed deal fulfills government’s desire of consolidating the oil and gas
sector.
► Integrated oil and gas companies will have better bargaining power and
competitive power with enhanced global standing
► Government can monetize its stake without diluting much of the control since
the government would still have controlling stake through its majority holding
(56.75%) in IOCL.
► By virtue of this acquisition
► Risk appetite for IOCL increases
► Avail economies of scale
► Take higher investment decisions
► Match performance of international and domestic private companies.
► Taking environment friendly natural gas to uncovered parts, particularly
eastern India, is a priority for the government.

Page 22 21 March 2019 IOCL and GAIL
Merger and Acquisition Motives
Empire Building Theory
► Empire BuildingTheory
► The global model is one of consolidation and not of specialization. For example
companies like Exxon and Shell operate in extraction, offshore drilling, and refining,
marketing, gas and also in downstream petrochemicals.
► The only company in India that has attempted that kind of deep forward and backward
linkages is Reliance Industries which is present in the entire hydrocarbon value chain from
extraction to Petrochemicals.
► That is the model that the government wants the oil sector in India to move towards. In
the last budget, finance minister Arun Jaitley had mooted the idea of creating oil and gas
conglomerate which will span the entire range of hydrocarbons.

Page 23 21 March 2019 IOCL and GAIL
Efficiency Theory
Synergies

Page 24 21 March 2019 IOCL and GAIL
Natural Gas Marketing
► Gross Sales Rs. 38,021 Cr.
► Over 11,000 Km network of
pipeline
► Participation in 5 MMTPA
LNG Regasification Facility at
Dabhol
City Gas Distribution
► Serving over 21 lakhs
vehicles & 25 lakh
households
► Presence across 38 cities/
Geographical area directly
or through subsidiarity
and Joint ventures
Petrochemicals
► Domestic Market Share – 15%
► Petrochemical Plant in Pata
(UP) with capacity of
0.81MMTPA and 0.28 MMTPA
BCPL
► Gross Sales for
Petrochemicals is Rs. 5,788
Cr.
Synergies for IOCL
Liquid Hydrocarbons
► 6 Gas processing plants
producing LPG, Propane,
Pentane, Naphtha etc. with a
total capacity of 1308 TMT.
► LPG Transport Capacity 3.8
MMTPA via 2038 Km long
pipelines
Source: GAIL Annual Report 2017-18

Page 25 21 March 2019 IOCL and GAIL
► IOC has entered the Gas market with City gas distribution projects offering CNG for vehicles and PNG
for households, in nine Geographical Areas (GA) through two Joint ventures
► IOC is collaborating with fleet owners and automobile manufacturers to promote the use of LNG as
transportation fuel.
► IOC 2nd largest marketers of Petrochemicals and natural gas in India
Type of
Synergy
Synergies
Marketing
Synergies
Manufacturing
Synergies
Operational
Synergies
► GAIL gets access to 600+ patents of IOC
► IOC has dedicated BS – VI emission test facility at its Research and Development Centre in Faridabad
► IOC is working on a new model to produce bio-CNG from Methane and its application as a
transportation fuel. IOC has signed MoUs with 9 parties to retail Bio-CNG through its marketing
network.
► Access to GAIL’s ready-made gas distribution network in the form of over 11,000 km of gas pipelines
and over 850 CNG stations across the country.
► IOC provides LNG to 58 institutional customers from fertilizers, power, refining, steel and other
industrial sectors
► IOC provides Pipeline Consultancy which will help GAIL in setting up pipeline network efficiently.
Efficiency Theory
Synergies

Page 26 21 March 2019 IOCL and GAIL
Synergies for IOCL
Product Category GAIL IOCL Total
Petrochemicals
Petrochemicals
Sales
(Rs. In Crores)
5788 18531 24319
Sales Volume (TMT) 674 2133 2807
No. of Plants 2 19 21
Capacity (MMTPA) 1.09 0.81 1.9
LLDPE/HDPE (KTA) 1280 350 1630
HDPE (KTA) 0 300 300
PP (KTA) 400 600 1000
Product Category GAIL IOCL Total
Gas Marketing
Sales
Gas Marketing
Sales
(Rs. In Crores)
38021 - 38021
Sales Volume
(MMSCMD)
85 - 85
Natural Gas
Pipeline Length
(Kms)
11000 13400 24400
Pipeline Capacity
(MMSCMD)
206.03 9.5 215.53
LPG and Other
HC
LPG and
Other HC Sales
(Rs. In Crores)
4179 - 4179
Sales Volume
(TMT)
1279 - 1279
No. of Plants 6 - 6
Capacity (TMTs) 1308 - 1308
Pipeline Length
(Kms)
2038 431 2469
Source: IOCL & GAIL Annual Report 2017-18

Page 27 21 March 2019 IOCL and GAIL
Valuation and Cost of Acquisition
GAIL - Valuation
EPS Rs. 23.31
P/E Ratio Rs. 16.05
Number of Shares 225.51 Crores
Total Earnings
=No. of Shares X
EPS
Rs. 5,256.24 Crores
Valuation
=P/E Ratio X
Total Earnings
Rs. 84,362.66 Crores
IOC - Cost of Acquisition
Current Market Price
(as on 26th Oct,2018)
Rs. 340
Number of Shares 225.51 Crores
Current Market Capitalization Rs. 76672.42 Crores
Calculated Value of the Firm Rs. 84362.66 Crores
Undervalued by 9.12%
Operational Synergy 23.58%
Total Premium 32.69%
Price per share with premium Rs. 451.15
Total Value of Firm at Premium Rs. 101737.41 Crores
Value of 53.07% Stake of GOI Rs. 53992.04 Crores
Cost of Acquisition for IOC Rs. 53992.04 Crores

Page 28 21 March 2019 IOCL and GAIL
Future Outlook
► Many countries including India are committed to cut
pollution and greenhouse gas emissions by using
“Natural Gas” for power generation purposes by
introducing programmes like Saubhagya.
► As a feedstock, natural gas has advantages.
Compared to coal-fired generation, natural gas
produces half as much carbon dioxide, less than a
third as much nitrogen oxides, and one percent as
much sulphur oxides.
► Considering the domestic and industrial requirement
for Natural Gas, it will be a must for any OMC to carry
it in its product portfolio.

Page 29 21 March 2019 IOCL and GAIL
Alternate Deals
Pipeline
Business
Marketing
Business
Pipeline
Business
Marketing
Business
SWAP of
Pipeline
Asset

Page 30 21 March 2019 IOCL and GAIL
Alternate Deals
Pipeline
Business
Marketing
Business
Pipeline
Business
Marketing
Business

Page 31 21 March 2019 IOCL and GAIL
Thank you