WHERE TO CONFIDENTLY INVEST IN AN ANXIOUS MARKET

Its not for the first time that I am recommending this stock to the investors. Ever since the IPO days, the
stock has been on my recommendation list and has delivered good returns to the investors.

When an old stock is recommended again, the reader feels short –changed. It is almost like gifting the
old sweater of the elder brother to the younger one.

So when an analyst recommends the same stock again, it could mean two things. Either the analyst has
run out of ideas or the fundamentals of the stock have changed for the better over time.

I am sure, the readers are going to appreciate that the second reason is more appropriate.

For GSPL, the world has changed a lot in the last few months, for the better. To appreciate GSPL, you will
have to understand the changed equations.

A catalyst is empowered

The Petroleum and Natural Gas Regulatory Board (PNGRB), the regulator for all the downstream petro-
chemical activities from refining to ultimate sale, had been existence since 2006, but it was like a watch
dog who was prohibited to bite.

The Government on July 15, 2010, notified section 16 of the PNGRB Act of 2006. With this the regulator
has been fully empowered.

PNGRB is now in a hurry. It now wants to make up for the lost time. So all those projects , which were
supposed to come up , whether in cross country pipe lines or City gas Distribution business, will now be
cleared at double the speed.

This creates a favourable environment for GSPL and other gas pipeline companies. And GSPL has a had
a head start.

GSPL gets a national footprint

Bids were invited for 1593 km Malavaram-Bhilwara pipeline, 900+700 km Mehsana-Bhatinda pipeline
and 400 km – Bhatinda-Nangal pipeline.

In order to bid for these pipelines, GSPL formed a JV with oil marketing companies with GSPL- 52%,
Indian Oil –26%, HPCL-11%, BPCL –11% equity holdings.

GSPL’s existing pipeline length is just 1650 Km. It has not got these 3600 km of additional pipelines,
which makes it a company with a national footprint, spread over 9 states and a union territory.
GSPL will be re-rated

GSPL will be re-rated for graduating to the national player status. The second reason for re-rating is
that GSPC gas, an associate of GSPL, is now the largest city gas distribution company in the country. City
gas business gets a higher discounting, atleast 50% higher, from the capital markets. This will happen,
once the public starts appreciating that GSPL is in this business.

As the PNGRB wants to reach more than 250 cities in the next few years, bidding by GSPL and its
associates will change this perception for the better.

So I am looking for not only higher earnings but a higher PE as well. So GSPL is a good Diwali gift, not
only for this year, but for the next five years as well.

Pay attention to the Agri Input sector

I am finally succumbing to the demands of the investors and suggesting a sector exposure to which can
be built over the next year.

Arable land is decreasing every year. Population is exploding. Therefore, the need to raise the
agriculture output will only increase each year.

So companies that make bio-fertlisers, bio-herbicides, pre-emergent weedicides and high yielding seeds
will be the once to watch. Amongst them, the seed companies offer the best proposition.

Apart from the usual logic, a trigger will come in the next few weeks from government legislation.

The Government is likely to introduce a long pending bill, National Seed Bill 2004, in the upcoming
session of the Parliament. The Bill aims to regulate the quality of hybrid seeds and check the sale of
spurious seeds in the country, besides increasing private participation in seed production and
distribution. The Bill also proposed to repeal and replace existing seeds act, 1966, for it does not deal
with the quality control of GM (genetically modified) seeds, as they are generally not notified.

One can appreciate the fact that the bill, which was to be tabled in 2004 is now finally seeing the light of
the day. The new act will pave the way for an increased demand from the farmers for high yielding
seeds and keep spurious seeds out of the system. This will enable better remuneration and
compensation for the seed companies for their research expenditure.

Another reason for looking at the sector is that the tax authorities are taking a lenient view of the
returns filed by seed companies. Some of the companies have filed their tax returns considering their
income as agricultural income, and the department has not actually contested that. while it may be too
early to count the tax chickens as yet, but things could go the seed companies way.

I expect the valuations of seed companies to improve going forward the same way, they have improved
for the Pharma sector research outfits.

Wish you all a happy Diwali and prosperous year ahead.