Ladies and gentlemen, good day and welcome to GAIL (India) Limited Q1 FY 2024 Earnings Conference Call hosted by Ambit Capital. As a reminder, all participant lines will be in listen-only mode, and there will be opportunity for you to ask questions after the presentation concludes. You need assistance during the conference call, please signal an operator by pressing star zero on your telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vivekananda from Ambit Capital. Thank you, and over to you, sir.
Thank you, Seema. Good evening, everyone. It's my pleasure to welcome all the participants and the management of GAIL India Limited, led by Sri Rakesh Kumar Jain, Director of Finance, along with other senior executives. On behalf of Ambit Capital, it's a pleasure for us to receive all of you this evening. I would now like to request Sri Rakesh Kumar Jain to give you his initial comments, and then we can move on to the Q&A. Over to you, Rakesh.
Thank you, Mr. Vivekananda, from Ambit Capital. My colleagues sitting with me here in our boardroom, my dear friends from investors and analyst community, a very good afternoon and warm welcome to this earning call for Q1 2024. At the outset, I thank you all for attending this earning call. I'm pleased to share with you that GAIL received clean comments from CAG with respect to financial statements for financial year 2022/2023, which is 14th year in a row. Further, our GAIL Vijaipur unit received 18th Cost Excellence Award, first position in manufacturing sector, public medium category from the Institute of Cost Accountants of India.
Also, by acquisition of JBF Petrochemicals Limited, we have successfully become wholly-owned subsidiary with effect from 1st June 2023, and the name has been changed to GAIL Mangalore Petrochemicals Limited. That GAIL has seen a very challenging business environment in previous quarters of financial year 2022/2023, for reasons explained to you during various calls and communications. Going forward, we expect a favorable outlook and better business prospects. Business results for quarter ended June 30, 2023 have been declared today, and physical performance in gas marketing, gas transmission, petrochemicals, and LHC segments has improved in Q1 financial year 2024, as compared to previous quarter.
Gross turnover for the quarter stood at INR 32,138 crore. PBT stood at INR 1,889 crore, an increase of 220% over the previous quarter, at INR 1,412 crore, an increase of 134% over previous quarter. On a consolidated basis, GAIL clocked a turnover of INR 32,755 crore in Q1 financial year 2024, versus INR 33,086 crore in previous year, down by 1%. PBT is up by 231%, INR 2,283 crore. PAT is up by 150% to INR 1,793 crore. The CapEx for Q1 financial year 2024 is approximately INR 2,400 crore. This is on pipelines. To be specific, INR 967 crore on pipelines, petrochemical, approximate INR 530 crore, CGD, approximate INR 69 crore, operational CapEx, INR 135 crore, equity contributions to JBF and others, INR 660 crore, et cetera.
The company has also embarked on alternative energy like green hydrogen, renewable energy, and biofuel projects, which are of national importance and would provide a transition to sustainable future. I would like to share the performance highlights of Q1 2024. Financial highlights. Gas turnover stood at INR 32,138 crore in Q1, financial year 2024. Q1 2024 as against INR 32,684 crore in Q4, financial year 2023. There is marginal decrease of 2% due to natural gas pricing staying down. PBT during the quarter increased to INR 1,889 crore, as against INR 591 crore in Q4, financial year 2023.
Up by 220%, mainly due to better performance by our gas marketing segment on account of increase in gas marketing spread, decrease in inventory loss, increased tariff realization, gas transmission, along with better performance of petrochemical and LHC segment. The PAT during the quarter increased to INR 1,412 crore, as against INR 604 crore in Q4 of financial year 2023, up by 134%, mainly for the reasons explained above. Now I come back to the physical performance for the current quarter versus previous quarter. Physical numbers for our business segment during the quarter are as under: gas marketing volume increased to 98.84 MMSCMD in current quarter, as against 96.46 MMSCMD in previous quarter.
The increase in volume is mainly due to increase in our LNG sales on accounts of relaxation in downstream, on resumption of SMTS supply and offset with the decrease in overseas volume. Natural gas transmission volume increased by 8.1 MMSCMD to 116.33 MMSCMD in current quarter, as against 108.23 MMSCMD in previous quarter. The capacity utilization is 56% during the Q1 2024. The increase in transmission volume is attributed to increase in RNG sales on account of relaxation in downstream, on re-resumption of SMTS supply.
Polymers production increased to 164 TMT, as against 147 TMT in last quarter. The plant load was ramped up post resumption of supplies by SMTS. The capacity utilization was 82% for the quarter. Electric production increased to 243 TMT, as against 232 TMT in previous quarter. The capacity utilization was 69%. LPG transmission stood at 1,073 TMT, as against 1,079 TMT in previous quarter, on account of Jamnagar -Loni LPG pipeline capacity augmentation by 750 TMT. Total LPG transmission capacity increased from 3,830 TMT to 4,580 TMT, capacity utilization was 94% during the quarter.
Now, with respect to consolidated financials for Q1 as compared to Q4 financial year 2023, the consolidated turnover in current quarter stood at INR 32,755 crore, as against INR 33,086 crore in Q4 financial year 2023, marginally down by 1%. The PBT in current quarter is INR 2,283 crore, as against INR 689 crore in Q4 financial year 2023, up by 231%. That is INR 1,792 crore versus INR 634 crore in Q4 financial year 2023, Q4 financial year 2023, up by 183%. Now coming back to GAIL CDG, GAIL is having infrastructure of 154 CNG stations and approximately 270,000 DPNG connections during the current connections.
During the current quarter, one new CNG station and approximately 77,000 new DPNG connections were added. The physical volume is 0.3 MMSCMD during the quarter. In the next two years, GAIL targets to add over 100 new CNG stations and 200,000 new DPNG connections. Now, coming back to our wholly-owned subsidiary, GAIL Gas Limited. During the current quarter, gross turnover stood at INR 2,192 crore, as against INR 2,522 crore in Q4 financial year 2023, increase of 13%. This is mainly on account of decrease in natural gas prices and gas trading quantity.
EBT stood at INR 102 crore, as against INR 90 crore in Q4 financial year 2023, increase of 13%. PAT stood at INR 76 crore as against INR 67 crore in Q4 financial year 2023, increase of 13%. The physical volume during the quarter remained flat at around 5.26 MMSCMD. During the current quarter, 1,600 new DPNG connections were added. GAIL Gas, along with its JV subsidiaries, has infrastructure of 870,000 DPNG connections and 456 CNG stations. The another subsidiary company, Bengal Gas Company Limited, as on June 30, 2023, Bengal Gas Company Limited is having 12 CNG stations, 213 km pipeline, and 8,000 domestic CNG connections, infrastructure made available.
During the current quarter, two new CNG stations and 32 km pipeline was added. Now, coming back to the project performance, Mumbai-Nagpur gas pipeline. This pipeline, total length of pipeline is total length of 1,755 km. Activities are moving in full swing, and Mumbai-Nagpur section of length 698 km is expected to be completed by December 2023. Regarding Jagdishpur-Haldia, Bokaro-Dhamra pipeline, 2.2550 km out of total pipeline length of 3,293 km have been commissioned, and the remaining part is expected to be progressively completed by June 2024. Srikakulam to Ongole main pipeline of length 423 km is likely to be completed by December 2023.
PNGRB has authorized GAIL on 11th July 2023 to lay the Gurdaspur-Jammu natural gas pipeline, having length of 160 km within 36 months. Regarding Dhamra-Haldia pipeline, length of 253 km, Odisha portion of the length around 150 km, expected to be completed by December 2023. Barauni-Guwahati pipeline, 363 km section out of 770 km has been commissioned. The last portion is expected to be commissioned, completed by October 2023. Now, let me give you some outlook about our various segments. This outlook is short to medium term. In aspect of natural gas transmission, company has implemented tariff with effect from 01/04/2023.
Post implementation of integrated tariff of INR 58.61 per MMBtu, the transmission revenue have seen an upside of approximate INR 660 crore in Q1 financial year 2024. This increase is expected further increase with the volume ramp up. This is expected to grow by 6%-7% from existing level of 116 MMSCMD. Let me tell you once again, currently we are flowing on around 116 MMSCMD volume, and it is expected to grow by 6%-7%. Increase in transmission volume from 116 MMSCMD to 123 MMSCMD. We expect by the end of this financial year, we will be reaching, transmission volume at the level of 123 MMSCMD.
Further, during next two to three years, there will be increase in transmission volume by around 50 MMSCMD. That means we are expecting the transmission volume will be somewhere around 138 MMSCMD- 140 MMSCMD. Further, the company has submitted a representation for review of the moderation done by PNGRB in the tariff order as integrated tariff of INR 68.5 was submitted to the regulator for gas tariff of INR 58.61 per MMBtu was approved. You may recall that GAIL submitted tariff of INR 68.57, regulator approved INR 58.61. The major reduction regulator has done on account of fuel cost, which is INR 5.76.
You know, they considered the fuel cost at the rate of $3.61, and that price does not exist. There are some more parameters, but this is significant parameter that I thought that bring to your notice, and we expect the tariff will be increased. And INR 5.76 was on the date of issue of order. On NPV basis, it will further increase. Gas marketing for financial year 2022/2023 has witnessed challenges in profitability of gas marketing segment, and various mitigation efforts were put in place. Despite all challenges, GAIL was able to clock gas marketing profit of INR 3,000 crore during financial year 2022/2023.
Global gas market is settling down, and many of the negatives such as elevated spot price, shortfall, geopolitical situation is improving. This is visible from the volume ramp up in domestic consumption. Let me remind you that during the analyst call we had in Mumbai, at the end of the financial year in May 2023, we said that we expect to earn marketing margin of approximate INR 3,500 crore, today we maintain the same, that at least we will earn marketing margin of INR 3,500 crore in financial year 2023/2024, as informed earlier. This is also evidenced and supported by the fact that during the current quarter, that is Q1 FY 2024, we earned marketing margin of approximate INR 1,000 crore.
GAIL is planning to source long-term natural gas supplies approximate to the tune of 7–8 MMTPA from sources in a staggered manner by 2030, do not intend to depend on one country for more than 1–2 MMTPA of volume. This will help to protect from sudden shocks like steep hike in spot prices, SMTS, disruptions like SMTS supply disruptions we had. Polymer production stood at 164 TMP, as against 147 TMP in last quarter. The production has increased on account of plant being operated at higher load. During the year 2023/ 2024, it is expected that we will adjust the nameplate capacity of around 810,000 metric ton.
Liquid hydrocarbon production stood at 243 TMP in Q1, financial year 2024, during the year production is estimated as same previous level production. To protect the margin in LHC segment, GAIL is effectively involved in pricing of LSC prices— LPG prices, I beg pardon. That's all from my side regarding the overview of performance of various segments and projects progress. The management of the company is available, and We'll be glad to clarify on any questions that you may have. Over to you, Mr. Vivekananda . Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question, may press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Mr. Amit Rustagi from UBS. Please go ahead.
Yeah, sir, thanks for this wonderful comment on the transmission and other segments. Sir, I have two questions. One is, can we assume in the transmission segment that the revenue we have earned on 116 MMSCMD volume, this kind of revenue run rate will be maintained even in this Q2-Q4? Can we annualize this revenue, and it is actually what 10% growth plus on an annualized basis?
Second question?
Actually, second question is, can you give us a breakdown of your transmission costs, because in this quarter also we have witnessed a higher transmission cost. Can you give us a breakup, like, how much was the fuel, fuel cost, and how much was the normal expenses in this quarter? Thank you.
Okay. With respect to your first question, we expect that this transmission revenues not only to be maintained, but to further increase. Your expectation of INR 10,000 crore we are likely to achieve.
Okay.
With respect to transportation costs.
Yeah, sir.
As we said in our annual earnings call, that we were carrying a costly gas, that is the $1.40 for MMBtu, which we purchased sometime in last quarter of calendar year 2023, in order to meet the immediate reduction in the allocation which we had. That is one impact which we had during this quarter. If you want the amount, we can also share. That is one impact we are having. That is around 66. What is that? INR 172 crore we have booked extra cost during this quarter, which is no more going to exist in coming quarters.
Okay.
Second, we also made a provision of around INR 60 crore on account of one arbitration case the company had. That is another one-off in this segment. Around INR 233 crore to be precise, is one-offs or costly gas, which we don't see in coming quarters.
Okay. sir, can you give us like a annual run rate? Because, there has been a significant increase in revenues. However, there's a significant increase in cost, even after we adjust this INR 233 crore. For example, like, I am assuming 1.5 MMSCMD gas consumption in the transmission segment at an annual— at a cost of around $12 per MMBtu. Will that be a correct estimate for the fuel and power cost, or the compression cost in this segment?
Yeah, for the reduction in the allocation of APM gas, the $12 or sub $12 will be the cost which we are likely to be booked to our fuel as a fuel to our compression.
Okay, sir, got it. Sir, just one question more on the city gas distribution. Are we looking to monetize any of our city gas distribution assets? Because we are seeing a significant amount of profitability coming from, you know, MNGL, even our GAIL Gas is doing well. What is the plan on outlook on monetization of any of the entities in the city gas distribution?
Okay, there, one is our wholly owned subsidiary. Certainly, that call we can take. We are evaluating. Another is a joint venture. The two promoters have to sit together and take a call. Nevertheless, we are reviewing and considering the same for monetization. That evaluation part or the examination part is in hand.
Okay, sir. Got it, sir. Got it. Thanks a lot for this. I'll come back to you. Thank you, sir.
Thank you.
Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two participants. We take the next question from the line of Mr. Probal Sen from ICICI Securities. Please go ahead, sir.
Thank you for the opportunity. Congratulations on the strong set of numbers. I just have a couple of questions. One is, with respect to the trading segment, sir, is— you know, do you now have any volumes available for overseas sale to take advantage of the arbitrage? Basing it on the right, you know, now with the Gazprom new subsidiary, I presume all of the lost volumes are now actually flowing through into our system, all the 8.5, 9 MMSCMD. Are there any volumes available for hedging or for, you know, opportunistic trade outside the country?
No. Whatever volume we have from overseas, we have intent to bring all the volumes to India. Therefore, in terms of the availability of volume, certainly, we don't envisage any trading of volumes in the international market except what we have done in the past for this current year and next year. When I'm making this statement, this does not mean that we will not do it, but if in case some arbitrage is available, we find that we can take the advantage of the situation. Certainly, U.S. volume, being flexible volume, we'll continue to do that. In terms of requirement, there is no extra, additional or flexi or we have any surplus volume available, which we think that we will not bring to India. We intend to bring 100% volume to India.
No such sale actually happened in Q1, sir, is my understanding correct?
Sir, we have not done any trading specifically. As I said, whatever contracts we did in past in terms of swaps and all that, those are continuing, and we have not done any specific cargo trading in Q1.
Right. One housekeeping question, sir. You spoke about the CapEx, done in 1Q for INR 400 crore. I just wanted to get a sense of what the Q4 for the overall year?
Yeah, we intend to spend around INR 9,000 crore-INR 10,000 crore as a CapEx during current financial year.
Would it be possible to break it down on segments? Is there any change from the presentation you have made?
Specific figure, I'm coming to the specific, not here, quickly one guy. Clear control. I'm coming to the specific figures. We intend to invest around INR 5,000 crore on pipelines, INR 1,400 crore on petrochemicals, operational CapEx in the same range, equity around INR 1,000 crore, around INR 300 crore, city gas distribution around INR 200 crore. This is around INR 90 crore-INR 100 crore we are estimating as of now.
Understood.
Let me, let me correct you. Let me give you a revised figure. This is, this is not.
Sure.
Let me come back again. What I said about pipeline crore rupees and petrochemical around INR 3,000 crore. In undoubtedly, I told you the figure of 2022/2023. Pipeline INR 4,000 crore, petrochemical around INR 3,000 crore, or to be specific, INR 3,200 crore. We also intend to incur operational CapEx, INR 700 crore, then CGD, INR 200 crore. You know, an equity contribution, substantial equity contribution is there during this year, around INR 2,500 crore. As you know that we have acquired JBF Petrochemicals. Already we have paid INR 2,100 crore as equity contributions. This is what we planned for the 2023/2024.
All right, sir. I'll come back again. No, no questions. Thank you so much for your time.
Thank you.
Thank you, sir. The next question from the line of Mr. Abhishek Nigam from B&K Securities. Please go ahead, sir.
Yeah, hi. Thank you so much for the opportunity. First question is on the petrochemical loss. My understanding is, I mean, if you look at your volumes, you are now operating almost close to, you know, 80% or so utilization. The loss has reduced on a Q2 basis, but, you know, it still remains. If you could just, you know, give us some clarity on what is happening there?
Unfortunately, the petrochemical prices in the international market has come down significantly. Even if you compare with the Q4 last year, it has come down by INR 8,000, if you compare with the whole year, it has further come down. That's what is hurting us. Though still we are able to reduce the loss, we are not only able to recover variable costs, but also to some extent, the fixed cost part of it. As we produce more, because Q1 we did not produce to the capacity, we will further able to recover our fixed costs.
Second, this is the history, but future what we expect that there has been significant drop in the LNG prices. We are capable of sourcing the better gas at a better price. This segment, a significant improvement as we close the year. It is actually difficult to give me a precise figure, will be better off than Q1 2024.
Fair enough. That's, that's very helpful. The second question from me is on the tariff revision. You know, as you mentioned that, the PNGRB allowed a lower tariff, and they took into consideration lower fuel costs, and you are trying to, you know, tell them to come up with a more realistic tariff number. Is it possible for you to sort of, you know, give us a sense of the timing when this further revision will come through? I know this is tough because it's really with PNGRB, but any clarity would be very helpful.
Actually, the moment the tariff order was issued, within the timeline, we made our submissions to PNGRB. They heard us once. They now put the date for, you know, hearing us again in November. Of course, they have given a very delayed date. We have action in hand. We'll go them and expedite that date to the earlier date, because the sooner they do, it will helpful from the customer's point of view, because you know, the tariff is calculated on BCM basis. The delay will means GAIL will get its share.
The customer will get loaded because of the net present value of the money. We are concerned also from customer's point of view. We'll get the money maybe by November, if not by November, certainly we should get by the end of this financial year. As you already said, it's difficult because it's the regulator's job when they take up it. Our job is only to expedite, which we are doing.
Sure, so that, that's very helpful. Thank you so much. That's it from me for now.
Yeah.
Thank you, sir. The next question from the line of Mr. Maulik Patel from Equirus. Please go ahead, sir.
Yeah, thanks for the opportunity. Sir, a couple of questions. One is on the volume side, this 116 MMSCMD volume has been one of the highest. Can you just give some kind of, you know, guidance on the colors and where we can see this volume? Because there are a couple of auctions happening in the domestic side, particularly MG, where the volume is still ramping up. What do you expect this end of this financial year, the volume can be from specific segment? That's the question number one, sir.
As I said in my opening remarks, currently we are transmitting 116, and by the end of the year, I said, and your question is, we will expect to reach by 123 MMSCMD.
This growth is coming from this segment?
Yeah. Growth will come, because as you know, that we are not running petchem plant to its full capacity. We expect 123 MMSCMD to come from there.
Okay.
When I said 116, it does not include the volumes of HURL, Barauni and Sindri, which they were in shutdown for past one week, so they take 4 MMSCMD. RCF Thal was drawing almost 1 MMSCMD less. Restoration of Dadri-Panipat pipeline. As you must have gone through the papers, the news, that there is a disruption in supply through Dadri-Panipat line, so almost four million volume has gone there. Increase in off take by CGD.
As you know that CGD is our growing business. These are the areas we expect the volume will come, but there will be one negative. Currently, NTPC is taking almost 5 MMSCMD of volume because of the seasonal demand of power, so that will go down. If you net off all these things, we reach more than 123.
Okay. Sir, the second question is on Dabhol. The breakwater facilities were supposed to be completed, so do we expect it to be completed by this year-end? The next year, you not required to use the hedge ship or the cargo will be available throughout the monsoon?
That's, Yeah, that's what we are expecting. This weather should be the last weather where we are not having breakwater and not able to run at full capacity. From next year onwards, we—after this monsoon, we'll be able to run at full capacity.
Sir, approximately how many cargoes you ship in the monsoon from Dabhol to the hedge?
Can I tell you that? At an average, four cargoes per month.
That will be almost around 12-16 cargoes in a monsoon period?
In this monsoon period.
Okay. Thank you. Thank you very much, and wish you all the best.
Thank you, sir. We take the next question from the line of Sabri Hazarika, Emkay Global. Please go ahead.
Yeah, good morning, sir. I have two questions. The first one is, I think, again, the gas cost or the fixed, or the fixed cost, something, I mean, the gas, the rhetoric is quite high. Was there this costly cargo being like put in petrochemical also, or is it just the normal line of business? What could be the average LNG price for the Petchem segment in Q1?
Average LNG price which we have consumed?
Yeah.
Yeah. We have used LNG or gas at an average price of $13 per MMBtu.
That is for the Petchem?
Yeah.
Okay. you expect it to go down going ahead?
Certainly, market has gone down. Why we will be putting higher cost gas to petrochemical?
Right, sir. The second question is, is a conceptual question regarding the hydrogen blending that you are doing. So this blending of hydrogen happens in CGD network, so this is again extracted from somewhere, or it is consumed in the PNG connections directly?
We—first we are injecting this hydrogen, the gray hydrogen, not the green hydrogen.
Yeah
To our on of the CGD's pipeline, Aavantika Gas, Indore. We experimented by 2% injection by volume and increase it to 5%, and it is in CNG, which is largely being used.
Right. It is burned as a fuel only, nothing like not for transportation aspects of hydrogen.
No, actually, there, there is a challenge to use hydrogen beyond a certain point in CNG.
Okay, sir. Okay, sir. Thank you so much.
Thank you, sir. The next question is from the line of Mr. Sanat Kumar, Value Research. Please go ahead.
Yeah, can you hear me?
Yes, sir, please go ahead with your question.
Yeah, thank you for providing me this opportunity. I have two small questions. One is, currently, GAIL is getting revenue from five of their blocks. What is your projection of adding new?
I'm sorry, I'm not able to hear you. Can you come up loudly?
Okay, just a moment, sir. Just a moment. Hello, can you hear me now?
Yes, yes.
Okay. I have two small questions. Thank you for providing me this opportunity. Question number one is related to your exploration and production business. Currently, you are getting revenue from five blocks. What is the projection for addition of revenues from, you know, C&P going forward? That's one question. The other question is related to the cost escalation in your petrochemical project, which is somewhere around approximately four increase of INR 4,000 crore. What is the reason for such an escalation? These are my two questions.
Yeah. First question, the C&P revenues, we expect largely to revenue remain in the same range with which we have today.
Okay. you're not expecting any additional blocks coming online for purchase and sales?
No. With respect to cost escalation, you know, most of the orders for the PDH-PP process during the Ukraine war, and there— at that point of time, there was a lot of hike in the steel prices in particular. That is one reason. Second reason is that after selection of licensor, you know, we do detail engineering, and then detail engineering suggested some more items or some more quantity, which we are required to procure. These are the major reasons which actually resulted into estimated increase in CapEx, that's all.
Okay. There is an additional cost which is incurred on some external system that is, you know, coming because of the detailed feasibility study?
There are some. There are some.
Okay. Okay. Thank you, thank you so much.
Thank you, sir. The next question is from the line of Mr. Yogesh Patil , Axis Capital . Please go ahead, sir.
Thanks for taking my question. sir, you say $13 per MMBtu was the gap cost for the petrochemical unit, and you also mentioned that the gap cost will come down. At what gap cost do you expect the petrochemical unit to come back to the sustainable profit? What is the current utilization rates of petrochemical unit in July 1, and have you planned any maintenance shutdowns for the petrochemical units going forward?
Your first question, at what level we will be at EBIT level in profit, can you give me the price, which price will be prevailing throughout the year? Because it all depends on the price of polymer. At current prices, if you ask me specific, around $10+ is the breakeven price for petrochemical, below that we will be having profit. Second, July onwards, certainly we have ramped up our plant, we will be at normal capacity.
Okay, no maintenance shutdown plan for the next few months.
No, we don't. We say then if, because we had a lot of opportunity when we were not using our plant, so we could carry out all those maintenances during that time.
Okay. Second question is the commissioning of the Dhamra LNG Terminal. Is that a correct understanding, your gas requirement for the compressors of the transmission pipeline has come down because the Dhamra LNG Terminal has commissioned?
Actually, our gas compression requirement remains almost in same range. There was a time we consumed little bit more, it is not going to go down. It will remain in the same range.
What is the current share of APM gas in the total gas requirement for the compression?
Currently allocation is 0.4.
Okay. It has come down from 0.6 to 0.4. Do you expect that will continue, 0.4 it will stay only?
It will further go down.
Okay. Thank you.
Thank you, sir. The next question is from the line of Mr. Raj Gandhi from SBI Mutual Fund. Please go ahead, sir.
Hi, thanks a lot for the opportunity. Your— there was a little bit of difference between your integrated tariff and the unified tariff, which came up, some 10%-12% differential there. How should we read through on those differential?
The differential was in quarter one of this financial year, and which we have also disclosed in our accounts. PNGRB has revised the unified tariff upward, so that differential is, we have started recovering. By the end of this financial year, there should not be any outstanding. If I understood your question correctly, this is the answer.
You know, the integrated tariff, which the NGAS passed the order, and subsequently the unified tariff came in 12% higher, and then it's been further revised upward. I'm just wondering on the difference between the integrated tariff and the unified tariff. Because we, you know, the zonal volume distribution is totally different. You know, aggregate tariff, the unified tariff comes much higher than the integrated tariff. Ideally, it is supposed to be similar to integrated tariff, I presume, so I'm just trying to understand the difference between the two.
Ideally, what you are telling may be ideal only. Regulation provides for distribution of revenue and settlements into zonals with the based on formula. The risk for change in volumes remains with the transporter. Sometimes, it may be helpful to or allow to recover a bit higher, or sometime it may be same, or sometime it may be nearer to that, a little lower.
Okay.
Ideally, yes, but ideally, volume does not flow in the same way the zonal distribution is done, because that is done on estimation basis.
Sure, sure, sure. Is there a scope of the same, maybe to over-recover, under-recover on this count?
I said that risk of zonal distribution remains with the transporter.
Okay, okay. Sure, sure, sure. Thanks a lot.
From the line of Mr. Aditya Suresh from Macquarie Group. Please go ahead, sir.
Sir, thank you for the opportunity. Just on your CapEx plans, now, in terms of the business today, CapEx loss has been here for the past seven quarters now. What sort of return on capital employed profits are you looking at while you're allocating a very large part of your CapEx towards SCMT? I guess the concern really is that you're spending so much on CapEx, this is going to further dilute your group, and maybe some thoughts from that first.
The new plant, new investment we are doing, petrochemical, probably whatever we have incurred, I think, that should not be, we are not in a position to discuss that. Whatever new CapEx we are incurring on PDH-PP, we are meeting our hurdle rate and even beyond that. We are hopeful that we'll be able to earn that.
Any specific profits you can share, sir, in terms of, any specific target rates or under what margin assumption you may be able to meet those numbers?
I think the specific, let us not discuss, but we can well, I can at the moment say that we are able to meet our hurdle rate based on our analysis, even with the revised cost.
The second question was on gas transmission. There is really quite a few moving parts here on your CapEx and your OpEx. I was wondering if you could give any guidance on the SCM. Is that possible at all to you?
He's asking the data for SCM, not the revenue for SCM. I will come back, actually. This data we'll certainly be able to give you. Let me give one statement. You should be encouraged by the performance of this transmission segment, and this segment is going to give you significant part of revenue and profit going forward, right from now.
Thank you, sir.
Thank you. The next question is from the line of Somai from Avendus Spark. Please go ahead.
Vishnu from Spark. Sir, I heard you mention 135– 140 MMSMD in the next few years. Is that right? This—Is this driven by the supply increase, or you're seeing some real demand that is coming from certain sectors? If you could just help us understand where do you see this growth coming from?
Let us start from under 116, which we are prospecting today. I said that by the end of this year, we'll reach 123. I provided breakup. For the benefit of everybody, let me reiterate once again. Currently, we are consuming almost 1.5 MMSCMD less at our petrochemical plant. Once we are on full stream, which we are today, we will increase 1.5 MMSCMD. Currently, HUR Barauni and Sindri, which takes 4 MMSCMD volume, not going, that will be added. RCF Thal, 1 MMSCMD. Our restoration of Dadri-Panipat incident, which happened very recently, will be added to this 116 MMSCMD. CGD, as you know, our growing business, at least 1 MMSCMD will come from there. There will be one minus NTPC because of seasonal demand.
Currently, growing six, high MMSCMD will come down, so this will make more than 123. What do we expect in coming two to three years? At least 3–4 MMSCMD will come from CGD business again, because CGD will have continuous increase of demand. IGL, IGGL, 2 MMSCMD will come. Of course, it will come progressively, maybe by 2035, but it will start from 2025/ 2026. Refinery, NRL, which will take around 2 MMSCMD, will start from 1 MMSCMD, will reach to 2 MMSCMD. Then major chunk will come from IOCL refineries, Hyderabad 3.8, Haldia 1.2, Barauni 1.5, Guwahati, say, 500,000 , and Bombay, Bombay ga by 700,000. These are the areas which will provide us another at least 15 MMSCMD of volume, and will take us through 138–140.
This you see in by fiscal calendar 2025 will get there or?
I told you 2023/20 24, we will be ending up by 123, and in another one tontwo years from there, we'll reach 140.
Understood, sir. On the gas transmission business, if you can give us the volume you are currently utilizing, I mean, in terms of the gas utilization, which are you using for the transmission? Is it 1.27, 1.3? What is the number?
If you ask me, the average consumption in fuel is around 1.3-1.4.
1.3 to 1.4. Of this, 0.4 is domestic. If this price is $14.
Not $14, the domestic are basically around $12, because we have— we can source from domestic source as well as the ability to have LNG around that price.
Okay. Got it, sir. Thank you.
Thank you, sir. The next question is from the line of Mr. Kirtan Mehta from BOB Capital Market. Please go ahead, sir.
Thank you, sir, for giving this opportunity. We are envisaging 135–140 MMSCMD volume in just two to three years. What would be the pipeline utilization at that point? We are currently at 56%. How would the pipeline utilization change in anticipation of the new pipeline which are coming?
Second related question was in terms of what is the current ROC that we can earn based on the tariff formula at 56% utilization, and how would that change in next two to three years timeframe?
That's not— I think let us not be specific. You can work out what ROC we are earning, because you know capital employed and all the profitability levels. But with respect to your question on capacity utilization, actually, from here on, we will have two more pipelines which will be commissioned. One is Mumbai-Nagpur, and another is Hathirka-Kolhapur, which will add to our capacity of 20 MMSCMD. I am telling that, we will be reaching around 140, so on estimated basis, we will be around 60% capacity utilization.
Thank you, sir. One more question was about the Bangalore-Kochi pipeline. Could you give us the latest updates in terms of the last mile that is remaining to be completed? When is now it targeted to be completed?
Target date, do you have target date? We actually, let me find out the target date. I think it is next year, November, October or November next year. I will give you the exact timeline, which we have given to ourselves. The work is in progress. We actually, the issue was ROU. We are aligning some of the portion of this pipeline along the roads and some through fields. We are using the hybrid approach to come over the situation of ROU. Exact timeline I will give, but certainly before the end of next calendar year, maybe around October, November. I will find out and you can check offline.
Thank you, sir.
Thank you, sir. We take the next question from the line of Mr. Vikas Jain from CLSA. Please go ahead, sir.
Hi, Rakeshji, thanks for taking my question. Specifically wanted to drill a little bit deeper on cost or gas cost within the gas transmission business. If you can, you know, there's something which I just wanted to understand, if you could explain, last year the average pricing of gas, because it is, you know, not changed by the quarter, allocation was taken away, et cetera. The average dollar per MMBtu price that we paid for the gas consumed within the gas transmission business, and for the 1.4 MMSCMD, You said that there is about 0.4, which we are still getting from domestic, obviously, there is that, that will also be taken away in the coming quarters.
The remaining one, how much flexibility do we have to shift between spot, long term, as well as the domestic HPSC gas? You know, those are the two parts of the question. One is the average cost of the gas that we consumed through the year last year, and what did we do for this particular quarter to get an understanding of how much change will be on a YoY basis for FPGD was in the quarter?
Vikash, thank you so much. First, answer to first question, let me try to give you, if possible, right now or else will be offline. Yeah, Satish has just worked out. No, no, last year.
Last year.
Last year, not Q1. No, last year.
Energy will have it.
I will give you the, just hold on.
69.
No, no, how can it be 69? Maybe Charlie is already far gone. We will give you, we'll give you offline. Regarding your second question, ability to have the switchovers from the LNG to domestic, domestic. If you know the tariff order, you have seen the tariff order. Tariff order provides that the ceiling prices, HPSC, will try to source the gas from mostly from domestic source to meet the requirement of fuel in compressors. That's what is our challenge and target, and which we are continuously trying to do. I will give you answer to your first question, maybe today or maybe offline. Right now or offline.
Okay. You said that, did you mention that for this particular quarter, the blended cost for that 1.4 MMSCMD or so that you're using, how much is that for this particular quarter?
This I can give you. Quarter ka?
16.6.
This quarter, I think we have used more than $16.
Six-
More than 6, $16. $16.6.
Yeah, because, you know, my kind of possible guess is that your blended average cost for last year would not be so much lower— so much higher as the one or two quarters of high gas for parts of the volume kind of suggest, because your. There was still allocation for domestic gas in the last part of the year. Okay? That is why, you know, versus 16, if you look at the current run rate versus the full average of last year, that would not be very different. I— that is what my guess is, of course, and later on to understand that clearly.
Ah, we'll work out and actually compare. Your guess may be correct. So this year, the cost quarter is only 16.6. A large part of this quarter, April and May, we used the carryover gas from last year. It will go significantly down from Q2 onwards, but it certainly will not be less than $12-$13, average basis.
Okay, okay. Basically, whatever is the gas cost part of that within the overall, that might fall from 16.16 to 7.3 or so, which is, you know, about a 20% fall in the gas cost, right? The other, other parts would be largely stable unless and until your 0.4 MMSCF allocation is also taken away, then gas cost will again possibly go up.
That is likely to go away.
Yeah. That is, that is actually one concern within the overall OpEx margin, overall profitability.
The average may not go up because even 0.4, the price we don't expect to go above 12. Rather, it will bring down on an average basis below 16, because the because HPS, the price is going to go down. It will go down, not go up.
Yeah, yeah. Sir, for this quarter I understand. Whatever will be the Q2 number, on that basis, it will obviously go up, right? This quarter there is that $50 gas, the legacy of last year, which you're suffering from. On an overall basis, the gas cost will definitely go.
With last year, maybe because I don't have data, but from Q1 2024 it will go down, because it cannot be 16 on an average basis.
Sure, sir. Sure, sir. That's obvious. That's obvious. Okay. Basically, this, in the current-
Vikash, hold on. You were asking about last year, so on a ballpark basis, we last year had average of $12+.
Okay. The last year, full year average is about $12-$13.
Yeah, yeah.
From that perspective, the overall segment OpEx for this particular year, because of a very bloated of 1 Q, would actually could end up being flat to slightly higher versus last year, right?
May-maybe, maybe. Last year, significant. One cargo at $40 is a significant weighted average for... This year, either 12 or less than 12, remaining quarters, so it should be, average should be around 12-13. Well, the same as last year.
Flattish versus last year, so there's not likely to be any OpEx saving versus last year in terms of the, the gas transmission segment, right?
Yeah, yeah. If, if price remains around 12-13, and last year was 12+, so certainly what you are telling is correct.
If the 0.4 MMSCFD goes away, then it could actually be higher than 13 also.
No, no, it will not be, nah? That will source at $12 or less than $12, the average will not cost. The price, gas price will be $12 only.
Sir, in that case, in that case, sir, in that case, your current average should be lower than 12, because there is 0.4, 1.4, which is a good, 60% coming at 6.5. The remaining 70%, you are saying is 12, 13, right? The blended-
We’ll give you detail, but actually that last year's carryover gas has increased, price significantly, but which.
Yeah, I'm not talking about 1 Q. I'm not talking about 1 Q. I'm saying in Q2 onwards, when you don't have that carryover problem. 1 MMSCF out of 1.4 is obviously is about $12 or lower, right? The 0.4 is at 6.5. The average cannot be higher than 12, right? It has to be lower.
This will be lower than 12 until the full gas allocation is taken out.
Okay. Okay, sir. Petchem, sir, as prices stand right now, both for polymers and for the LNG that you're using, would all of that be giving you some kind of hope of breakeven in Q2, or we are close to them, or even Q2 is difficult?
Vikash, you are talking of full year basis or Q2?
No, I'm. See, full year prices prediction will be very difficult, but obviously, I'm, if I am thinking you, we, from an Excel sheet perspective, we were to build and extrapolate the current situation, so it will be near EBITDA or EBITDA breakeven? Petchem, if, you know, if this situation continues.
In Q2, unless prices goes up, we don't expect to be breakeven. We may near to be breakeven, but unlikely to achieve breakeven. Still a difference of $2-$3, so we will be nearer to breakeven, but I cannot give you confirmation that we'll be breakeven.
Full year petchem profitability, unless prices move significantly favorably, is unlikely to be in the green?
Input price goes down.
Yeah, yeah, whichever. Whichever prices move favorably, either input or output.
Yeah, yeah, yeah, yeah. Actually, what happened in Q1, we didn't produce also, because we were having inventory. Now, now that issue is not there. We are producing. Contribution towards fixed cost now is positive because we are producing at full level, so that issue is not there. Remaining year also, we are likely to produce at full level, and the prices have softened. The Q1, we used the higher price gas, we'll use the lower price gas. At least these are the certain things, and therefore, we will be better off than Q1 and Q2, Q3 onwards, we see more margins toward fixed cost or maybe towards profit. As you also said, it is difficult because unless we know the price we know the price certainty.
Thank you so much, Rajeshji. Thanks for answering my questions.
Thank you, sir. This is the last question from the line of Mr. Maulik Patel from Equirus. Please go ahead, sir.
Sir, for the LPG segment, are you getting the full domestic gas, and what kind of a gas consumption can be there for the LPG currently?
For LPG, we are getting full domestic gas, and the allocation is around 1.75.
1.75, we are getting this full number, right?
Yeah.
Sir, in the Petchem you mentioned that currently it's at a price of around $10 per MMBtu of LNG, you will be breakeven, right? Or in the Petchem?
I have not yet told that 10-year LNG. I am telling $10-$11 maybe, delivered.
Yeah, good.
LNG have to be lower than 10.
Yeah. $10-$11 delivered gas, you know, you can be breakeven at in a Petchem side. Thanks. Thank you.
Thank you, sir. I now hand the conference over to the management for closing comments.
Thank you, dear investors. A lot of questions we received. Hopefully, we were able to answer most of the questions. I know one or two questions we could not answer, and we will, we'll be giving those answers offline. Thank you again for taking interest in GAIL. Thank you very much.
Thank you, sir. On behalf of Ambit Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.