Ladies and gentlemen, good day and welco`me to GAIL India Limited Q2 FY 2025 earnings conference call, hosted by PhillipCapital India Private Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, you may please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari from PhillipCapital India Private Limited. Thank you, and over to you, sir.
Thank you, Shilpa. Good day, ladies and gentlemen. On behalf of PhillipCapital India Private Limited, I welcome everyone to GAIL India Limited's second quarter FY 2025 earnings call. Today, we have the pleasure of having with us the senior management team of GAIL, led by Director of Finance, Shri R.K. Jain. I will now hand over the floor to the management for their opening remarks, which shall be followed by a question-and-answer session. Over to you, sir.
Thank you, Nitin. Thank you very much. My dear friends from investors and analyst community, good morning to and warm welcome to you for this earnings call for Q2 financial year 2025. At the outset, I thank you all for attending this earnings call and would briefly touch upon the major highlights. I'm happy to inform you that GAIL has registered highest-ever PBT and PAT of INR 7,095 crore and INR 5,396 crore for the first half in financial year 2025. This is mainly driven by strong marketing margins, increase in transmission volumes, and better PAT performance. On a standalone basis, in Q2 financial year 2025, GAIL has reported gross turnover of INR 32,814 crore, EBITDA of INR 3,453 crore, and PAT of INR 2,672 crore.
On a consolidated basis, in Q2 financial year 2025, GAIL clocked a turnover of INR 33,861 crore, PBT of INR 3,470 crore, and PAT of INR 2,694 crore. GAIL gross turnover is stood at INR 32,814 crore in Q2 financial year 2025, as against INR 33,627 crore in Q1 financial year 2025. The PBT during this quarter is stood at INR 3,453 crore, as against INR 3,642 crore in Q1 financial year 2025. PAT during the quarter is stood at INR 2,672 crore, as against INR 2,724 crore in Q1 financial year 2025. Consolidated turnover in Q2 financial year 2025 is stood at INR 33,861 crore versus INR 34,753 crore in Q1 financial year 2025. PBT in Q2 financial year 2025 is stood at INR 3,470 crore, as against INR 4,114 crore in Q1 financial year 2025.
PAT in Q2 financial year 2025 is stood at INR 2,694 crore, as against 3,183 crore in Q1 financial year 2025. The gas marketing volume sold during Q2 financial year 2025 was 96.60 MMSCMD, as against 99.47 MMSCMD in Q1 financial year 2025. The decrease is mainly on account of reduced gas consumption by power sector due to prolonged monsoon and reduced average temperature.
Natural gas transmission volume was almost flat at 130.63 MMSCMD in Q2, as against 131.79 MMSCMD in Q1 financial year 2025. The average capacity utilization is stood at 62%. Volume of production was 234 TMT, as against 162 TMT in Q1. Capacity utilization for the quarter was 116%. LHC production was 252 TMT, as against 216 TMT in previous quarter. The capacity utilization is stood at 71%. LPG transmission throughput is stood at 1,124 TMT, as against 1,065 TMT in previous quarter.
The capacity utilization was 98% during the quarter. GAIL CGD, GAIL, having the infrastructure of 194 CNG stations and 348,000 PNG connections in the six geographical areas authorized to GAIL, during the quarter, 3,765 new PNG connections were added. The physical volume remained at 0.38 MMSCMD during the quarter.
The share of APM and RLNG in the physical volume is around 0.23 MMSCMD and 0.15 MMSCMD, respectively. In the next two years, GAIL targets to add around 80 new CNG stations and around 120,000 new PNG connections. GAIL Gas Limited, turnover was up by 5% at INR 3,150 crore, as against INR 2,987 crore in Q1 financial year 2025. The increase is mainly on account of 8% increase in sales volume from CNG segment, 15% from industrial segment, and bulk trading segment by 5%.
PBT stood at INR 167 crore, as against INR 149 crore in Q1 financial year 2025, an increase of 12%. PAT stood at INR 124 crore, as against INR 110 crore in Q1 financial year 2025, up by 13%. During Q2 financial year 2025, GAIL Gas, along with its JVs, added 26,795 new PNG connections and 8 new CNG stations. It is having infrastructure of 1,030,000 PNG connections and 580 CNG stations. I will take you through project performance. Mumbai–Nagpur–Jharsuguda pipeline work is under progress, and the entire pipeline is anticipated to be completed progressively by June 2025. Jagdishpur-Haldia-Bokaro-Dhamra pipeline . This pipeline is having a length of 3,289 km. 2,896 km has been commissioned, and the remaining part is expected to be completed progressively by March 2025. Kochi-Koottanad-Bangalore-Mangalore pipeline . This pipeline is a 901 km pipeline.
579 km has been commissioned, and the remaining part is expected to be completed progressively by March 2025. Srikakulam-Angul pipeline work is under progress, and this pipeline is 421 km. Work is under progress and likely to be completed by June 2025 Gurdaspur-Jammu pipeline . This pipeline is 160 km. Work is under progress and is expected to be completed by July 2026. Dhamra-Haldia Pipeline.
This pipeline is 253 km. 154 km has been completed, and the remaining part, this is basically West Bengal section, is expected to be completed progressively by March 2025. Petrochemical Projects. PDH-PP at Usar. The capacity of this plant is 500 KTPA. Project cost is INR 11,256 crore. Completion date is mechanical completion by April 2025, and the project is expected to be commissioned by October 2025. Currently, the progress of the project is 75%. PP at Pata having a capacity of 60 KTPA.
Project cost is INR 1,299 crore, having target mechanical completion date of December 2024, and the current progress of the project is 91%. GMPL, that is GAIL Mangalore Petrochemicals, is having a licensed capacity of 1250 KTPA, and the approximate project cost is INR 4,200 crore, having a scheduled completion date of June 2025. CAPEX during Q2 2025. During Q2 2025, CAPEX incurred is 1885 crore, and this is mainly on pipeline, CGD projects, net-zero renewables, operational CAPEX, and others. Now, I will take you through the segment-wise outlook for short-term medium term. GAIL's marketing business continues to demonstrate enduring performance and has informed in our earlier earnings calls and investors' meetings. GAIL will be able to earn at least INR 4,500 crore of marketing margin from this segment in financial year 2024-2025.
Since we have already earned a gas marketing margin of INR 3,287 crore in the first half of financial year 2025, which is approximately 73% of the three-year annual gas marketing margin guidance, the same will be again reviewed for further guidance and revised during the results of Q3 financial year 2025. Gas transmission volume for 2024-2025 is expected to be 130 MMSCMD. Average gas transmission volume for H1 stood at 131.21 MMSCMD, which is in line with the guidance given to you. Further, during the next two to three years, transmission volume is expected to increase by around approximately 10- 12 MMSCMD on a year-on-year basis. Volume of production stood at 396 TMT in the first half of financial year 2025.
The segment has returned to profitability in the first half of 2025, with a PBT of INR 116 crore against a loss of INR 461 crore in financial year 2024. First half, I'm talking. We expect to make reasonable profits before tax from this segment in financial year 2024-2025. We further plan to optimize our sourcing to increase the bottom line of the petrochemical business. LHC production stood at 468 TMT in the first half of 2025.
During the year, production is estimated to be at the same level as it was in financial year 2024. Also, to protect the margin and hedge segment, GAIL is from time to time taking hedging for its prices, the LPG prices, that is propane and butane. I think this is all from my side regarding the overview of performance and projects. The management of the company is available and would be able to clarify on any questions that you may have. I now hand over to you, Nitin. Thank you.
Thank you so much, sir. We will begin the question and answer session. Anyone who wished to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only headsets while asking a question. Ladies and gentlemen, to ensure that the management is able to address questions from all participants, please limit your questions to two questions per participant. For follow-up questions, you can rejoin the queue. We will wait for a moment while the question queue assembles. The first question is from the line of Probal Sen from ICICI Securities. Please go ahead.
Thank you for the opportunity, sir. The first question is a little bit of a clarification. You mentioned in your opening briefing that trading volume's decline is due to the reduced gas consumption by power sector. However, if we look at the transmission volumes, they have remained broadly flat. I just wanted to understand, sir, on a very basic level, how should we basically then look at the mix between transmission and trading volumes, which seems to be sort of reducing if I look at the last two-quarter trends. So in terms of building in numbers, even if transmission is at 130, trading volumes can actually fluctuate between 96- 98, depending on which segments we are supplying to, sir?
Thank you, Probal. Actually, our marketing volume, as I said, has gone down by three million, whereas the transmission volume remains almost flat, so it is down by almost one million if you compare quarter to quarter, and there are two factors why the transmission volume almost remained flat, maybe one million down, and marketing volume has gone down.
The fact is that in Q1, power sector consumed a significant amount of gas because of the weather conditions, and Q2, because of monsoon, it has gone down. That is the major reason, and while transmission volume remains almost the same, and marketing volume came down because of this reason, I think that in Q2, we did not supply the power, whereas our plants, Pata was on the same, which was not there in Q1.
Basically, sir, the transmission volume remaining flat meant that two MMSCMD or three MMSCMD went to either internal consumption or sectors where we don't actually get any marketing margin?
The marketers have because we were short of volume, and we could not get the APM bid, which comes regularly because we were not having volume. So, though we participated during those bidding processes, but based on our prices, which we were to source, we could not get those volumes. So that is the reason that marketing volume was not available to us and has gone to others. That is another reason.
Got it. Okay. Thanks, sir. The second question I had was with respect to the petrochemicals. Obviously, we have seen a good recovery in terms of volumes. Just wanted to understand that what kind of run rate should we be looking at for the second half? Are we confident we can maintain basically this 220-230 TMT on a quarterly basis, sir, for the next couple of quarters?
Yeah. We have in our guidance also said that, and now I continue to maintain that this year we will be producing at the same capacity of PATA, which is 810. We will be reaching around that level so that run rate will continue to be maintained.
Right. Last question, sir, if I may. The overall CapEx guidance, sir, you mentioned INR 1,885 crore done in Q2. Can we get a sense of overall CapEx done in H1 and H2 guidance?
CapEx you are talking?
Yes, sir.
CapEx, we have planned to incur around INR 8,000-9,000 crore of capital expenditure during this year. So we will be maintaining the current rate of CapEx, maybe a bit higher than current rate because in the second half, always the CapEx will be more than first half, if it is paid. So we will end up around INR 8,000-9,000 crore when we end this financial year.
Got it, sir. I'll come back if I have more questions. Thank you so much for your time.
Thank you so much. We have next question from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi, thank you for the opportunity. So first question is on gas marketing segment. So I know that you guided for a full year of about INR 4,500 crores, but.
bit louder. It's a bit louder. I'm facing a problem of getting your question.
Oh, yeah. Sure, sure. Yeah. So, I was thinking on the first question is the gas trading segment. So, I wanted to understand what's the reason for the drop in the contribution, EBITDA and EBIT contribution from the segment in Q2 versus Q1?
Actually, Q2 is a normative return. Q1 was a bit higher. I will put it differently. We have given guidance of INR 4,500 crore on a yearly basis. If you see Q2, it was around INR 1,200 crore. So Q1 was higher than normative guidance, and why it was higher? Because we marketed, there are two, three reasons if you want to know specifically. One, we marketed almost 3 million volume more.
That is one. Second, the arbitrage available between the upstream contract, that is the Henry Hub, and downstream contract, that is the crude link contract. If you see crude prices during quarter one was higher as compared to quarter two. Henry Hub prices were lower as compared to quarter two. So therefore, those arbitrage which were available in Q1 has reduced to some extent. These are the two primary reasons for our marketing margin reduction as compared to Q1. But we continue to maintain our guidance of 4,500 crore.
Sure, sure. And so is that the only reason, the lower spread between the crude link LNG and Henry Hub LNG?
And some other.
Some other factor in Q1 as well. So is there any other factor beyond this? Because the fall is about almost 30%-35% on a Q2 basis. So is that the only reason that the spread reduced in Henry Hub and?
There are two more reasons if you want to work hard. As I said during questions by another participant, that in Q1, we were having volumes for marketing. In Q2, we sourced the volume to fulfill our commitment. There was some shortage of volume, and those volumes did not give those margins which were available in Q1. We sourced these four cargoes and fourth reason is a reason that one of the upstream contract has got nine months average, and downstream contract has got three months average, so three months average gives us less return as sourcing will be paid higher, but over a period of time, it gets better.
Sure. Got it. On CapEx, I thought in the last call, I think the guidance was for about INR 11,500 crores for FY25. So are you guiding it lower now?
No, it is not lower. I was a bit conservative when I was explaining INR 9,000 crore. It may even touch 10,000+, INR 10,000 crore. So we will be touching that.
Okay. And also, any update on the transmission tariff revision that you said that PNGRB would soon decide upon?
So we have submitted our tariff petitions to the regulator, and it's almost more than one and a half months when we submit it. We expect the regulator to process our tariff petition because there is a process of analysis by them, then making a public consultation document, having public comment, and then analyzing and then making the tariff order. We hope that this tariff will be available as an approved tariff by March 31st and expected to be applied from 1st April. That's our current estimate.
Got it. Thanks a lot.
Thank you so much, sir. We have next question from the line of Sachin Mehta from Diamond Asia . Please go ahead.
Sir, I basically wanted to get your guidance on the petchem project that we are expanding on the CapEx side and the rationale behind doing this to justify the kind of ROC because I think even if you look at the mean margin that you would be making, there would be a significant dilution on the ROC. So if you can guide something on this.
Which petrochemical project you are talking about?
The petchem expansion.
Sorry?
The petchem expansion project.
So if you are talking about the PDH-PP plant at Usar, so this project we conceived way back in 2019, and I explained that this is likely to be commissioned mechanically by April and also the commercial production by October. Actually, we do not have. There are various reasons. We do not have PP in our slate. We currently produce PE. We want to also have PP. Second, this is not natural gas-based production. This will be based on propane. So I have been continuously giving this information that there is an excellent correlation, good correlation between propane as a feedstock and polypropylene as an output. When we analyze this and it continues to remain same even today, we are getting more than our hurdle rate, and that's the reason.
Third reason is that you know that our country is growing maybe at the rate of around 7%, and the polymer demand is also going in similar range. Therefore, the demand side, there is no problem. The correct margin side also, there is no issue because it is propane versus polypropylene. And third, it will help us in marketing because we do not have polypropylene in our market.
But we are also looking to expand our PATA capacity as well, right?
No, we are not expanding Pata capacity. What we are doing, two things we are doing. A small capacity addition in terms of polypropylene that is 60,000 KTPA we are putting, and the reason for the same is that we have polypropylene available from Pata. Currently, we are marketing that. In order to utilize and make better use of polypropylene, we envisage the PP plant at Pata, which is a very small capacity plant, 60,000 KTPA at a CAPEX of INR 1,299 crore.
That's the reason we are putting. Second, expansion is not an expansion. What we have said, we are laying a line, the pipeline from Vijaipur to Pata plant for carrying C2, C3. What is currently happening, we are expecting C2, C3 at Vijaipur mixing in natural gas. Again, we are expecting at Pata. This actually results in 10% loss. In order to capture that loss, we are putting that line, and that is the other efficiency and improvement. And those CapEx would give us better return than the current capital expenditure. These two things we are doing at PATA. There is no third thing.
Okay. Sure, sure.
Thank you so much, sir. We have next question from the line of Puneet from HSBC. Please go ahead.
Yeah. Thank you so much and congratulations. My first question is, are there any new pipeline projects that you envisage? Because I think other than Gurdaspur, Jammu, you'll be pretty much done with the projects by June to October 2025. Anything new in the pipeline yet?
Yes. We are working on that. Rather, we have been expecting that regulator either will authorize directly or through bidding process. We do not know. But the pipelines which were authorized to other entities and having canceled by the regulator, we expect that those pipelines either will be authorized directly or maybe through bidding group. Those pipelines may come up in future very soon, we expect. And those are the pipelines we expect to be in our fold.
Understood. And is it possible to get a break-up of the other income for this quarter?
Other income?
Yeah.
Can I? Hold on. Other income? Other income includes interest. I'm sorry. Other income includes the interest crore rupees. The sale of steam which we are producing at Gandhar around INR 52 crore. BCPL, the product which we are marketing, those commission, sale of steam. That's how the other income includes.
And dividend?
Dividend income of INR 364 crore.
Yeah. Okay.
Right? And the interest on customers or delayed payment, delayed payment, interest on loan which we have given to our joint venture subsidiaries, which is INR 163 crore. Customer delayed payment is INR 51 crore. These are broad, broad things I have explained to you.
That's very helpful. Thank you so much. And lastly, if you can just update on what is still stopping you from updating your marketing business guidance. You're already 73% plus there. Nearly there's INR 3,700 crore plus. So why not increase it this quarter?
Yeah. As I said, that we are also meeting the guidance of INR 4,500 crore. As you already know, that almost 73% we achieved, and we have only completed two quarters. So right now, I will say that we are only close to meeting our guidance. In respect of revision in guidance, as we did in last year, we come to you in third quarter.
Third quarter. Okay. Fine. That's all from me. Thank you so much and all the best.
Thank you.
Thank you so much. We have next question from the line of Maulik Patel from Equirus. Please go ahead.
Yes. Thanks for the opportunity. Just a couple of things. One, on this recent government notification where they reduced allocation, APM allocations to the CGD sector. Your thoughts on that? What kind of outlook one could have for the GAIL Gas, which is your subsidiary? And second is that, where do you see the gas consumption in the country in the next one year or so?
So because there is some issue of clarity of voice, if I understood you, the impact of the reduction in gas allocation, the impact on the subsidiary and also on GAIL. So GAIL Gas, we expect the impact of INR 16 crore per month, right? And for GAIL, around INR 6 crore. But GAIL as a company has an opportunity. There are two things which we are sorry. I have been corrected.
INR 16 crore per quarter for GAIL Gas and INR 6 crore per quarter for GAIL. GAIL as a company has an opportunity now to source and market more and more volume in terms of LNG to meet those demands which have come up because of GAIL allocation. So we are very, very positive in terms of GAIL as a company.
Do you think that in the future, there will be less and less gas which will divert from the CNG sector within the CGD and will go to the other sectors? From a policy perspective, because what we understand that there was already a three SCM reduction in the last one year or so to the CNG sector, and with the additional four SCM, they will come. What's your thought that will the government make CNG a much more market-driven business compared to that that they get a significant cheaper gas through the APM allocation?
So this is very difficult for me to answer what will happen in the future, but history suggests that in view of increased consumption by city gas distribution, expansion of geographic areas, certainly history suggests that this allocation may come down.
You have raised the prices in your GAIL Gas, the CNG prices, or the price revision is yet to be taken?
So this call will be taken by GAIL Gas. They are analyzing it. Certainly, there is impact, but during the course, they will certainly review their prices and considering the customer's demand, how it will be going to impact, they will take action. But as of late, the price revision has to take place.
Just the last question. What's the outlook on the spot LNG given that the spot LNG has been very steady at $13 per MMBTU for the last couple of months, and the inventory levels in Europe are at a relatively higher level, but the price is not coming down? What's your thought overall on the spot LNG price, which you expect in 2025?
Actually, this is an abnormal situation. Normally, you find that the spot prices, except the Ukraine war situation or geopolitical situation, remains lower. Currently, the spot prices are a bit higher than normally used to be. We expect the spot prices to come down, but all this is in future.
Okay. Thanks.
Thank you so much. We will proceed with the next question, which is from the line of Sabri Hazarika from Emkay Global. Please go ahead.
Yeah. Good morning, sir. A few questions. Firstly, on the OpEx side, I mean, it shows that there's been some increase in transmission OpEx. So was there any particular factor during that quarter?
The OpEx in transmission has increased because of increase in fuel consumption during this quarter.
This was because of?
Fuel increase in fuel consumption in compression.
Okay. And this is going to remain like this or there can be decline?
Actually, more or less, when volume increases, certainly the levels of what we have seen recently will likely to be maintained. There may be a bit plus minus. But that's not an area of concern because in terms of regulatory provisions, we are going to get back.
Okay. Fine. Second is, you mentioned that there were some shortfall in gas sourcing due to which you have to rely on spot gas and that marketing volume also down. So any particular long-term LNG contract where this shortfall happened or the mix of everything?
Actually, shuttling of cargo sometimes happens in such a way that you feel that you don't get cargo in particular part of one or two cargo stores. But this is largely not from long-term contract. As I explained, basically, we regularly source from spot market. Almost you see our 10% or 15% volume of LNG is from spot market. We continue to source and we participate in various bidding which come particularly for fertilizer sector that is a larger one.
As I said earlier also, because the spot prices were higher, we did not source or when we sourced, we wanted to source, it was not actually meeting our marketing margin or kind of arbitrage was not available. So this particular situation has happened in Q2, and we continue to, of course, take the sourcing from spot market. So this Q2, there are two reasons. One, the allocation of cargo based on shuttling, and second, we did not source spot because the prices were higher.
I like that, Got it. And two more questions. Firstly, one second.
Sorry for interrupting, sir. I would request you to rejoin the queue for more questions.
Okay. Thank you.
Thank you so much. Participants, in order to ensure that the management is able to address all the questions, I would request you to please limit your question to one question per participant. We will proceed with the next question, which is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Thank you for doing the call. Just a question in terms of your CapEx spending around the PetChem expansion on the PET side. Can you just give us an update of how much has that been completed, what's left in spending on that?
Okay. Sanjay. So as I said in opening remarks, actually, our major petrochemical project is PDH-PP Usar, and we have project cost of INR 11,256 crore. The project current progress is 75%. So you can assume that around 25%, that is around INR 3,000 crore is spending to be incurred on CapEx for petrochemicals.
Okay.
Thank you so much, sir. The next question is from the line of Saurabh Handa from Citig roup. Please go ahead, sir.
Yeah. Thank you for the opportunity. I had two questions. Firstly, on the tariff filing, is this a part of your regular tariff filing, and when can we expect the public consultation process to begin?
It's a part of regular tariff filing. Actually, it's very difficult for me to comment on the regulators working when they will come up. But based on our past experiences, we can expect that maybe by December, they can come up for public consultation.
Okay, sir, and just my second question on your city gas investments, whether they are at the standalone entity or in GAIL Gas, is there any thought process to look at restructuring these, streamlining these investments?
So we, as a company, about GAIL Gas, have not yet taken any call for restructuring of GAIL Gas. This is in our mind, but nothing concrete I can share with you right now.
Okay. And nothing at the parent level or the various JVs as well?
So, also, we are looking for listing one or two JVs which we are in the process. And once we move forward and we take a call, we'll come back to you. But that we are certainly working, and we are in a good phase.
Okay. So when can we expect an update on this, please?
Two, three.
Okay. Thank you so much.
Thank you so much, sir. We have next question from the line of Vikas Jain from CLSA. Please go ahead.
Thanks for taking my questions. Just firstly, on depreciation, what has made it come down so much? QoQ suddenly from 10.
Vikas sir, depreciation, actually, there are in Q1, we had one-time depreciation. As you know, that part of petrochemical was under shutdown for annual plant maintenance. So whatever expenditure we do on plant maintenance, and we actually have to book in terms of the accounting standard along with the plant life. The plant life for PATA has already been completed or almost completed. So we have to book one go those expenditure.
Second, for our similar expenditure has happened for pipeline maintenance. That is around INR 99 crore, INR 100 crore. And thirdly, one of the ship completed its leasing period, and that also goes to depreciation. So these all three factors have led to reduction in depreciation. So if you are interested in figures, the part of INR 41 crore, overall at Hazira INR 99 crore, and ship of INR 569 crore. These three elements total up to INR 234 crore, which were one-time in Q1.
Ongoing, this should be the rate other than the capitalizations which are pending.
Yes.
I mean, if you or I'm sure Sanjay would have this ready, for FY 2025, what is the kind of depreciation number that we are looking at given the pending capitalizations that we are talking about?
Around INR 3,600 crore.
Around INR 3,600 crores.
Yes.
Okay. Which is going to be lower than FY 2025, you mean?
No, no, no. No, no.
Sorry. Yeah. Okay. Sorry, sir. No, no. Sorry. It was even lower. Yeah. That was yeah, correct. And at the same point of time, if I were to also look at the, you said INR 6 crore was the impact due to this gas allocation change for GAIL. That is coming from where, if I may understand that?
I said six crore per quarter for GAIL.
INR 6 crore.
What is your percentage in this regard?
That is coming from where, sir?
6 CGDs.
Okay. The ones which are sitting in GAIL.
Yeah. Yeah.
Okay. And just similarly, like depreciation, the capitalization of interest, what is it? What level is it currently, and what will that be expensing increase that we see as some of these pipelines get capitalized? Increase in interest expensing.
Vikas, sir, we immediately do not have that figure, and certainly we communicate you offline.
Okay. Thank you so much, sir.
Thank you so much. We have next question from the line of Yogesh Patil from Dolat Capital. Please go ahead.
Thanks for taking my questions, and congratulations for the good setup number, sir. I have two questions. Sir, my question is related to recent LNG purchase contracts of close to MMTPA. Majority of them will start in January 2026. We wanted to understand the pricing part of the LNG. Is it a Brent link or any other index link? And if it is Brent link, is it cheaper than the Qatar LNG? And considering these new LNG suppliers, do you want to give us the EBITDA guidance for the FY 2026- 2027 period? That would be helpful.
First, there is a correction. We have sourced 1.53 MMTPA from two sources, which we also informed in public domain. One from Vitol and second from ADNOC. Right? And second, these are crude-linked contracts. Third, certainly you can take it that this contract is cheaper than the current contracts. Right? And regarding the EBITDA guidance for 2026-2027, we'll come back. We have not worked out.
Okay. And sir, the last related to petrochemical. Sir, majority of these petrochemical expansions will be mechanically complete in the next one year. But on the practical terms, commissioning, stabilization, and the actual profit from these incremental petrochemical capacity, when one can expect the profitability out of these new incremental capacities? And any in-house estimates if you have, you can share about the profitability of these new petrochemical plants?
So PDH-PP is the only big project. Let us not talk of PPP, which is very small. PDH-PP is expected to be commissioned in 2025. That is FY 2026. The profitability from this project will start from 26-27. We do not expect any profit in the year one. Right? And the level of profitability, we will come back.
Okay. On the JBF side, sir, which we acquired and now renovating the projects on that side?
JBF, as I said, that it is likely to be commissioned in June 2025. So again, first year, we should not expect much things to happen. Next year onwards, we'll be having profit. And again, we'll come back because let us discuss about as we reach closer to the commissioning. Because certainly, the market situations at that point of time, it is better to give any guidance when we are having some kind of maturity about that.
So the major profitability can be expected post second half of FY 2027 only. Is that a correct understanding?
Yes. Because there will be a lot of things happen in 2026-2027. Not only we will be commissioning our one of the biggest plant of 500 KTPA, that is one. The GMPL second. And third, already we have sourced 1.53 MMTPA. The marketing will increase. Fourth, we are already given guidance that our transmission volume will increase from 10 million almost. Fourth, this will happen. And fifth, we are in the midst of looking for additional sourcing, which we have already said in various communications that we have targeted to source 7 MMTPA of LNG at least by 2030. And already we have sourced 1.53 MMTPA. And in phases, we'll continue to add up to our existing volume. All these will certainly help us or add to our bottom line.
Thanks. Thanks a lot, sir.
Thank you so much. We have next question from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Hello. Thank you for this opportunity, sir. One clarification on the petrochemical business. What was our gas sourcing cost for the petrochemical during Q1 and Q2?
Okay. Just hold. We'll tell you. And then we'll call up for MMTPA. So in Q1 and Q2, Q1 around 8.5, approximate 8.5, and Q2 around 9.
Right, sir. And one more question was on the marketing division. Over past six months, if we look at the global market, we have seen spot LNG prices tightening, whereas we have seen the oil price expectation coming down for FY 2026. So what sort of impact would it have on our marketing business for FY 2026? The change in this external environment?
Actually, our marketing margin, as we are moving forward, are getting stabilized because whatever long-term sourcing we had done, we have marketed now on same index, back to back, mostly so the marketing margin is going to get stabilized so therefore any change in spot price does not impact or not likely to impact our marketing margins. The marketing margin will actually go up for two reasons. One, our actual portfolio will increase.
The demand in countries is increasing. Second, the spot prices at current level are not likely to remain. You can see for yourself that historically, the spot prices do not remain for a longer period at this level and we almost market 10% of our portfolio on spot so that we'll provide arbitrage or we'll be able to take care of the opportunities available in the spot market. So now to sum up, our marketing margin has stabilized. We'll move forward with more and more sourcing. The spot prices, which are currently not helping, will help when the spot prices normalize.
Thank you, sir. Just one more follow-up on the same. So out of the INR 4,500 crore guidance for this year, how much % of the profit is attributable to the back-to-back contract?
So, this detail we can share with you, but it's not right now available, but you can assume that now we almost have contracted back-to-back. Maybe I'm giving only a ballpark number. Maybe 80%-85% almost we have done back-to-back. 75%-80%.
That is on the volume front. But out of the profit guidance of INR 4,500 crore, how much upside is attributable to the non-back-to-back contracts? Where we had the sort of lower HH versus the arbitrage profits that have come from the tighter crude oil prices or other way around the way we explained earlier in Q1.
Remaining total 20%. I said 75%-80% back-to-back. The remaining is actually giving us those arbitrage based on market situation.
Fine, sir. Thanks for this color.
Thank you so much. We have next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good morning and thank you very much. And wish you the best of festive greetings. So dwelling again on gas marketing segment, so is it fair to understand that now that you have placed all the gas you have sourced, how is the gas sourcing and the selling balance for this quarter? Are you back to normal balance between what you're sourcing and able to place?
And in terms of the volume, what is the kind of number we should assume for the second half compared to what you have done in the first half in terms of MMSCMD? And when do you think we'll see some growth? Because last year, you had mentioned that you expected about five MMSCMD of growth in gas marketing. So what is the kind of growth we could assume, say, in FY 2026 and 2027 in gas marketing?
Actually, marketing margin guidance we have given on annualized basis. And we have reached 73% of that. For two quarters, we expect to continue to earn a reasonably good margin. But if you want to have guidance, we will give one in Q3, not right now, which I have been maintaining. But we expect that our guidance of INR 4,500 crore is likely to exceed. We do not want to give any number right now.
Sir, I'm not asking about the margin specifically. Since you mentioned that the reason for the lower margin in second quarter was because there was an imbalance between what you could source and place, I'm trying to understand whether you are back to normal sourcing and placement on a back-to-back basis this quarter, and secondly, what is the kind of growth one can expect in marketing volumes in the second half and say over FY 2026-2027?
Actually, this guidance also we have given, we expect that this year we should get five million volume growth this year, and we continue to have similar growth in coming one to two years.
Okay. Second thing is, if you look at your.
We'll ask you to rejoin the queue as we have more participants online.
Vijay, one last one on the debt. If you look at the current debt, where do you see the debt getting finalized once all the projects are capitalized? And what is the average interest rate on the debt?
Debts are likely to remain around same range, maybe INR 1,000 crore- INR 2,000 crore more from current level. The interest rate, if you want to know, around 7.5%-7.6%.
Thank you very much, and wish you all the best.
Thank you.
Thank you. Next question we have is from the line of Tarang Agrawal from Old Bridge. Please go ahead.
Hi, commenting, sir. Just referring to one of the previous participant questions on your.
Vijay, we are not able to hear you.
Can you hear me now?
No.
Your voice is a little muffled, sir.
Okay. Am I audible now?
A bit better.
Okay. Sir, just referring to the previous participant's question on your gas sourcing from ADNOC and Vitol, you said that your new contracts are crude linked and they are cheaper. Sir, would the cost be cheaper in terms of the slope, or would there be any other factors which would be determining the better procurement of the gas? And number two, how cheaper would these contracts be in context of your current contracts?
Actually, I will not be able to answer you this specifically. I can only say these contracts are cheaper. And I can give you a rough number, maybe $0.50-$1 or maybe more if we see both the contracts. But specifics may not be desirable, or I should not.
Okay, sir. Just maybe not specific, but just wanted to know if the cost differential predominantly emanates from the slope, right? The agreed-upon slope. Or there could be other factors also which could drive the differential cost?
When you source crude linked contracts, certainly slopes come into the picture.
Okay. And the number, when you speak about 0.5 or 1 or whatever that number is.
For your satisfaction, because you're asking, it may be around $1 or $0.50. Let us not discuss because it goes up to formula which we will not be able to share.
Sure. Okay. Thank you, sir.
Thank you so much. The next question is from the line of Kishan Mundhra from DAM Capital. Please go ahead.
Hi, sir. Two questions from my end. So firstly, you were exploring setting up a 1.5 million-ton cracker in Madhya Pradesh. So is there any development on that front? Have you finalized anything?
Sorry, you come back again, please.
Sir, there were news articles.
What's your point? So as I've been answering this question, in last earnings call, I also said that we as a commercial organization evaluate all the possibility of investment which commercially suits to us. Currently, we are evaluating a lot of opportunities, including the Ethane cracker. Regarding decision, we have not yet taken any decision.
Okay, understood. Sir, second question is on the Dabhol breakwater. What is the progress on that front? When do we expect it to be completed, and once completed, sir, what is the expected utilization that we can expect?
So Dabhol terminal will be full weather terminal next monsoon. The job is going on. There were some issues in between. Now job has started, and we expect to be completed by February, right? And as far as utilization is concerned, we will be able to utilize fully because currently we are sourcing cargo that bringing to other terminals. So when we have our terminal, we'll certainly be able to utilize to its capacity.
Okay. Understood. Thank you, sir.
Thank you so much. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to management for closing comments.
Thank you very much. We thank participants from our investors and analyst community for their wholehearted support to GAIL and participating in such a manner asking a lot of questions. I know there was a time constraint. Some of the participants could not have asked or did not get the opportunity to ask questions. We as GAIL are always available to answer all your pending questions or some of the queries we could not answer offline. Thank you very much.
On behalf of PhillipCapital India Private Limited, that concludes this conference. Participants may disconnect your lines. Thank you for joining us.