Q1 24/25

Aug 8, 2024

Summary

Q1 revenue reached INR 4,615 crore and PAT INR 330 crore, with EBITDA up 39% YoY; total volumes rose 19% YoY. Record CNG demand supported growth, while Morbi faces a temporary 30%-40% volume dip risk; overall volume growth guidance remains 5%-7%.

Ladies and gentlemen, good day, and welcome to the Gujarat Gas Limited Q1 FY 2025 earnings conference call. As a reminder, all the participants' line 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 assistance during the conference call, 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 the coordinator, Ms. Setu Mathur, from Anurag Services LLP. Thank you, and over to you, ma'am. Good afternoon, and welcome to the Q1 FY 2025 earnings conference call of Gujarat Gas Limited. From Gujarat Gas Management, we have Mr. Rajesh Sivadasan, Chief Financial Officer; Mr. Sandeep Dave, Company Secretary; and Mr. Dipen Chauhan, Head Commercial and Marketing Business Development. We will begin the call with opening remarks from the management, post which we will have a question and answer session. Thank you, and over to you, Mr. Sandeep Dave. Good afternoon, everyone. A very warm welcome to Q1 FY 2024/2025 earnings call of Gujarat Gas Limited. I am Sandeep Dave, Company Secretary and Head of Corporate Communication on GGL. To give you a brief background about Gujarat Gas, GGL is the largest city gas distribution company in India. The company is operating in 27 geographical areas, spread across six states and one union territory. We have a good mix of mature and emerging city areas. We have developed a pipeline network of more than 40,000 kilometers, which provide natural gas to more than 21,50,000 households, 4,400 industrial customers, and 15,200 commercial customers. We operate 811 CNG stations and serve approximately 400,000 vehicles per day. We are happy to inform that we have achieved highest ever CNG volume of 2.98 MMSCMD in Q1, which is 14% higher than the Q1 of previous year. GGL aims to deliver affordable, reliable, and cleaner energy by operating responsibly and performing effect fuel and governance factors. As part of our commitment to ESG initiatives, we have taken various measures, which includes hydrogen blending pilot project, which we have successfully completed with 5% blending. Now we have increased the blending level from 5% to 8%. We are also aggressively setting up CNG infrastructure, as well as upgrading our CNG infrastructure to promote use of clean and green fuel. We have also started injecting biogas into GGL system. We have embarked on major digitization drive across various business operations and processes. Our major contribution to the environment is that by virtue of promoting use of sale of natural gas to industry customers in Q1, we have reduced burning of approximately 17,285 metric ton of coal per day. Further, through our CNG sales outlets, we have reduced combustion of approximately 2,946 kiloliters of petrol per day during this Q1. At Gujarat Gas, we adhere to highest standards of safety and a strong culture of safety. GGL is an ISO-certified organization for integrated quality, occupational health, safety, and environment management system. We build, operate and maintain a safe and reliable gas network in our areas of operation. With this brief background about Gujarat Gas, I now request Sandip Dave to share business updates of GGL. Over to you, Dipen. Thank you, Sandip. Good afternoon, everyone. First, I'll update on domestic and commercial segment. We are seeing a positive growth in the domestic segment. GGL's customer base is more than now 21.52 lakh domestic customers. We are able to add 40,000 customers in the quarter. The commercial segment is showing a steady growth in connection numbers. We expect the numbers in the domestic and commercial segment to increase over a period of time as the new areas mature. GGL at present has a customer base of 15,200 commissioned commercial customers spread across our geography. Now let me update on the industrial segment. In the industrial segment, sales volume increased to 7.25 MMSCMD for quarter ended 30th June 2024. That was 5.88 MMSCMD for the quarter ended 30th June 2023. That is an increase of 23%. The Morbi volume increased by 37% from 3.82 MMSCMD in Q4 FY 2024 to 5.21 MMSCMD in Q1 FY 2025. In non-Morbi market, volume increased by 2.5% from 1.98 MMSCMD in Q4 FY 2024 to 2.03 MMSCMD in Q1 FY 2025. The Morbi volume increased by 30%, from 4.01 MMSCMD in Q1 FY 2024 to 5.21 MMSCMD in Q1 FY 2025. The non-Morbi volume increased by 8.5%, from 1.87 MMSCMD in Q1 FY 2024 to 2.03 MMSCMD in Q1 FY 2025. We have been tracking business environment across all our operating areas, wherein we understand that the export market for ceramic industries is expected to remain subdued on account of multiple factors, including increase in the price force. Further, the monthly volumes shall be affected due to present August month, that is the festival of Janmashtami, and ongoing strong monsoons across our operating areas. However, GGL is hopeful that market will improve by the end of Q2 FY 2025. Finally, let me update on the CNG segment. I would like to highlight that we have achieved highest ever CNG sales volume of 2.98 MMSCMD in Q1 FY 2025. In Q1 FY 2025, CNG sales in Gujarat increased by 12% year-over-year and by 2% quarter-over-quarter, while outside Gujarat, sales surged by 27% and 9% respectively. Overall, CNG sales across regions grew by 14% annually and 3% quarterly. CNG maintains significant price advantage, being approximately 47% cheaper than petrol and 15% cheaper than diesel. During this quarter, we have added three new CNG stations, enhancing accessibility to the customer. This performance underscores a positive investment outlook driven by increasing consumer adoption and strategic infrastructure development, positioning CNG favorably in the energy market. This is all business updates from my side. Now I'll request Rajesh Sivadasan to read further. Thanks, Dipen. Good afternoon, ladies and gentlemen. I welcome you all to the earnings call of Gujarat Gas Limited for the first quarter for the financial year 2024/2025. I would like to thank you all for attending this call today. I trust you would have gone through our financial results of the Q1 for the financial year 2024/2025, which are reported on 6th of August. The investor presentation, which has been uploaded, expanding the geographical coverage and expansion of the gas network has led to a drive in the CNG volumes. We have been able to grow the volumes at 19% from 9.2 MMSCMD in the corresponding quarter of Q1 in 2023/2024 to around 10.98 MMSCMD for the quarter one of the financial year 2024/2025. The current quarter has seen an overall volume increase of 13% as compared to the quarter four of the financial year 2023/2024. During the quarter, the company has connected close to 37,400 domestic customers, making a total PNG connection of more than 21.52 lakhs. The company has commissioned new industrial customers having 2 lakh SCMT of SCMT volumes in the Q1 of the financial year 2024/2025. During the quarter, the company has invested close to INR 106 crores in the gas infrastructure. The company is presently having 40,200 kilometers of PE and steel pipeline network, along with 811 CNG stations, which is the backbone of our business. In terms of revenue, the company has registered a revenue from operations of INR 4,615 crores during the first quarter of financial year 2024/2025, against INR 3,924 crores for the corresponding quarter of 2023/2024. The company has reported a profit after tax of INR 330 crores during the quarter one of financial year 2024/2025 as compared to INR 215 crores in the corresponding quarter of the previous year. That is an increase of close to 53%. The company's EBITDA for the quarter one for the financial year 2024/2025 stands at INR 574 crores as compared to INR 412 crores in the corresponding quarter of the previous year, an increase of close to 39%. In terms of rupee per SCM, EBITDA margin, it stands at close to INR 5.75 per SCM against INR 4.91 in the previous quarter of the previous corresponding year. We are closely monitoring the propane futures going forward in the medium term and the long term. Accordingly, we will stick to our strategy to calibrate and strike a balance between volumes and margins for the quarters to come. The various government initiatives by the way of reducing VAT is helping CGD companies to grow volumes and compete with alternative fuels. During the quarter, the CNG volumes have grown to 2.98 MMSCMD as compared to 2.61 MMSCM in the corresponding quarter of 2023/2024. That is an increase of close to 14%. GGL is currently operating around 811 CNG stations. During this quarter, GGL has added close to three new CNG stations. Gujarat Gas continues to have a great rating of AAA stable for the long term and A1 plus for the short term from CARE, CRISIL and India Ratings, which shows the holistic consensus and the trust on the operation capability of GGL. We have already uploaded our investor presentation in the GGL website. We hope you have gone through the same. With this, we open the floor for the question and answer session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to withdraw 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. First question is from the line of Probal Sen from ICICI Securities. Please go ahead. Thank you for the opportunity. Good afternoon, sir. Congratulations on a strong set of numbers. I have three questions. Firstly, with regards to Morbi, I think it was mentioned that due to the festival, the weather, as well as some slightly slower exports, at least in the second quarter, numbers could be a bit more muted. Is it fair to therefore assume that overall volumes, or at least on a quarter-over-quarter basis, could probably see a slight decline? Of course, you can't share the numbers or anything, but is it possible to share the current run rate of volumes of Morbi at this point of time? Yeah. Hello. Hello. Yes, sir. Can you hear me? Yes, sir, I can hear you. Yes. As I mentioned earlier, there are basically five major reasons as of now going in the Morbi market. Number one is, of course, the geopolitical situation. Number two is the propane price. Number three, festival season, which is very important in the Morbi market, that is of Dussehra coming. Right. Monsoon is somehow very strong this year. Number 5 is the shipping. I think our customers are facing some issues concerning the shipping, because of course, the disturbance in Middle East and that part of the world. Right. But we are expecting there will be a dip of 30%-40%. That will be temporarily for this quarter. Okay. 30%-40% in the Morbi volume. Correct? Hello? Yes, please. Yeah. Sir, the second question was a broader one in terms of CNG. The momentum, is it fair to assume that this quarter's CNG station addition is slightly lower than what we have been maintaining for the last six, seven quarters? Because the rate of addition of CNG stations has been very aggressive from what we have seen in the last 2 years. This quarter's number of just 3 stations, any reason it has dropped off, and what are the plans for the rest of the year, sir? We are aggressive, in fact, but we are developing on so many fronts. For example, we have planned 22 new CNG stations this financial year, and we have planned 62 upgradations in this financial year. Apart from that, we have just introduced a new scheme called FDODO, that is fully dealer-owned, dealer-operated scheme, where everything, CapEx and everything will be done by the dealer, and Gujarat Gas will provide all kind of support and gas to them. Okay. We have received more than 600 applications for them under this scheme, and we are about to issue letter of intent sometime next week. Once everything will be on the line, you can see, I would like to say that exponential growth in here. Perfect, sir. Last question, if I may. Margin guidance, is there any thought of changing it upwards? Because if I remember correctly, you had mentioned a range, I think, of INR 4.5 to INR 5.5 earlier. We have done INR 5.7, as was indicated this quarter. So any thoughts in terms of what a realistic guidance could be for 2025 and 2026, and what is the CapEx guidance for this year and the next? That's all from me. Yeah. We will go by the earlier guidance of 4.5 to 5.5. And with respect to the CapEx, we will be achieving close to INR 1,000 crores of CapEx. For both years, sir? Pardon. For the entire- For both FY 2025 as well as FY 2026, or this is only for FY 2025, sir? This is only for 2024, 2025. Okay. Thank you so much for your time, sir. I will come back if I have any questions. Thank you. The next question is from the line of Yogesh Patil from Dolat Capital. Please go ahead. Thanks for giving me an opportunity. I have few questions. Sir, as per your press release, the company has signed a volume of 0.63 MMSCMD, which will be commissioned in coming days. Sir, my question is, when do you expect this consumer will fully start consuming a volume? How many months they will consume it, and is there any pricing terms which you have signed with them related to propane and the PNG industrial? This is my first question. Okay. First, we would like to let you know that within 6 months, the customers will be commissioned. We'll achieve that volume target. That's what we are Okay. My second question is again related to, sir, during the month of March 2024, you had offered a cheaper PNG industrial pricing formula compared to the propane, and you were expecting more ceramic industries will tie up for at least 1 year PNG industrial volume. How many industries entered into the contract under this formula? Any update there has been? We have received more than 150 responses to our EOI. It is at the EOI stage, and we are progressing on this signing the agreement, and I think we'll do it soon. So 0.63 MMSCMD is included under that EOI also? Pardon? No, it is not included in this EOI. Okay. The last question from my side, sir, could you please share a proportion of APM gas that you received for the priority segment during the quarter one? If possible, can you give us more details on the non-APM gas sources right now you are getting a gas for your PNG industrial and the commercial side? We are getting nearly 75% of our allocated volume, and rest is from the market. Can we get a breakup of 25% from where you are sourcing? Is it HPHT or any contracted LNG? Yes. See, we have long-term sources. From long-term sources, we are getting close to 27% of the entire volume. From the spot, which we practically are getting 49%. Okay. Thanks a lot, sir. I'll come back in again. Thank you. The next question is from the line of Vivekanand Subbaraman from Ambit Private Limited. Please go ahead. Yeah. Hi. Thank you for the opportunity. On extending a question that Probal asked on CNG volumes. From 1 MMSCMD to 2 MMSCMD volume, it took you around seven years to move there, add that one, double the volumes. Now, it seems that you are on a faster trajectory as far as CNG is concerned. Could you help us understand or think through the ramp-up of this business, given that you are now more keen on expanding infrastructure both within the state and outside the state? If there is any guidance or aspiration, let's say next three years or five years, that you would like to provide. That's question number one. Secondly, on CNG itself, if you look at, let's say, the current infrastructure and the way you are deriving volumes here. The volume trajectory with the current infrastructure, is there a way to look at it on a like for like basis, the same stations, the current existing stations, the volume growth or, say, big cities volume growth versus, say, new areas volume growth within the CNG business itself? That perspective will help us think through the volume ramp-up of CNG better. Thank you. As a company, historically, we are very bullish on the CNG market. We are very aggressive also. Hence, just to increase our speed of developing new infrastructure, we have introduced this FDODO scheme. Apart from that, we are in a major process of upgrading at least 60 plus CNG stations this year. We are going to add our own 22 stations this year also. If you just count the number, I won't be surprised that by year-end, we will add triple-digit CNG station numbers in this financial year. Right. Would you like to discuss about volume aspirations, given that you are now disclosing things within Gujarat, outside Gujarat. Can you help us understand how volumes could scale up in the next few years? Any targets that you have in mind? The way we are moving aggressively in the market, I think we are going to issue at least 200 LOIs in the first phase for our FDODO scheme. Apart from that, if you see the market, so many OEMs and everything, the ecosystem, the way it's developing, we are expecting at least one MMSCMD of volume addition in the coming year, at least. Okay. That is helpful. These FDODO stations, are they coming up mostly in Gujarat or outside of Gujarat? If you can give us some color. Are they in the city, highway? Where are they coming up? If you just count the number, percentage-wise, I think more than 60%-75% stations are coming in Gujarat, where ecosystem is already developed, where customers are already aware. At the same time, we have got good response from outside Gujarat also. Right. Last question on CNG is, you mentioned that the volume trajectory outside Gujarat is much faster than inside Gujarat. I think you said 14% in Gujarat and 27% outside of Gujarat. Can you help us understand how CNG volumes are split across Gujarat and rest of the markets? Current CNG volumes. Outside, I would like to say that currently, whatever the markets we are there outside Gujarat are in proximity to already developed CNG markets, and that's helping us a lot. For example, Maharashtra, Bombay is very developed. Punjab and Haryana, that is also close to Delhi and Northern India, where CNG is there for more than a decade or two decades. So that is helping us a lot. It's not just Gujarat. All markets which are near to this developed CNG market, that is also bringing growth to the company. Okay. the split between CNG volumes, Gujarat and outside Gujarat, would you be able to help with any sort of percentage volume mix? We know the number of stations that you disclosed, Gujarat versus outside Gujarat, volume-wise. Practically 95%, more than 98% is outside Gujarat, and rest is practically in Gujarat. Sorry, it is not 97%, it is 87% is in Gujarat, and rest is outside Gujarat. Great. Thank you very much, and all the best. Thank you. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead. Yeah. So two questions. Firstly, you said about the Q1 CapEx, I could not get it properly. How much was it? 206. INR 206 crore. Okay. Secondly, so overall, in terms of volumes, whatever you have mentioned. I think earlier you have mentioned that almost 14%, 15% could be the CNG volume growth target that you may be looking at. Does it remain that way, or it could be higher than that? Because if you say that you would be adding one MMSCMD, then the CNG volume growth could be close to 20%, 25%. So what could be the right number to assume? No, what has been told is basically the FDODO scheme would be adding that volume of one MMSCMD that will span out over a period of one and a half to two years. So that is not going to come in entirely in this financial year. So that 14% guidance for the CNG still remains as it is. Okay. What about the overall guidance now? Overall guidance now looks like around 5%-7% on a volume growth. Overall- On an average level, 5%-7%. Yeah. On a year-on-year basis. Year-on-year average basis, 5%-7% of overall volume growth. Okay. Yeah. Thank you so much. Yeah. Thank you. The next question is from the line of Varatharajan Sivasankaran from Antique Limited. Please go ahead. Thanks for the opportunity. Just wanted to dwell on this procurement, which you mentioned, 49% you are getting from outside. If you can give us some kind of a split on the overall volume, what we have done, and what has been the mix in terms of which contract. Incrementally, when you are growing, will you be looking only at procuring incremental spot volumes, or do you have plans or already something in progress in terms of contracts for the incremental growth volumes as well? On CE, we procured close to 11.09 MMSCMD of gas this quarter. Of that, close to 2.69 came from the APM and approximately 3 came from the long-term sources. The rest was sourced from the spot. Basically, if you look at this quarter, the spot was cheaper in terms of even the long term. That is practically the breakup of the sourcing mix. Sure. Going forward, one can expect the incremental volumes to be also spot? No, no. Ultimately, there is a fluctuation in the volumes with respect to industrial volumes, which is coming in. Once we have a stability in that, we will be getting into long term. Again, we are in search of getting into long-term agreements anyway. Fair enough, sir. In terms of this margin, once again, I wanted to highlight, you were talking about the 4.5-5.5. But if CNG growth is going to be higher, can we expect this number to shift closer to 6? Because CNG obviously is more profitable than the industrial. I think you need to look at our portfolio mix practically. We have industrial, CNG, PNG, and the commercial. If you look at it, the EBITDA guidance is based on an average of that. Sure. Finally, on the non-Morbi industry part, what is the kind of a growth one can actually look at? Because outside of this 5%-7% overall growth, what you are referring to, you also had this Ahmedabad rural, pre-growth area, and you had already tied up some amount of MOUs out there. So you would have a better visibility of that market volume contribution over the next year or 2. So in that context, the non-Morbi volume growth, can we expect it to be higher than that, or you want to still stick to the overall volume of 5%-7%? I think the non-Morbi volume growth will almost be the same with respect to the guidance. Yes, if at all, we will be adding new. See the Ahmedabad rural, the Thane area, and the DNH area, we are expecting better volumes. But yes, there is a competition which is there with alternative fuels, et cetera. So that's the reason we have kept the volume guidance at 5%-7%. Well, non-Morbi, is it a structural growth we should assume over a longer period of time? Or do you think after growth in the next 2 to 3 years, it could moderate and stay flat beyond that? Yeah. We need to develop those areas. Basically, they have some alternative fuels over there. We need to replace them. We have to basically educate them. Yeah, that's a long drawn process, as you rightly said. Fair enough, sir. Thank you. Thanks. Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead. Thank you, sir, for the opportunity. Just taking forward on the non-Morbi volumes. While we have been signing the volumes for some time, we had indicated 0.8 MMSCMD plus. But when we look at the non-Morbi volume growth year-over-year, it has increased only by 0.2 MMSCMD so far. Are we losing any volume in the non-Morbi areas and which is getting replaced by the new volumes? Not exactly. We are developing the infrastructure in, as Rajesh has mentioned, that in Dadra, Nagar Haveli, Thane, Ahmedabad rural, and Pithampur, which is near Indore. Of course, we are developing the infrastructure in Kutch West also. We are facing some challenges, the way we face challenge in developing infrastructure. But whatever the numbers we have projected, I think we will be able to achieve it soon. At this point of time, you are guiding for 5%-7% growth in non-Morbi area for next couple of years, correct? A couple of years, no, but at least first 2, 3 quarters, I can say. Understood. In terms of the FDODO scheme that we are offering, how much basically the margin we will be offering? Would it be higher than what we offer to OMCs at this point of time? We have mentioned it. If you just see on the website or you register with us, we offer almost double the margin. Right. It's quite attractive from the user perspective, dealer perspective. Absolutely. In terms of the Morbi, you mentioned about the 35%-40% pullback in the volume in the coming quarter. What is currently the total demand rate, and how is the split between NG and propane at this point of time? I think the total volume in Morbi with respect to the fuel is close to 6, and with respect to NG is close to 2.5-3. That's the NG volume which is there. How are we competitiveness versus propane at this point of time? We are at INR 44 or so. Yeah. I think we are costlier by close to Rs 4. This could continue through the winter season as well, or do we expect this to change? We expect this to change. Let us see how the winter pans out, because every month and every quarter, the things are changing now. Basically, let us see. That's the thing which we are always into and look out for that. Right. Couple of more questions, if I may. In terms of the gas purchase mix, we have said we are purchasing around 3 MMSCMD from long-term contract. If I remember, we had around 5 MMSCMD of the long-term contract. So have some of them expired or we have backed them down because spot was cheaper? No, this is the procurement which we have done. The total contract is close to 4.3. Close to 4.3. What I told you is the actual volumes, not the contracted volumes. Understood. Just last question, in terms of the ROEs have taken a beating of around 15% from around 24%, 25% level that we have seen, and this is more on the back of margin correction that we have seen in the industrial volumes. Looking forward also, our guidance is 4.5 to 5.5. Is this 15%, 16% margin trajectory something that we are going to live with for next two, three years, or do we see this coming back to 20% plus level? No, I think we have to have a balance between the price and the volume. If you look at this quarter, we had a volume of close to 7.25 in industrial. That could be achieved because we had some leverage on the margins. Basically, we will be balancing both the things going forward. What would be about your target on ROE with this balance approach? I think it will be around 15%. That's the level we are looking at. Right, sir. Thanks for answering all these questions. Yeah. Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead. Good evening, and thank you very much. When you discussed the Morbi volumes in first quarter, what was your PNG price and what was the propane price? Could you get back? We could not hear you. Just hold on. Yes. Hello. Yeah. In the first quarter, for the volumes you have reported out of 7.25, what was your PNG price and what was the propane price in the first quarter? Our average PNG, you are talking of the industrial thing or entire thing? In Morbi. Okay, in Morbi. Yeah, in Morbi, I think the natural gas price was INR 42 per SCM, while propane was INR 41 per SCM. Currently after the pricing raise, your price is 44 and propane is 40? Yes. Okay. If you look at your CNG stations split between Gujarat and outside Gujarat, 30% are outside Gujarat. But you are saying the CNG volume from outside Gujarat is only 13%. Do you see the per station throughput or the number of vehicles increasing in the GAs outside Gujarat? How do you see that playing out over the next 2, 3 years? What is the profitability of the new GAs, based on the current volumes and pricing there? I think that, the new GAs have been developed in very greenfield area. Basically the entire ecosystem for natural gas is being developed by the government along with the CGD companies. For example, if you look at Gujarat Gas in Gujarat, it has taken a time to basically develop the entire ecosystem. So that ecosystem is being developed over there, and gradually the growth will definitely come in. We being the first player over there and basically the infrastructure being there, we will definitely get the benefits of the growth. Okay. If you are looking at your overall CNG volumes and the number of vehicles per day, is it possible to give a split of the category of vehicles? Because on an average, it looks like you are selling 7.5 SCM per day per vehicle. Is it possible to give a split across the categories of vehicles? I would like to say that mainly it's four-wheelers and three-wheelers. But the way you are asking the breakup is difficult to give. Okay. If you're looking at your spot gas price, what is the current spot gas price? And if you're looking at your, say, third quarter, once Morbi normalizes, would you be able to get back to this INR 5.5 margin based on the current gas mix and the spot gas prices? Sir, presently, if you look at the spot prices, it's around 13, and even our long-term sourcing prices are around 13 to 14. So basically, we need to get back to Morbi when the propane practically gets closer to that. Okay. Finally, if you're looking at your CNG price- Yeah, just let me complete. Based on today's forward curve, basically what I'm telling is based on today's forward curve. Going forward, the changes can occur in the forward curve, wherein we can become cheaper also. That's the thing. Okay. Based on the CNG price increase you have taken, you increased it by Rs2 as of August 1st. Based on the current growth in CNG, to what extent can you make up the shortfall in Morbi volume in terms of the overall revenue and EBITDA you can generate for second quarter or EBITDA per SCM? Yeah, I don't think so we are here to basically get a price from CNG to compensate for the industrial volumes or the margins which we are losing over there. I think we have been maintaining the price stability over a period of time. Even in the previous years also, such type of cycles have happened, and basically we have got over that and maintaining that pricing stability which is there. I understand that. We all understand it because there's a cut in March. We are trying to understand in terms of the impact on the second quarter, to what extent the CNG volumes and the increase in prices can offset that. If you look at, say, the second half based on the CNG price increase and normalized volume, will you possibly back on trajectory in terms of the year-on-year growth and the EBITDA per SCM, right? No, with respect to the CNG volumes, I don't think so we are coming down on the growth numbers because CNG is a product which practically everybody has to use. It's just like petrol is. You have an inelastic demand over there. Okay. With respect to industrial, basically the customer has the option of switching it off and basically switching to another fuel. Okay. If you look at the longer-term trajectory in the biogas blending, how does the economics work, and what is the target for biogas blending in your network, say, over the next 2 years? Based on the current price that is payable to the biogas producers, we understand that biogas is actually cheaper than APM gas. Does it improve your overall margins for the CNG segment or on a blended basis? If you see that biogas is mainly operated under the SATAT scheme, and so many factors are being under the control of the producer. We are just the off-taker. We have biogas in our pipeline, means we are off-taking it from few suppliers. But pricing and everything is controlled by SATAT scheme, so we don't really want to comment on that. One last also. Similarly, on hydrogen blending, you are talking about 8% blend. How does the economics there work? Because there is a certain cost you have to incur for hydrogen, right? How is that being priced? What is the weighted average impact on your overall gas cost, if you may add? See, as on date, basically it's a pilot project with NTPC which we are doing. NTPC has put up the hydrogen generating unit over there, and it is only being supplied to the staff quarters and for the requirement of NTPC at a really specific level. The only thing is this is a pilot project to test the effectiveness of hydrogen blending into the pipeline, et cetera. Basically, we are doing the testing of the pipelines, et cetera, whether how much blending can be done or not. During the pilot phase, will it be booked in the P&L or will it be capitalized? That's a sense one wants to get. No, it's a pilot project. See, the hydrogen is being given by this NTPC because it's their project. We are just blending it in the system. Okay, fair enough. Thank you very much. Wish you all the best. Yeah. Thank you. The next question is from the line of Caesar Aggarwal from Despe Lado Advisory. Please go ahead. Thanks for taking my question. Sir, your company had provided guidance to set up 200-plus CNG stations over next 2 to 3 years, from which around 25 to 30 stations is planned to be added in FY 2025. But in the recent quarter, we saw an add-on of only three CNG stations. Is this guidance still in place and seems achievable? Also, please elaborate on the factors contributing to slower than expected rollout and how company plans to accelerate the pace to meet the long-term target. Actually, it means you have studied our scheme, FDODO, where we are going to participate with so many business partners. CapEx and project management, everything will be done by the applicants or our business partner. That's the reason we are hopeful that we will increase the speed of developing infrastructure for CNG stations. That's why we have targeted this number, and we are going to implement from next month. Okay, thank you. Wish you all the luck. Thank you very much. Thank you. The next question is from the line of Pratyush Kamal from InCred Capital. Please go ahead. Hello, sir. First of all, congratulations for having a good set of numbers. I have a couple of questions. First would be, again, you said that about 45%-46% of the sourcing volumes are coming from the spot. I just wanted to understand the reasoning for having that dependency on spot, given the fact that the spot prices are too volatile in the market, and we have seen it across the years from 2020 to 2024. Second would be, I think that there is some Qatar gas contract which needs to be renegotiated in the middle of 2025, if I am not wrong. What is the update on that, and how do you think? I think that the current contract is at 14% or so. Do you think it would come down to 10% or 12%, or would it remain the same? First of all, with respect to your question of that Hello? Yeah. You're audible. Yeah. With respect to your question on the sourcing of gas and why short-term is more. See, we were better to propane during this quarter. Basically, as I told you, there's a volatility in the prices of gas and the propane, which is affecting the long-term sustainability volumes in Morbi. And other problem is basically the short term, the APM being, there's a shortfall of APM close to 25%. So these two have contributed to the sourcing of short-term gas. And if you look at the short-term gas has come at a much cheaper price than the long-term, which we are sourcing for this quarter at least. Understood, sir. Yeah. Yeah. How about the second part, like what is the update on the Qatar renegotiation long-term contract? It is currently at 14% or so. Would it be coming down to 10% or 12%, or how do you see it? I think the sourcing part is, I think the main agreement is being done from GSPC side. GSPC is in the process of talking to Qatar. Then subsequently once it is finalized, there will be back-to-back agreement with Gujarat Gas. Understood, sir. Thank you. Thank you. The next question is from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead. Thank you for taking the call, sir. A quick question in terms of the rollout of your network. Can you just talk to us in terms of how you are seeing rollout of network in different part of geographical areas where you are expanding, and where you are seeing demand growth outperforming your own expectations and where it is being slower? As we mentioned earlier also, we are focusing mainly, if you talk about the industrial market, then we are focusing on Ahmedabad rural, Thane, Dadra and Nagar Haveli, and Pithampur, which is near Indore, and of course, Kutch West. So for industry volume focus is there on these markets for new network development. For CNG stations, of course, Gujarat is a major focus, but the market, we are close to Delhi and Bombay and where CNG is already developed, we are focusing in nearby GAs in those markets also. So these are the main volume driver for us in coming quarters. Okay. In terms of your expectation versus the growth that you are seeing in these industrial areas, have you seen faster growth in specific areas, or it is pretty much online what you have kind of thought about before when you rolled out these networks? We are expecting a quick and faster growth in this market. Apart from that, all the existing markets or where we are present, we are getting good growth in those markets also. And in terms of the CapEx of about INR 1,000 crores, how much is getting allocated to the new areas and how much is it in the existing? It's almost 50/50 because we have to develop the newer areas more. So most of the CapEx, 50% of the CapEx is going towards the newer areas, the new GAs, and the rest is basically for consolidating our position in the existing places, especially Ahmedabad and all. Okay. Thank you. Thank you. The next question is from the line of Gagan Dixit from Elara Securities. Please go ahead. Yeah. Thanks for taking my question, sir. Sir, when you at the start said that you are closely following this propane futures market. So what I assume basically, you are targeting something, price difference between your industrial gas price and the propane price, something range you are targeting. Is that what my understanding is? Yeah. I think, ultimately the customer has the option to switch between the two fuels. So I have to compete with propane. Mm-hmm. So what is the typical, your understanding is the premium of the gas over the propane at which you think that customer will remain with the Gujarat Gas, there is no risk to the demand. I think in the last quarter you indicated in Morbi, your gas is INR 1 costlier versus the propane, but still you get the demand. So can I safely assume that even this INR 1 premium, is that something that you are comfortable with the propane over the gas? Yeah, it is between INR 1 to INR 2. Basically, after that basically the switch happens. Okay. My final question is about this industrial volume outside Morbi. I think Morbi is around 6, 7 MMSCMD. Outside is around 1.25 MMSCMD. Can you give some broader breakup of the outside geographies, like industrial volume, and typically what is the volume growth you have witnessed on year-over-year basis? Yeah. It is basically coming from Surat and Ankleshwar, Bharuch areas and Surendranagar areas. These are the areas where, other than Morbi, it is coming in. Okay. So Surat and Keshod, which is the additional geography of the Gujarat Gas, I guess. Morbi is also there. There is also an industrial well towards it. Okay. What is the Y-o-Y growth that typically you have seen in these areas? I think Dipen told, talked about that growth. Yes. We are expecting 7%-8% growth in this market. Okay. My final question is that, in the Morbi, you expect if your gas remain competitive, let's assume for the next 12 months versus the propane. From the existing customers, you expect the peak volumes you can touch in the Morbi region? I mean, customers try to take all the volumes from the gas instead of propane. You mean to say what we should do? Yeah. What's the potential in the Morbi is possible? In a total Morbi potential is close to 8, is the Morbi potential of gas. Okay, sir. That's from my side, sir. Yeah. Thanks. Yeah. Thank you. The next question will be from the line of Vishnu Kumar AS from Avendus Spark. Please go ahead. Thanks, sir. Just want to understand the CapEx numbers that we are likely to do over the next 3-5 years. What will be the quantum that we are likely to do, considering all the gas investments that is required? I think you are talking about next 3 years or in- 3-4, 5 years. What is the strategy? How much CapEx would be required from our side to maintain our commitments? If you have for maintaining commitment as per the bidding rounds, I don't think there is much of commitments which is left back except for the domestic connections which we have to do. With respect to the CapEx, we like to do is, it should be close to INR 1,000-INR 1,200 to INR 1,500 crores. That's the range which we are looking at. The plans will come in once we have finalizing the growth plans with the expansion plans in those areas where we are getting in now. Because these are all areas which are expanding in a big way now. Basically all these plans will be finalized before the beginning of the year. But yes, you can expect that around INR 1,200-INR 1,500 crores of a CapEx going further. Understood. Sir, over the last four, five years, we have invested close to INR 3,500-INR 4,000 crores of CapEx. How much of this would have been in new areas, let's say, investment on CNG and let's say our current areas? Any rough idea if you could help us understand. It's close to maybe 40%-45% would have been in the new areas, because that's the area we had a commitment towards. Okay, got it, sir. Basically, the question is on the volume strategy. We have seen more volume growth happening up and down on Morbi, but the non-Morbi volume has been pretty static in a broader range. Obviously, we would have made a lot of efforts. What is not really helping us gain the volume momentum in this market? Is it any particular reasons that we can ascribe? How confident are we, let's say, on the ex CNG volumes that in the newer areas that we will be able to convert more, given our last four years we've not been able to do much. I think there is obviously that alternate fuel prices, we are highly competitive, and some of the markets we are allowing coal, furnace oil, and you know that it's very difficult to compete with those kind of fuel. That alternate fuel price is the major competition. So in the newer areas before laying a line or investing CapEx, any particular strategy or we will wait for any governmental action before we deploy the CapEx? Otherwise, if we are not able to draw the volumes because of the XYZ reasons, then an overall investment strategy or the return ratios may be a little not to the expected return. From that standpoint, we would be having any second thoughts or we will still go ahead because at the end of the day, it's a chicken and egg story. You have to lay the line and then volume comes. How do we think about that? No. Each of the projects with respect to expansions are evaluated with respect to the project viability and the commerciality. So once we are certain of those things, then only the CapEx plans are executed for sure. Okay. Got it, sir. Just one final question on the Morbi itself. Let's say, how much of the volumes would be, in our opinion, sticky volumes, let's say even if the price gap between the propane and gas would be more than 4 or 5 rupees if the delta remains. How much of that volume can be considered very sticky? Is it 3.5, or say 2.5? That depends on whether the customer has an source for alternative fuel or not. That has changed over a period of time, so it would range maybe 2.5 to 3 or something like that, but still, we are not certain on that. Got it, sir. Just before to close, any medium-term target in terms of volumes that we have in mind over the 3 to 4 years, let's say we are currently nearing the 11 mark, near the 11 mark. Do we have any number in mind, let's say by 3, 4 years, we will do 14, 15 MMSCMD. Any rough math, given all the areas that we are having, what would be our internal target that we are probably looking at, or even a range if you can help us understand? We would be happy with a range of around 10% basically, plus minus something. But problem is we have a product like industrial volume, which is practically volatile. So that practically affects the yearly volume drivers. Okay. Just on this new EBITDA model that we are now targeting, considering the higher cost of, let's say, the transportation and the margin that we have to possibly give because of the delta between petrol and, I mean, other petrol, diesel, CNG has to be maintained. So the incremental volumes probably comes at a lower margin for us. Is that the right understanding on CNG? No, that is not the right understanding, because whatever the OPEX and everything is there will be passed on to the dealer, and the company will maintain and sustain its margin. Got it, sir. Thanks for all the rest. Thank you. The last question for today is from the line of S Ramesh from Nirmal Bang Equities. Please go ahead. Thank you for the follow-up. When we look at the discussions on bringing natural gas under GST, have you seen any internal discussions within the industry and the government, any sense in terms of the timeline? Would we be safe to assume that for the industrial customers, you will be able to see the customers enjoying the benefit of that 6% VAT, and that could enhance the competitiveness of PNG and thereby potentially help you grow faster? Is that the way to understand the impact of GST? We will always welcome gas being part of GST because it helps the customer as well as the industry as such. Basically all the Yeah. Yeah. In terms of the maths, basically that 6% VAT will possibly be the saving for the end-use customer, right? Yeah. Yeah. Okay. Any sense in terms of timeline when we can expect that or is it still work in progress? We are all on the same page on that. Okay. Thanks a lot. Okay. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sandip Dave, Company Secretary, for closing comments. Thank you. To summarize, we have been able to make a good comeback in this quarter as compared to Q1 of the previous financial year. We will continue to focus on increasing volumes while maintaining a fine balance between volumes and margins. We continue to be optimistic about CNG volumes with planned increase in stations. Thank you. Thank you, sir. On behalf of Gujarat Gas Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.