Adani Total Gas Limited (ATGL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Adani Total Gas Limited 2Q FY '23 and 1H FY '23 Earnings Conference Call hosted by Anand Rathi Share & Stockbrokers. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Harshraj ] from Anand Rathi Share & Stockbrokers. Thank you, and over to you, sir.

Thank you, Melissa. Good evening, everyone. It is my pleasure to welcome all the participants to the second quarter and first half FY '23 conference call of Adani Total Gas Limited. We have with us senior management represented by Mr. Suresh Manglani CEO; Mr. Parag Parikh, CFO; and Mr. Priyansh Shah, Head of IR. Without much delay, I would like to pass on to the management for the opening remarks, post which we can open the floor for Q&A session. Over to you, sir.

Thank you, [ Harshraj ]. Good evening, everyone. Let me extend a very hearty welcome to all our investors, analysts and participants for taking out their time and participating in today's call for H1 and Q2 FY '23 results of Adani Total Gas, which is a JV of India's largest growth platform, Adani Group and world -- one of the largest energy conglomerate, Total Energy. As you're all aware that safety has always been our major thrust and a precondition to work in ATGL. Now with increase in the intensity of a number of GAs and also coverage of various businesses, we have enhanced our safety -- HSE coverage to all 52 GAs as well as CGD business, EV business and Bio business. And we have been holistically focusing on HSE from all perspective, and I'm happy to inform you all that we have been able to maintain a strong track record of a zero fatality and zero harm. Now first, let me give you the important events that has happened during this quarter. ATGL has won a very prestigious award of Corporate Citizen Award by PHD Chambers of Commerce & Industry. This is a recognition of ATGL's ESG program, which includes one of our iconic plan on Greenmosphere. It has gone through a very strong scrutiny through -- with dignitaries of the Supreme Court judges and high dignitaries. In addition to that, ATGL has incorporated two wholly owned subsidiaries companies, Adani TotalEnergies E-Mobility Limited and Adani TotalEnergies Biomass Limited. This will help ATGL to -- while continuously focus on CGD business and also take the full benefit of its strength, to develop adjacent businesses of EV and Bio business. Now coming to the results, the Board of Directors met today and have approved the result for H1 and Q2 FY '23. CGD sector is continuing to see a challenging time where we have seen a significant rise in gas input cost, both on APM side and also on the R&D side. Despite this very challenging scenario, which all oil and gas companies, including CGDs are passing through in India and world over. ATGL has a mandate from both the promoters have continued its focus and intensity has been increased on growing the backbone infrastructure. And I'm very happy to inform you all that several milestone infrastructure has been achieved. We have now surpassed the target of 10,000-inch kilometer for a steel pipeline across India. Similarly, as I have been informing you all that we have been focusing on enhancing home PNG connection. In the first half, we have added 62,000 new home connections. And with that, now our number of home PNG connections, who are enjoying piped natural gas supply, have grown to 626,000 homes. On the CNG front, we have added 33 more CNG stations, and the total tally has gone up to 367. Out of 367, 69 stations are company-owned-dealer-operated and dealer-owned-dealer-operated. In this first half, we have added 10 new dealer-owned-dealer-operated. If I add the number of CNG stations set up by our JV IOGPL, we would be touching a mark of around 600 CNG stations across the country. In addition, we have been diversifying our consumer base. Besides home, we have added 412, 4-1-2 new businesses, hotels, restaurants, conservatoriums, temples, small-scale and medium-scale industries who brings the anchor load for us. So with 412 new PNG customers on I&C side, our total tally has now grown to 6,088. On the volume front, for the first half, our overall volume stood at 374 MMSCM, which has grown by 19% if I compare year-on-year vis-à-vis the first half of the previous year. CNG volume stood at 222, 2-2-2, MMSCM, up by 40% on year-on-year basis on a half year to half year comparison. PNG volume were 152 MMSCM, down by 3%, primarily because of high prices as well as curtailment of a gas supply from supplier side. During H1 FY '23, we have also seen, as I stated earlier, there has been a significant rise on price front, both on APM side and R-LNG side. And as you will see the result, while there is a growth of 90% in the revenue, which has grown to INR 2,301 crores in the first half as compared to the previous first half, EBITDA has remained stable, the same, virtually INR 464 crores as compared to INR 462 crore in the previous first half FY '22. So this is a result of our conscious call of calibrating the pricing, while we were taking the price rise in the input gas cost, pass-through has been calibrated to make sure that both promoters vision of maintaining affordable price for PNG and CNG is carried out delicately. And that is the reason we have ensured that while profitability is sustained, at the same time, consumer wins on both sides, PNG and CNG side. Our PBT and PAT, profit before tax and profit after tax, was at INR 373 crores profit before tax and INR 277 crores profit after tax. Coming on the quarterly numbers, Q2, July to September, overall volume stood at 191 MMSCM, up by 9%. Despite these challenges of high price on both APM and R-LNG front, we have been able to achieve 9% growth. We have always been hoping to achieve double-digit growth. But still in this scenario, we have been able to achieve 9% growth. Our CNG volume were 113, 1-1-3, MMSCM, up by 25% year-on-year basis and PNG volume was 77 MMSCM, down by 8%, as I stated earlier, due to very high rise in the prices and curtailment of gas supplies from suppliers. Revenue for Q2 FY '23 stood at INR 1-1-9-0 crores, INR 1,190 crores. This was up by 73% as compared to Q2 FY '22, largely because of the price rise and some portion because of the volume growth. EBITDA for the quarter was INR 236 crores as compared to INR 246 crores of Q2 FY '22. Profit before tax and profit after tax were INR 188 crores and INR 139 crores, respectively. Gas price continues to remain volatile, and our view is that a couple of more quarters, R-LNG prices will remain volatile. And -- while APM price is on a rise, but we are expecting, there would be some moderation in the prices. ATGL continues to have a focused approach on sustainability front. During the quarter, ATGL has published its maiden sustainability report. We are perhaps the first CGD company which has published a detailed comprehensive sustainability report and continues its initiative on ESG program like Greenmosphere, Green belt development, solarization of ATGL sites, water harvesting, and greening our all fleets. We have a commitment to make 100% CNG as our fuel for the vehicles which are being run for ATGL. In these challenging times, I am confident that with the continued support from all the stakeholders and motivated team running Total Gas, the journey ahead is going to be much more exciting and successful. I would like to acknowledge and be thankful, the role played by our stakeholders, consumers, dealers, suppliers, business partners, investors, fund houses, and all stakeholders who are associated with Adani Total Gas for their trust and continued support. Thank you. Now it is open for all of you to ask the questions.

[Operator Instructions] We have the first question from the line of Avnish Khara from VT Capital.

I just wanted to understand that Adani has said that a lot of investments are going to be made in green hydrogen. So what kind of plans do you have to integrate that into your Adani Total Gas business?

Avnish, first of all, thank you for participating and being a very regular participant. Yes, Adani Group as well as TotalEnergies in their part of the world have very high focus on developing green hydrogen. So that is being done by Adani Group and our promoters. ATGL shall certainly be the beneficiary because you have been hearing us in all investor calls that besides our continued focus on CGD, we are also taking full benefit of our strength on adjacent businesses like EV, Bio,CGD and now even hydrogen. We will certainly be exploring all the possible opportunity in hydrogen site. In particular, being as a vehicle for transportation of hydrogen in our infrastructure. Second, also we'll explore how do we bring hydrogen blending with our CNG, whether it's [LCNG ], HCNG, or some different forms. The field is at very nascent stage. Product standards, et cetera, are getting developed. We are keeping our complete options open, but we know that this will bring another opportunity for ATGL.

Sir, I just have a follow-up on that. As you said that blending is something that a lot of companies are looking at. So just a question on the technical side that is it true that to blend green hydrogen with the gas that we already have in the pipeline, a mix of more than, say, 15% or 20% won't be achievable and that if the mix needs to be made where the composition of green hydrogen is higher than new pipelines and new investments will have to be made for that?

You see a lot of work is going on understanding what is all required to strengthen, reinforce infrastructure to maximize the blending. Currently, as the study suggests internationally and domestically, what you stated the number, 15%, 20% is being talked about. These are initial stage of development of a hydrogen and particularly looking at the infrastructure of -- existing infrastructure of pipeline. I'm sure with a lot of experts and several research teams working on it, we will have a solution to enhance the quantum of the blending in the same infrastructure because that is in the interest of our nation and the world that we gainfully utilize the existing infrastructure. So currently, you are right, people talk about 5% -- 15%, 20% in India, some also just talk about even 5%. All these are -- opinions are currently -- are going on and in some parts of the world, they are testing up to 10% and 15%. India, I think, our testing is currently sub 5% level. But I think we all have to wait to see the kind of a development, which will take place because there is a huge investment happening world over and in India on hydrogen side. So I'm sure a lot of newer solutions will come on the blending side as well to use the existing infrastructure.

We have the next question from the line of Yogesh Patil from Centrum.

I have a couple of questions, sir. First of all, on your APM gas, what was the percentage of APM gas that you were receiving for CNG and the PNG domestic during second quarter FY '23? And what is the current share of APM in your CNG under domestic CNG sale?

Are your questions are over?

No, sir. I have a few questions. So I think so we can go one by one.

No, no, you can ask all questions, test our memories.

Okay, sure, sure. So the second one is on the side of that related to VAT here as we are aware that Gujrat state government cut the VAT on the CNG and the PNG domestic. So have you passed on the full VAT rate cut benefits to consumer? Or you have retained some benefit? So that was the second one. Third one was on a pricing gap between the CNG and the alternate auto fuel. So as we, again, are aware that gap between the CNG and the alternate auto fuel has dropped to the lowest level, so how are the CNG vehicle conversions or additions are happening nowadays? And how was it in the second quarter FY '23? The fourth one would be on the side of, again, on the PNG round. So as per my knowledge, you have won highest number of geographical areas in a recent PNG bid rounds. So the company presentation indicated that you are going to invest close to INR 20,000 crores in the CGDs over the next 8 years. So the question comes in my mind that the gas supplies issues mostly for the rising demand of CNG and the PNG domestic. So from where do you see the additional gas supplies will come? So these are the 3, 4 questions which were...

Very, very good, Yogesh. First of all, I think I feel very delighted when you do such a good homework and come to the call. And in a way, you represent many more investors because they must be having similar questions and you have preceded them. Now let me see whether you can -- I can pass the memory test, which you have put in. I think first was the APM gas supply shortfall. As we have been stating in previous calls as well, there has been, from an APM when it moved to the unified base price where government, as a part of their strong support, started blending domestic gas. The supplies have increased, of course, at the UBP price, which is slightly higher than the APM price. So -- and these are basis the past periods sale of each of our CGD areas. So the future growth still remains with us. So there has been a shortfall of, as I stated last time around 13% and now currently is around 3% of the shortfall. So basically, there is a significant demand is being met. On the APM, I would say, not early APM, but the UBP side, the unified best price, the supplies are being met on the -- from the government's side -- APM side. The second question was your VAT.

So sir, just have a quick question on that side. You said 3% shortfall. So should we assume 91% allocation. Because based upon the ratification...

Correct, correct, correct.

Second question was on VAT rate cut of Gujrat.

Allow me. I remember VAT is there. VAT question is there. So VAT, you know that as a part of a joint venture of 2 very strong parentage, Adani Group and TotalEnergies. It is our responsibility that we support the state government's vision of bringing PNG and CNG at affordable price. So certainly, we have passed through 100% VAT reduction, what took place in Gujrat on the very same midnight. Because that is what we always follow the philosophy of making sure that PNG and CNG is available to the consumers at affordable price and more and more consumer embraces PNG and CNG as a choice of their fuel. So I think we have 100% pass through. Third was your alternate fuel. As I stated in my opening remarks, and I'm sure since you're doing a lot of good homework, you are aware that the gap is reducing. Gap between the alternate fuel price and the PNG price is reducing. Somewhere it is actually, in fact, going higher than the alternate fuel price. So if I may come specific on CNG side, GA-by-GA, it will vary. Company-by-company also it vary because depending upon what is the fuel price of petrol or diesel in that local place, GA, vis-à-vis PNG -- CNG price, the difference will vary. But if I take a country-wide picture, I think it may vary from 10% to 15% difference to even 30%, 35% difference in some of the geographies where the tax is zero like Delhi. So I think there is quite squeezing of this gap, and government is conscious of this. Government would like to see that consumer gets affordable price. That's the reason you must have heard that there is a constitution of expert committee. And I'm sure there will be -- in the due course of time, there will be some moderation of APM price or UBP price, so that we continue to bring wider gap of a saving for the consumer on CNG as well as on the PNG side. And the fourth was your question was that we are going to be investing INR 15,000 to INR 20,000 crores in developing the infrastructure from where the gas supplies will happen. There is a continuous upside happening even in the domestic gas production. So if you see, even the next few months, we will be getting a significant amount of domestic gas coming for bidding. Similarly, we are seeing several LNG terminals are getting commissioned or getting developed. The excessive terminals capacity is getting expanded. The national gas grid is getting doubled. So I think all this is happening on the back of the clear understanding that there will be sufficient gas supply coming in India. We would be beneficiary of this ecosystem development, whether it is LNG terminal, pipeline or the domestic gas production increase. All this will benefit the buyer and we would be the buyer in the value chain. So in my view, I think gas is going to be available. India has a vision to grow from 6.5% to 15%, which is a huge volume growth. We would -- all CGD companies including an Adani Total Gas is going to be beneficiary of this ecosystem development. So I think that are the four questions I have responded. If you have any further question or if I have missed, please ask.

So a few questions on the -- based upon the current discussion. First of all, I was mostly interested into the alternate fuel price gap in the CNG and the alternate fuel. On that side, I was interested on the CNG vehicle conversion and additional run rate. So have you seen any kind of a fall in vehicle conversion during of Q2 FY '23 compared to the Q1 FY '23? That was more specific questions. If you could answer, that would be helpful.

Ask any more questions on your side?

And secondly, sir, you are looking much more confident that the domestic gas production will increase from the side of K-G gas. But why do you think that the CGDs will only get the sizable amount of gas from the K-G gas option? So these are the two specific questions. So because looking into the gas consumers, there are -- other sectors are also, like the fertilizer, petrochemicals, refinery, they can come and compete with the CGD as well. So that's why the availability of gas could be an issue for the CGD. And lastly, on the pricing side, you might be aware that recently, the ONGC was trying to do an auction of 0.5 MMSCMD kind of a gap, but because of a very high price bidding, so it couldn't work out. So on that also if you could give us any clarity how the auction will happen and what would be the pricing on that front if the domestic gas production will increase from the K-G gas side?

See, on the conversion part, it would always depend upon the GA-on-GA where the saving is higher, conversions are still going on, number one. Plus also the segment by segment. If you see the private vehicle conversion, people would really be looking at little more savings than what they used to get earlier. So they actually -- consumers in India have been used to have a bit higher saving than they convert and which is rightly so because you are going to put cylinder in your boot space, et cetera. So currently, conversions are, I would say, the moderate. The way the exuberance was there, that has slightly moderated. But if you ask, Ahmedabad, Ahmedabad is seeing a very good conversion. So it depends upon which GA we are talking, what kind of consumer base or consumer demography we are looking at. If you talk Northside, NCR anyway, vehicle has to run on CNG. So I think India is seeing growth of CNG. It is slightly moderated because of the obvious reason of very high prices. But we see it's a very, very temporary phase. The growth of conversion would come back. That's the reason government is extra support of constituting expert committee so that APM prices are moderated in a manner that consumer gets the affordable prices.

So if I may add, Yogesh, if you look at our own experiences, our half-year-to-half-year volumes purely on the CNG front, grew by 40%. Further, if you look at it from a quarterly comparison, it grew from last quarter to this quarter at 25%, whilst even as a succeeding quarter, it has grown by 4%. Whilst this is the overall numbers, prima facie the larger growth has also come from the newer geographies. And the newer geographies effectively would mean that there is an ecosystem being developed and newer conversions are getting initiated. So we are seeing both coming back in terms of continued growth on the more developed geographies like Ahmedabad and also in terms of the increasing contribution on the CNG volume from the newer geographies.

Thanks, Parag. On the ONGC bidding, I would certainly impress upon to attend ONGC call because it was their bidding. From our perspective, we participated, but we came out after a particular threshold because as a responsible corporate, even though there is a ceiling, we'll only be going up to a particular threshold. And finally, we saw bidding getting abandoned because of price, bidding was very high, assuming that always the gas will be available on the ceiling price. But I think more detail you should take from ONGC because ONGC also conducts investor calls when their results come. Was any third question from your side?

Yes, there was a third question regarding that you said earlier that the domestic gas production is on the rise from the various fields like K-G basin. And you was more or less sure that the CGDs or Adani Gas will get gas -- sizable amount of gas from that side also. So my question was quite simple that why don't you -- why do you think that CGDs will only get a sizable amount of gas because all other consumers like the fertilizer, petrochemicals, refiners are also in a line to take that gas. So the competition will be huge on that side. So don't you think it would be difficult for the CGDs to grab the sizable volume out of that upcoming auctions?

What I would, Yogesh, bring the perspective that one is we all are aware that CGD has the first and highest priority in the APM allocation. APM's today gas ability is significantly higher than what collectively all CGD consumes. So there is a gas availability there and government has been giving and enhancing the gas supply. So we believe the gas shortfall will continue to remain very moderate to bring necessity of competing very heavily or aggressively on the other gases. But yes, we would certainly need these domestic gas or an R-LNG at a good price and developing a good portfolio for our Industry & Commercial segment. We will surely bridge the shortfall through domestic or R-LNG portfolio as a mixed portfolio. My view, I think, given the priority of a government on CGD side, we would certainly be able to meet our gas requirement through APM as well as domestic production increase which is happening and number of terminals capacity going up. All this put together along with the national gas grid, there would be sufficient or adequate availability of gas for CGD and then other sectors as well.

[Operator Instructions] We have the next question from the line of Kirtan Mehta from BOB Capital Markets.

One more question as a follow-up to Yogesh's question is a little bit on the conversion side, what is the monthly conversion rate that you're currently kind of see? And how does it sort of splits between the new vehicles versus where appropriate? And if you can also share -- give us an idea about the mix of vehicles like the gap between three-wheelers, four-wheelers, taxis, LCVs? This is the first question. The second question, again, in terms of -- sort of you mentioned that the codeveloping the alternate fuel consumers, you would need domestic LNG and the R-LNG portfolio. So from a perspective of sort of 3 to 5 years looking beyond this crisis, do you think that any leading of slope, about 14% could make it sort of unviable in the longer term? Or do you think that the consumers can afford higher slope?

So let me -- sorry, you completed your questions, please?

Yes.

Yes. So let me try and attempt to your second question first, and then I'll hand over to Rahul Bhatiaji, who is our business development head to give you the answer to the first question. I think we cannot look at one particular source and a particular slope of a gas supply for a CGD company. I think as a good -- and I would say the robust process for CGD company, as we have always been maintaining our philosophies that we need to develop a good, optimized portfolio with multiple sources, multiple tenure and multiple indices. So a particular slope at one particular point of time could be higher. We could attempt for a shorter period to meet our demand, but we will also get a window as we keep developing our portfolio to get a good slope or a different -- mix of indices of JKM as a brand. So within Adani Total Gas, we follow developing of portfolio of our different tenures and a different sources as well as different indices. So we do not see any one particular slope being unviable because ultimately, we develop a portfolio. I would hand over now to Rahulji to give you a response to your conversion part question. Rahul?

Yes. Generally, the conversion factor changes from GA-to-GA , especially if it's a mature geographical area like Ahmedabad or Faridabad versus new GAs that we are developing. But generally, in a mature GA, we have seen that the ratio of new cars versus retro-fitment would range from about 25% to 75%. So new cars would be about 25% and retro-fitment would be about 75%. And depending on the cost of the retro-fitment cost of the kit, it could vary between 1/3 to 2/3 also from -- on a month-to-month basis. Have I been able to answer your question?

Yes. This is one part. But second part of the question was, would it be also possible to share the mix, like how many would be the private cars, how many Taxis, LCVs, three-wheelers? How does the mix look in the new conversions?

Yes. So about 70% to 80% would be private cars. As far as taxis are concerned, you don't have conversion from taxis because these are diesel taxis and generally people dispose of the diesel vehicles and they buy new CNG vehicles. As you know, the conversion of diesel taxis doesn't happen. So the -- and most of the conversions from the diesel to the CNG taxis have already taken place. Having said that, we've got these -- the LCVs, which have come on to CNG, that is a very interesting segment, which has come up for the last 1, 1.5 years. And in that is the Chota Hathi, et cetera. We are seeing a very good improvement and interest on CNG for LCVs.

How many percent would the LCV at this point of time in new conversions, incremental conversions? Would it be 10% of the total conversion?

Conversions generally don't happen in the LCVs. Basically, people phase out their diesel LCVs and they are buying new CNG LCVs. The conversion happens basically on petrol vehicles.

Understood. Sorry, I used the wrong word. And what I meant was would LCV be amounting to 10% of your new additions on a monthly or a quarterly basis?

When you said 10%, do you mean the new LCVs which are being purchased, right?

No. Total vehicles getting added into the CNG fleet, so including all the vehicles. So there is a run rate of 10,000 vehicles per month. So would be -- LCV be 1,000 vehicles in a month or a quarter?

Okay. Okay. I think it would be somewhere around 10% to 15%.

[Operator Instructions] We have the next question from the line of Harsh Bohra from VT Capital.

So my question is relating to the new committee that has been set up for the revision of the gas pricing. So I just wanted to understand what are the expectations you are having from the committee. And when it is likely that the committee will submit its report?

So it's again a very important question you asked, and I myself referred twice. So this committee has been constituted by Ministry of Petrol & Natural Gas, which is being shared by one of the most renowned economist, Mr. Kirit Parikh. There is -- MoPNG is a member there. And all other stakeholders, including CGD entities are getting represented through Association of CGD Entities, ACE, body. Committee is currently very constructively engaged with the two objectives. One is that we need to make sure that India achieves a higher and higher production of a domestic gas so that we have self-reliance, which is the government target. And the second is that CGD has witnessed a very good movement of building in the last 2, 3 years, that momentum building has to rather grow further. So there should not be any downward trend in the CGD growth. So with these two objectives, committee is very constructively discussing. We are expecting, as a CGD entity, I would say, because one of the terms of reference is to provide PNG and CNG at affordable price. So we are expecting there will be good discussions and deliberation and recommendation on the pricing side. Committee is expected to submit a report in a few -- very soon, I would say. But timeline is not known actually, because the discussions are still continuing.

Okay. So sir, is it fair to assume like as and when the report is out, so the new prices will be applicable? Or will it be applicable from the first half of FY '24?

The process would be that this has been constituted by MoPNG or the report would go through the MoPNG. And then the government process of approval would take place. And we are expecting as a CGD entity like the way we see, even government is looking forward to make sure that at the earliest we should approve the recommendation. So we are expecting that with a good speed, government will internally complete the process part and then take a view on the recommendation. But it will not be -- committee is not empowered to announce new pricing on new regime. It will go to the government.

Okay. Okay. Got it, sir. Sir, and second question was regarding the government that has -- like our government is focused on boosting the EV space and the consumption of renewable energy. How do you expect the same to impact your business, given that you are one of the players to make the largest investment in the CGD space?

So again, this is a very interesting question, and I keep getting this question in almost all forums. So if you see a stated EV policy of government, it is 30-30. By 2030, government expects the new vehicle, 30% would be an EV. 70% still will be non-EV. And entire mass of an existing vehicle would be available in CNG. So India is a very vast country. As an ATGian, we have been always stating that we will see a mix usage of the fuels, all fuels will coexist. There will be petrol. There will be diesel. Maybe slightly more getting down, but there will be CNG. There will be EV. There will be a compressed biogas. In future, there could be even hydrogen. So if you see our strategy, we are focusing very strongly and with -- on the CGD side, but we have also incorporated two companies, one on the EV side, another on this compressed biogas mix. So we are taking advantage of our strength. When EV grows, our EV business will grow and the 70%, even if 30% is fully achieved, there is a target available to us for going for the CNG or a compressed biogas. So we don't see this as a threat. We rather see this as an opportunity.

Okay. Got it, sir. Sir, and one last question. like you have owned 14 geographical areas in the 11th round of CGD auction. So I just wanted to ask like what is the progress of the new GAs? And what is the incremental volume that you're expecting from the -- from this new GAs?

I could answer, but I'm asking our regional head R. B. Singh who has been working on 11th round to give you the response.

As far as this 14 round -- bidding round is concerned, we are focusing on early monetization and you know CNG -- establishing CNG stations will be the fastest one. So focusing on this part, we have identified around 466 COLO that is from OMC part out of which we have already applied around 100-plus for PESO approval and construction is going on for around 20 numbers. So we are expecting, in most of the cases, taking gas from nearby GAs, which is already charged. On the other part also, we are also focusing on the pipeline. We did survey. We are going with the detailed engineering part. And we are hopeful of starting gas pipeline laying in some of the GAs where gas is available.

If I may supplement what he is stating that as we got 14 geographical areas and we did extensive and aggressive work in 9th and 10th around, similar approach is being adopted by Adani Total Gas in developing and intensifying infrastructure development in all these 14 geographical areas, starting with CNG, but simultaneously focusing on laying pipeline so that we are -- we provide access to the consumer for a PNG as well very soon.

We have started identifying the land part also, land for CGS.

Yes. And lastly, like, how many of them will be operational in the next one year?

You are asking from 11th round?

Yes, yes, yes.

CNG part, almost I think we are able to operationalize most of the 14 GA within a year. CNG will be started either from the available gas in the GA or from outside. But we are hopeful of commencing each and every GA within a year.

[Operator Instructions] We have the next question from the line of Harsh Maru from Emkay Global.

So my first question would be on the performance of the JV. So we see that the earnings of our INR 20 crores have come in. So there seems to be a turnaround here. So if you could give some key drivers of this performance. The next question would be that the Kirit Parikh Committee, there was a flash on CNBC today. So that said that the price cut of approximately $2 per MMBtu is something that is getting evaluated. So assuming such a cut comes, what would be our strategy in terms of passing on the benefit to the consumers? And the third question is on the CapEx. So if you could elaborate a little on the FY '23 CapEx targets? And do we see any kind of change in our targets considering macro challenges in terms of LNG pricing? So these would be my three questions.

So let me first answer your Kirit Parikh Committee response, and then I'll hand over to Parag, our CFO, to give you perspective on the JV performance and other questions. I already responded on Kirit Parikh that there is a constructive engagement of all members. These deliberations are happening. So it would be difficult for us as a responsible entity to comment on a media news where they stated $2 or whatever. I have not seen it, but I take it what you are saying. I think my request would be to all our investors and participants and in general to all that we should wait for the recommendations to be submitted to the government and government once approves, I think then we will see the fine print and then accordingly -- you have seen us very responsibly, we come back very quickly whatever benefits could be passed through to the consumer. We saw, as we stated in our previous response when government of Gujrat reduced the VAT, the same very -- I think it came quite late evening, but on the same evening -- midnight, we responded, and we reduced 100% VAT and benefit was passed on to the consumer. So my request would be that we wait till this whole process is finalized and government announces whatever new recommendations are announced. And you will see us responding it with a speed which we always do, right? With that, I will now hand over to Mr. Parag to respond to your other questions.

As far as your query of IOGPL is concerned, IOGPL is on its way of continuing to build its trajectory in its volumes and which is also resulting in terms of improved financials over a period of time. So yes, this has been one of the quarters and the half year where we have a decent share on the consolidated VAT contribution, which has got added to ATGL. As far as its volumes are concerned, its volumes have actually grown on a Y-o-Y basis to slightly over 40%. And even on a quarter-to-quarter basis, it has grown by 2%. So this is one of the reasons on why we've seen the contribution being higher. Besides that, it has also taken advantage of the gas volatility in the market, and it's also traded a portion of the gas volume in the market, and that's also resulted in an additional profitability. So both these put together have resulted into better results for IOGPL. And we do continue to expect volumes growing over a period of time as it starts building its infrastructure.

See, I would only add what Parag has stated that the way of the strategy has been for ourselves, we have been guiding the same to our JV company, and we see IOCL completely, there is a meeting of minds that we must continue to grow this backbone infrastructure. This is for generations. This upswing will keep coming temporary in between, and we will overcome those things. So I think now since they have built a very good, strong backbone infrastructure of CNG and PNG and last mile connectivity, we do expect this upticking to continue and grow further. Your third question if you could please repeat?

It was on the CapEx. So if you could elaborate on the FY '23 and '24 CapEx plans? And have there been any kind of change in the strategy in terms of CapEx infrastructure given the macro challenges?

So while we've always maintained, we are building this CapEx for a license, which is for generations, for more than 20, 25 years. And therefore, we continue to incur our CapEx, build our ecosystem. Within that, as you may have heard a little earlier, for example, when we are moving on to our 11th round CapEx, focus is to make sure that some of the CNG stations are accelerated so that we start building some volumes, operationalize it, along with our CapEx spend. In line with this, we continue to maintain our CapEx in the number of around INR 2,000 crores to INR 2,500 crores on an annual basis. So that's the number you will see as an overall CapEx being spent, being incurred to spend on a year-on-year basis. So this INR 15,000 crores the number that we mentioned that we are likely to incur over the next 7 to 8 years. We see the first 2, 3 years picking up a little higher, and then it will start stabilizing over a period of time.

So on your one observation whether there is going to be a change in our CapEx over time because of the current challenging period? The answer would be no. As we stated that both the promoters are fully aligned that ATGL should continue to build a strong backbone infrastructure. So that CapEx or not plan shall continue because we see a very positive side of a CGD story that there is going to be a very good volume growth in the future. We are a catalyst for climate change. We are a catalyst for government's vision to grow from 6.5% to 15%. So we see a very positive perspective on the CGD growth. and all the very best.

[Operator Instructions] We have the next question from the line of Yogesh Patil from Centrum.

Could you please share a breakup between the PNG domestic and the CNG Industrial volumes for the second quarter FY '23? It would be really helpful.

Any other question, Yogesh?

On the same line, as of now, the propane prices are much, much lower than the PNG industrial prices. So have you seen any switching of PNG industry consumers to propane? Yes. That's two questions.

I will let Parag respond to it. I'll come back to you on propane as well. But Parag...

So I think in terms of the segment breakup, CNG constitutes for the quarter two of close to around 60%, while balance 40% is within the PNG segment. As always, industrial segment within the PNG dominates almost 75%, whilst close to 18% to 19% is on the domestic side. Commercial is the residual of about 5%, 6%. As far as growth is concerned, like I was mentioning a little while back, overall volumes have grown. CNG experiences have been good. On the PNG side, whilst domestic and commercial have grown in a quarter-to-quarter from a year-on-year comparison basis, industrial, we have been calibrating given the price volatility. We ourselves have been continuing to curtail as far as supply to some of the end industrial consumers are concerned. So that's where you would see a small dip as far as industrial volumes are concerned.

On the switching over from natural gas to propane, we are not seeing a very significant -- because our customers are very small, as you said as the small-scale and medium-scale industries, they do see a very stabilized prices, and we have been stating that we have been calibrating the prices. So everybody is looking forward the moderation of the prices, which we are now seeing in R-LNG, the trend has started. Our overall portfolio also is helping us to continue to give them kind of prices, which they could continue for quality products. So we have now seen a very significant switch from natural gas to propane, which we could report to you. Okay.

Can I ask one more question regarding the PNG industrial prices? So could you please share PNG industrial prices -- current PNG industrial prices, if possible?

Yes. We'll share with you, but I think it's again on a GA-by-GA basis. Therefore, with taxes, without taxes, so many things are there.

It's approximately about INR 65 a cubic meter on an average if we see.

Okay, sir. And the last question from my side. In the longer term, do you think the propane is a kind of a risk to PNG industrial based on the current price differential? And most of the industries which are already switched or installing propane receiving infrastructure at their gate. So in future, whenever there would be any opportunity, industries will switch to cheaper fuel -- whatever cheaper fuel, whether it will be an PNG industrial and propane. So don't you think any industry which have installed -- which has installed propane receiving infrastructure at their gate. So in future, that could be a kind of a threat or risk to the PNG industrial. They can consume the propane also. They can consume the PNG industrial also.

We have understood, Yogesh. I think Rahul will respond to you.

Thank you so much. See, we have seen that our customers, the alternate fuel, there are very few customers whose alternate fuel is propane. They are actually using either furnace oil or as LSHS. And we are lucky that our customers are very sticky customers in the sense that they have been using natural gas for a long time and they understand the benefits of an uninterrupted supply, continuous supply of natural gas. So we have seen that at adverse times also, which has happened during 2022, we have seen they are very comfortable to pay a premium of somewhere between 10% to 20% on an energy -- on a natural gas equivalent -- energy equivalent premium, they are happy to pay. And even on a temporary basis, when they see that the premium goes up to say about 40%, et cetera, they understand that this is a cycle. And while we do have conversations with them and we communicate with them and we continue to engage with them to give them the comfort that there is a cycle, they do wait for the cycle to turn around and for the linkage of natural gas to turn comfortable once again. So we are not really worried. We have sticky customers, and we know that they have a preference for natural gas, even at times when there is a certain premium vis-à-vis alternate use.

So the investors are more worried from the side if the gap price differentials between the propane and the PNG industrial continues for the longer period, then the propane receiving infrastructure costs can be recovered within a year or less than 2-year period of time. So the industries those who are right now consuming a PNG industrial can definitely think about this if the price differential continues for a longer period. So that kind of a threat -- so that is what my question is. I mean already...

I think, Yogesh, please understand, it is not so simplified that people will just have 1 year or 2-year payback. It depends upon the size, what they are producing, what is the whole supply chain on the reliability of propane. And we have to also keep in mind that while natural gas prices are volatile, it is not a guarantee that propane will remain the same price. So I think as Rahul was saying, rightly that consumers look at it that how engaged we have remained with them, we have been continuously working with them and whatever benefit we could pass through various other contractual way. As a private entity, we have been working with the consumer. So as we are experiencing and you are seeing from our volumes, that testimony is the number of volumes which we are giving it to you. The volume has grown. So I think consumers are using PNG. They are used to use PNG. They have a confidence in us that very soon as the opportunity arises, we would go back to them with a better pricing. And as we stated that we are working extensively on developing a very good portfolio so that this volatility also is taken care of to the large asset in the future as well. So I think we are seeing -- Rahul's statement is correct because he's dealing on a day-to-day basis, that there is a stickiness of our customers to natural gas supply.

We have the next question from the line of Harshraj.

Sir, one question I had in terms of the segments. So if you could just share what would be the maintenance CapEx for our 4 core GAs. The existing GAs has contributed about 80% of the volumes. And will it remain same or is expected to go up?

So I think -- Harshraj, I think the large part of our incurrence is in terms of buildings and network. So in terms of newer pipeline network, CNG stations. So that's where really the significant portion of CapEx is being spent. As far as the maintenance CapEx for the existing geographies is concerned, primarily, it is the last mile connectivity in terms of adding newer connections. So you should not expect any large CapEx coming from the existing geographies, Yes, we continue to see increasing growth as far as volumes are concerned, even from some of the mature geographies. And as a thumb rule today, we'll end up spending about 15% to 20% as far as the existing geographies are concerned, which I'm referring to the older ones, whilst the newer ones will contribute almost 75%, 80%. And this ratio will only skew further and further towards the newer geographies with passing time.

Right. So I had another question on the sourcing part. We have mentioned in our presentation that we source some volumes from IGX. So we're also a member of IGX with holding 5% stake. So is there any commitment on the volume in terms of sourcing? And if you could also share what kind of volume we show from Total during the quarter?

So firstly, on your question on IGX. Absolutely not, no commitment because you are there as a 5% shareholder, both are very distinct relationships. ATGL remains very, very active in terms of seeing any volume opportunities even on the IGX market, and that's how we are sourced. Rahul, you would like to add something?

On IGX, I'm in agreement with you, Parag. As far as this quarter went by, to buy from Total, we did purchase in bits and parts but there were several opportunities to buy domestic gas, to buy ceiling gas from the market, and we prefer to take those opportunities and to put since they were at a ceiling gas price around $9.92 and then 12.46%. So we prefer to purchase those very optimally right gas and include them into our portfolio rather than purchasing R-LNG at JKM prices, et cetera.

Okay. So I have the last question. Just wanted your view. Now that major states where the gas is consumed in terms of the CNG segment have reduced the VAT below 5%. So do you expect the gas would come under GST very soon?

You see, you've heard Honorable Prime Minister saying that gas should be under GST. Many states have been saying that gas should be under GST. GST and -- because this is the matter which is in the domain of a GST council, where matter has to be debated. We expect and a lot of work is going on. We expect that sooner or sooner this agenda would be taken up on the natural gas side, which is a suitable candidate on the petrol product to look at the GST, of course, all particular product could be impacted. But naturally, the natural gas is one of the candidate which is more suitable for GST in the immediate basis. So we do expect that this matter would come up in GST council as the government itself, government of India itself has stated their own position. Let's hope. Let's hope. We are all looking forward to natural gas, not because only for us, but also for our industrial consumer in particular, because when they buy gas from us, we charge them VAT and they don't get the credit. So there is a double whammy for them. When they buy alternate fuel, they get credit. They buy natural gas, they don't get credit, and natura glass is the fuel which is getting promoted by Indian government. So we hope this kind of anomalies will be addressed and natural gas will come under GST very soon.

Sir, if any closing remarks you would want to share with us?

No, I think it's been pleasure addressing so many questions coming from our participants. I hope we responded all the questions to their satisfaction. But if there is any question in your mind or your participant's mind, please do collect their questions. We'll be very happy to respond them even via e-mails or any other media. We are very keen that our investors are fully informed and they remain completely updated on all the developments which we are doing, plus on oil and gas side. So please do collect any further questions from their side. We would be and our team will be very happy. Priyansh is our IR Head. He is looking after, so you can get in touch with him. He will make sure that questions are addressed on a priority basis. Thank you.

Thank you, sir. Thank you, all the participants in the call.

Thank you, members of the management and Mr. Harshraj. Ladies and gentlemen, on behalf of Anand Rathi Share & Stockbrokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.