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

Ladies and gentlemen, good day, and welcome to the Adani Total Gas Limited Q2 FY '24 Earnings Conference Call, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, Seema. Good evening, ladies and gentlemen. On behalf of PhillipCapital, I welcome everyone to the second quarter and half year earnings call of Adani Total Gas Limited. From the management team, we have the pleasure of having with us today Mr. Suresh Manglani, ED and CEO; Mr. Parag Parikh, CFO; Mr. Priyansh Shah, who represents the IR. I shall now hand over the call to the management team for the opening remarks, which shall be followed by a Q&A session. Over to you, sir.

Thank you, Nitin. Good evening, everyone. Let me extend a hearty welcome to all our investors, analysts, funds for taking out their time and participating in today's call on H1 and Quarter 2 Financial Year '23-'24 Results of Adani Total Gas. First, let me give you the highlights on the CGD infrastructure side as on 30th September 2023. Our CNG network has now increased to 483 stations which includes 1 CBG station. Out of 483 CNG stations, 92 stations are company-owned dealer-operated, which we call it a CODO; and dealer-owned dealer-operated, we call it a DODO format. Our strategy is to continue to increase more and more CODO and DODO format CNG stations in the future. Our backbone steel pipeline infrastructure has now increased to 11,448-inch kilometer. This forms part of a backbone CGD infrastructure helping company to expand its reach of PNG and CNG to large masses across all of our geographic areas. We have added 27,873 new homes on PNG in quarter 2 and 51,801 new homes on PNG in the first half of financial year. In aggregate, we are serving 7.56 lakh homes on the PNG. Similarly, in the quarter 2, we have added 234 new industrial and commercial consumers and 414 industrial and commercial consumer in the first half of this financial year, increasing total number of consumer base of industrial and commercial consumers to 7,849. We are nearing to the 8,000 mark on the commercial industrial consumer base. With these, our pan-India footprint -- if I add our JV partner, along with IOCL, which we have formed a JV company, IOAGPL, Indian Oil Adani Gas Private Limited. If we add the numbers of IOAGPL, our CNG stations have now increased to 785 across the geographical area of Adani Total Gas 33 and 19 geographical areas of IOAGPL. Our PNG consumer base has now grown over 9 lakh homes. Industrial commercial consumers has surpassed 8,500 numbers. ATGL continues to progress on the infrastructure front, which will help in converting more and more consumers on PNG and CNG. This infrastructure growth progress has added in achieving superior all-round operational and financial outcomes. Now let me share with you the operational and financial numbers achieved by the company during this quarter 2, July to September, and the first half year, April to September. With the fast acceleration of CNG network and recent moderation of an APM gas prices by Government of India and consequent reduction in the CNG and PNG prices by the company, we have witnessed increase in the CNG volume by 20% to 136 million metric standard cubic meter for quarter 2 as compared to the corresponding quarter of the last financial year. So there is a quarter-to-quarter 20% growth in the CNG volume on the year-on-year basis. The CNG volume has increased to 264 MMSCM when we take the first half of the year. On a year-on-year basis, we have achieved 20% quarter-on-quarter and 19% on a half-year-to-half-year basis, this half year versus the last half year of the previous year. While on overall basis, company witnessed an increase in the volume by 10% in quarter 2 and 9% in first half year. In case of our PNG segment, the volume slightly declined by 3% on a year-on-year basis to 75 million metric standard cubic meter and 5% decline on year-on-year basis to 145 million (sic) [ million metric standard cubic meter ], largely due to lower alternate fuel prices resulting into lower offtake of PNG by industrial consumers. So summarizingly, overall volume has grown by 10%, CNG volume has grown by 20% in this quarter as compared to the previous corresponding quarter to the last year. On the financial front for the quarter 2 as compared to the last year quarter, year-on-year basis, revenue from operations for this quarter has stood at INR 1,178 crores. EBITDA for this quarter 2 has increased by 23% to INR 290 crores. Profit before tax and profit after tax have also increased to INR 225 crores is the PBT, INR 168 crores is the PAT, which both were up by 20% each as compared to the previous quarter of last year. For the half year, April to September '23 versus April to September '22, our EBITDA has increased by 17% to INR 545 crores. Our PBT and PAT have increased by 14% each to INR 424 crores is the profit before tax for the first half and INR 315 crores is the PAT for the first half year, 14% increase on the PAT and PBT, 17% increase on the EBITDA side in the first half year versus the previous half year. You are also aware that we have embarked upon adjacent business opportunities on both e-mobility side and the biomass side, and let me now give you some [ details ] on those businesses. On the e-mobility side, in a very short span of time, we have achieved the operationalized deal with [indiscernible] charging point -- 221 charging points across 64 locations and we have partnered with several B2B partners and there, we have installed EV charging points across India. Soon, our plan is that we will extend these 221 numbers to over 3,000 charging points on both B2B format, B2C format and e-mobility hubs, which we intend to create across the country. As I am speaking to you, over 600 e-mobility charging points are in several stages of progress. Many are awaiting for the DISCOM connections. The moment it comes, we will connect and many are under construction. So 600 more EV charging points are going to be soon added. In the soon future, we'll have 3,000 charging points. The teams are doing good work on e-mobility side. The plan is that we create more hubs also in the country. On the bio business side, you are aware that we are building India's largest biomass plant in the state of Uttar Pradesh, in Barsana. We are expecting -- it is 600 tonnes per day feedstock plant which has been planned in 3 phases. The Phase 1 of 225 tonnes per day, we are expecting that -- we are striving our best to commission in this financial year by March '24. You will be all happy that during this quarter 2, July to September, company has also won the tender in Ahmedabad Municipal Corporation, which was floated on municipal solid waste for 500 tonnes per day. We have started the work on starting the development of this plant in Ahmedabad. We are also looking forward for both formats, the municipal solid waste in several parts of the country as well as the non-municipal solid waste, which will include the agri waste, et cetera, also in the several parts of the country. We have already identified several locations where our teams are now working. Further, as a part of our strategic expand into adjacent businesses, ATGL is also looking towards expanding our footprint on LNG for transport and mining. We already started -- already identified a couple of lands and the LNG stations are now -- we work has been awarded. So we are developing LNG stations at the strategic location, and like the CNG session, we'll keep expanding the LNG stations also across the country. So as you see, the company is now becoming more and more of a mobility partner offering CNG, offering e-mobility, EV charging, CBG and soon we'll be offering the LNG for the heavy vehicles as well. ATGL has been constantly embarking upon digitalization and has created a platform which we have called SOUL, which will have standardization and automation of multiple operations across the company. Further, in the journey from customer care to customer delight, ATGL has revamped My AdaniGas app, which helps consumers to carry out all activities at their mobiles and their desktops, which enhances the customer experience and the delightness. You are all aware that HSE is the most critical aspect which as a gas company we will take care. On the HSE front, we have been adhering to highest safety standards and safety is a precondition to work, as we always announce. We have continued our holistic approach of enhancing the training to the workmen, of the contractors, our own employees. All our stakeholders, partners are being trained. Training and safety programs are being run to ensure that we build a safe and reliable CGD infrastructure and maintain a track record of a 0 fatality across our all geographical areas. ATGL has besides business of CGD, e-mobility, biomass and LNG for trucking and mining, we are also now -- we have been focusing on the ESG program: environmental, social and governance program. We have built a very strong platform framework which has been fully backed by our Board of Directors and our promoters. This is enabling us to create a sustainable growth with collaborative development of the community. Lastly, I would like to acknowledge and be thankful of the role played by our shareholders, analysts, fund houses, consumers, dealers, suppliers, business partners and all of our stakeholders and more importantly, our all employees, whether they are in corporate offices, on sites, project offices, we really compliment all our employees for continuously quarter-on-quarter, giving superior physical and financial performance. Thank you very much.

We can open the floor for the Q&A.

[Operator Instructions] We take the first question from the line of Mr. [ Amit ] from UBS.

Sir, I have 2 questions. First, relating to the LNG for transportation. So can you give us the size of the market and what kind of market we are trying to cater here? Can we use our some of the existing stations for LNG for transportation or you have to develop the cases from the beginning or from the scratch?

Okay, the second question there?

Yes, and so, second question is relating to the recent developments on the EV side in Delhi because we are also having a different GA in that area. So what do you read of that policy? Did it have any impact on Faridabad GA as well?

So thank you, Amit. I think both the questions are very relevant and pertinent and let me try and give you the answer for the first: LNG for transport. I think you have seen us giving full impetus on the CNG and now we are spreading CNG. CNG would cater to large number of formats on the vehicle, as you are aware. If you see the size point of view, actually 40% of our diesel is consumed by the heavy transport vehicles. That's the size, now how much market will get converted, we have the Energy Transition Committee report, which says that we should move towards LNG for heavy vehicles. So that recommendations are with the government. But what we are also seeing is a desire in the corporate world for decarbonization. That perhaps would help us to grow this market. We are beginning now, and as we enhance our touch points with the corporates, whether it's the FMCG companies or whether any format of the business. We are finding there is a desire that the corporates want to move away and convert, of course, as a starting with a pilot and then moving towards the entire fleet. They are also looking for the value proposition that what we are going to be offering because they have certain freight costs today. There are multiple players involved in this. It is the transporters who are involved, the fleet operators are involved and then the corporates are involved. Corporates are not owning these heavy vehicles. So we are working out all nuances of these businesses, and we have developed our blueprint. So we feel that this is -- once it takes the momentum and we bring the right value proposition in the tender, I think there is a good potential on this side of developing LNG for transport and the mining businesses. We can see international experience. I think there is a huge momentum in international side that corporates and the transporters are going towards the LNG for heavy vehicles, because LNG does provide you a very high mileage per fill. So that's the part on the size side. Whether we will develop separate station or we will use our own infrastructure, it will be the mix of 2, because wherever we are developing L-CNG stations -- in many places, we are developing small-scale LNG plants because their pipelines are not reached currently. Those places, certainly, we would take the full benefit of that location to set up and depending upon the market potential, we will certainly take the benefit of our location available. LNG is available there, in any case, LNG is coming, so we would set up LNG station. We will strive that we develop the market in the neighbourhood so that we use that place. But depending upon how do we get the translation of our current demand which we are expecting in India, if we are able to convert several corporates and we are ready to provide a customized or dedicated LNG stations as well as we set up open-to-public LNG stations. So both formats we will run, B2B and B2C, we will be able to set up. This is the beginning of this business development. We are seeing quite positive part of the whole touch points, whichever wherever corporates we are going, our teams are working, our partners are working. We will update you in the next couple of quarters as we see the growth in this business. The second question was your -- on the EV side. I think there is a focus on this policy from Government of Delhi. I think what we are seeing is there is a market for each fuel. There is a market for the fuel, which we can see that across the country. As I said to you, there are vehicle formats, which would go for a CNG. There are value proposition, which we are offering versus EV on the CNG side. So we believe that we will coexist. On the CNG we will have a growth. We could see there is a large number of vehicles which are available, which is -- millions of the existing vehicles are available for us, which is a market for a CNG. So in our view, while Delhi government has brought the policy, it is a choice of the customer. We believe, depending upon the value proposition which we bring on the table for different type of formats of vehicle as well as the customers, we would be able to continue to sustain the growth in the CNG market.

Sir, what kind of CapEx plan or targets you're looking for LNG for transportation? Because the market potential could be pretty big here. My sense is that you won't be limited by the GA restrictions which you have in the CNG business today, to grow depending on where the demand is. So do we -- are we putting any targets on the number of CNG stations or CapEx here?

So I think you are doing a bit of good homework on keeping yourself updated. I think, you are right, there's a huge opportunity. But as you have seen us every time in the investor call or media call, we have been saying as the SPV of 2 very large promoters, Adani Group and TotalEnergies, I think we have a very robust capital management and allocation process. Once we develop this blueprint of this business, as we are starting now, you will hear us in the next quarter's, or some quarter's call that capital allocation once the business is [indiscernible] would not becoming the concern. Initially anyway, capital allocation requirement would not be very large. So we anyway have a good capital allocation for our business side. So I think putting numbers precise currently may not justify depending upon how the business is unfolded. But my request would be we would have a discussion in the next couple of quarters. We are focused on developing this opportunity. As I said to you that we have already identified -- and some of these stations, our LNG stations currently are under construction. So we hope we will first provide -- it's a chicken and egg, whether we provide the stations or people will convert the vehicle. I think we are taking that lead as a company that we would set up LNG stations. Then simultaneously we are talking to the corporates. We are seeing good traction around that. So I think you wait for getting our numbers. Current capital allocation is not as material as we are putting into CGD as well as other business opportunities. But here, there will be no restraint or constraints for the capital part. As we business requires growth, we will be putting the allocation on the part.

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

In terms of your previous remarks that you believe that the CNG will coexist with EV, but that the same products [indiscernible] in the different vehicle classes. How do you see about achieving the penetration level within the GA? What should we be planning it? Is it 35% to 40% per penetration level, a good level to optimize to or where we develop our infrastructure? Or should we look at something like a 15% to 20% sort of a penetration level for the GAs while planning the infrastructure?

I think you have a very pointed question, but let me try and respond to you much better way as well. Actually, see, you saw the growth. EV has been there now for couple of years, FAME 1, FAME 2. There's a lot of exuberance on EV for the supply side incentive, demand side incentive, PLIs, I think we have seen -- and we are ourselves on the e-mobility side. We want to see that opportunity of e-mobility side. When I make a statement that we will coexist, that testifies you, Adani Total Gas actually is in e-mobility as well as on a CNG and we are putting investment in both sides. So I think we believe that we've seen this growth of a quarter to 20% over the previous one, while the EV actually is expanding. So clearly, India is seeing a mixed basket of a fuel which are going to be used for a pretty long time, we would -- we are seeing MSHSB (sic) [ MHSB ] also is growing, we saw EV growing, we are seeing CNG growing because Indian market is growing and people are getting more choices. So I don't think so that we should be putting the precise penetration number. I think market exists for EV and market exists for CNG and a big market exists. Since you are analyst and I'm sure you are looking at the OEM exuberance on CNG side as well. While a lot of EV models are coming at the same time, we are seeing several CNG models and CNG formats are being introduced. But I think we all have to see that these 2 fuels are not choice for a customer and people are opting it. Penetration level will be healthy from both the sides, and Adani Total Gas is very well placed to seize these both opportunities. So we are investing heavily. You have seen that our numbers investment is going on in the CGD side, despite our friend asked the first question in Delhi EV policy, we believe market will develop for CNG and market will develop for EV. Similarly, in other geographical areas, our investment on 11th round, 9 round, tenth round, existing GA, everywhere it is continuously going on. So to my mind, I think we should not put the penetration number in those precise range as you suggested. I think you should see the positive aspect of both the fuels, and Adani Total Gas is poised to see the growth in both EV side and CNG side. Maybe my colleague, Parag may want to add something? Parag, or anybody wants to add?

I think transportation fuel is dynamic today. Very exciting. Therefore, you see even at ATGL, we are spreading ourselves across all multi-fuel categories. So you could see maybe EVs having a stronger penetration in the 2 wheelers. CNG could continue to remain as far as the amount of 4 wheelers are concerned, LCVs are concerned. We are setting up LNG stations, and that's primarily because we see on the long-haul trucks potentially a segment where LNG could get adopted. So again, coming back, too early to put any penetration numbers across all segments, but there could be a customized fuel for different segments within transportation.

So Kirtan, I think you are happy with this answer or you need some more supplementation from our side? We could -- we'll be happy to respond. Hello?

Hello?

Yes, Kirtan was asking some question. I don't know whether he lost...

Mr. Kirtan, does that answer your question, sir? Hello, Mr. Kirtan?

Maybe he lost the connection, looks like.

All right, we'll move on to the next question. [Operator Instructions] We take the next question from the line of Mr. Nitin Tiwari from PhillipCapital.