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

Ladies and gentlemen, good day, and welcome to Adani Total Gas Limited Q1 FY '26 Earnings Conference Call. We have with us today Mr. Suresh Manglani, ED and CEO; Mr. Parag Parikh, CFO; and Mr. Priyansh Shah, Head, Investor Relations. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suresh Manglani. Thank you, and over to you, sir.

Thank you. Good morning, all. Thank you for participating in this conference call. Let me extend a hearty welcome to all our investors, analysts, funds for taking out their time and participating in today's call, which is for announcing the result of Adani Total Gas Q1 FY '25-'26. I'm happy to share the operational and financial numbers of Adani Total Gas Limited for the quarter ending June 30, 2005 (sic) [ 2025 ]. Let me begin sharing details on our network expansion during the quarter. Our CNG station network has increased to 650 stations. Out of these 650 stations, 124 CNG stations are either on CODO, Company Owned Dealer Operated or DODO, Dealer Owned Dealer Operated format. And as we build more CNG station, we are looking to add more CODO and DODO outlets as part of our expansion strategy. Our steel pipeline infrastructure has now increased to 14,197-inch kilometers. This is the backbone of our CGD infrastructure, which will help reach large masses across our all geographical areas to supply PNG and CNG. With the addition of close to 27,000 new homes on PNG supplies during this quarter, we are now serving almost 1 million domestic connections. In the industrial and commercial segment, which are our B2B users, we have added 157 new I&C consumers during this quarter, which has taken our base increase to 9,456. This covers diversified industries and commercial establishments. On our e-mobility business, I'm happy to inform you all that our footprint is now continuously increasing. As on 30th June 2025, we had installed 3,801 EV charge points across 26 states and union territories with installed capacity of 39 megawatts. Similarly, on the bio business side, we had already commissioned our Barsana plant, and now we have set up first DODO CBG station in Hodal, Haryana. Now if I may take it, our performance along with our 50-50 JV with Indian Oil Corporation, namely Indian Oil Adani Gas Private Limited, our consolidated nationwide CGD network today stands at 1,078 CNG stations, 11.7 lakh homes on PNG supplies, 10,640 commercial and industrial consumer getting supply of PNG and our backbone infrastructure, our steel pipeline together has increased to 25,829-inch kilometer. Collectively, as you are all aware, we are serving 53 geographical area, 125 districts, out of which 34 geographical area and 95 districts are being served by Adani Total Gas and 19 geographical area, which translates into 30 districts are being served by our JV company, IOAGPL. On the operational side, Adani Total Gas has achieved during this quarter, robust year-on-year volume growth of 16% to 267 MMSCM, which was largely driven by increase in the CNG volume by 21% to 185 million metric standard cubic meter MMSCM and achieved 82 MMSCM of a PNG volume, which grew by 6%. This increase in the volume was achieved despite our higher gas cost because we passed through very calibratedly to the end consumers. This higher gas cost was on account of, as you are all aware, lower allocation of APM gas which got replaced or offsetted with higher priced new well gas and high-pressure, high-temperature gas. And we also added some portion of domestic or RLNG gas, which was on the market price purchased. As a result of our continued efforts to build a robust gas sourcing portfolio, enhanced operational efficiency and very highly focused area of digitalization, automation, robotization of our processes, we have ensured 100% reliability of supply of PNG at a prudent pricing affordable to both PNG and CNG consumers. On the financial performance side, during the quarter, Adani Total Gas revenue grew by 21% to INR 1,491 crores on account of, as I stated, higher volume, primarily which was driven by CNG segment. Despite increase in the gas cost, we maintained a prudent pricing strategy with calibrated price adjustment to ensure volume grows on a sustainable basis. As a result of all these efforts, a team ATGL has delivered an EBITDA of INR 301 crores for the quarter April to June '25-'26. Our profit before tax for the same quarter was INR 219 crores and the profit after tax was INR 162 crores. Further, to enhance customer experience and offerings, you are aware that during this quarter, we have entered into an agreement with a Jio-bp, which sells MS petrol, HSD diesel to leverage each other's infrastructure to provide a complete range of high-quality fuels to the consumers. This tie-up will help us accelerating addition of DODO and CODO CNG station with Jio-bp fuel across all our 34 geographical area. In addition, we would also get benefit of our e-mobility business by setting up EV charge station -- EV charging station at a strategic location. Now let me touch on our ESG front, Environment, Social and Governance. I'm happy to report that with the dedicated focus on sustainability and ESG, our ESG rating has been improved by CRISIL from Adequate to Strong. We have been rated at CRISIL ESG 61. In closing, I would like to say that we remain optimistic about our growth that shapes us shape India's energy transition journey, and ATGL is committed to play a leading role by providing affordable and reliable low-carbon energy solutions for homes, industrial and commercial segment as well as for transport mobility segment. I would like to acknowledge and be thankful to our shareholders, analysts, fund houses, consumers, dealers, suppliers, business partners and at the first priority, our employees for providing trust and continued support and putting extraordinary hard work. Thank you.

[Operator Instructions] First question is from the line of Varatharajan Sivasankaran from Antique Limited.

I had 2 questions. One, with regard to the visibility of this APM deallocation, they were supposed to give a 6-month kind of a visibility. Is that system in place? Are we getting some kind of a signal that they're going to give us sufficient notice to cover our requirement in case of deallocation?

Yes. I think our gas sourcing head, Ravindra, will take this question. Ravindra, please.

Yes. So they have agreed upon giving enough notice so that everybody can plan the forfeit and the shortfall demand what they see. And it is under process. And definitely, it will be in place in due course. Earlier, it was very short notice that has been extended, but they are trying to extend it further. So enough time line is given to the requirement of CGDs.

Yes. So lately, we have seen the price of CNG vehicles vis-a-vis their petrol counterparts has actually gone up a bit. Are we seeing any impact of that in the conversions or adoption of CNG vehicles in your GAs?

No, I think, Mr. Varatharajan, on the contrary, I think our belief is it is not the price of alone CNG vehicle. This is a normal increase, which takes place by OEMs due to various factors. And that has a slight implication on CNG vehicle. But otherwise, the difference between petrol and diesel vehicles are being maintained as it used to be because there is a CNG kit and there is a tax on the CNG kit as well. On the point of a weather impact is there, but if you see, as I stated also in my announcement of a result that there is actually a volume growth of 20%, 21%. And this is across, if you see industry, good healthy growth is coming. There is a good healthy booking of CNG vehicles and as well as the conversion. So in fact, we are seeing a good traction of a CNG vehicle coming on the roads.

Just to add to that, in terms of some data points of registration, the CNG registrations have been growing. So if I were to look at from FY '23 to FY '25, registrations in FY '23 grew by 12%. These are more from India overall numbers. In FY '24 grew by 15%. And in FY '25, it grew by 17%. So on one hand, you are continuing to see registration, which is effectively newer conversion of vehicles. And as we just stated, even in terms of our own existing fuel mix, we are seeing CNG as a dominant fuel. 65% to 70% of our composition is coming from CNG fuel. And that's primarily because of the growth that we are seeing in this segment.

If I have one more question, just a question. Do you think in the case of commercial vehicles, be it light or medium heavy commercial vehicles, when we look at the price arbitrage vis-a-vis diesel, what is the optimum level you have seen beyond which we see some amount of pushback? I mean, is it more like 10%, 8%, 12% at the absolute price level?

See, I would say, Varatharajan, I think there are multiple considerations which gets into when people decide to go for commercial vehicle on CNG. One is, of course, efficiency or price differential between CNG and HSD, but also is driven by several organizational objectives. If organization has a commitment on emission norms to be followed for their exports, et cetera, they are taking commercial vehicle on CNG. So I think there are multiple factors which are playing. On the efficiency side, of course, everyone is expecting a bit higher efficiency. And that's the reason if you see, we have been stating that we are calibrating our prices, though the APM allocation has come down to almost 36% for CNG, right? And this has been replaced with new well gas, HPHT and we are buying additional gas to meet the consumer demand. But our pass-through has been very calibrated. That's the reason there is a slight dip if you see on the net profit at the end. But that is absolutely fine for us as long as we see growth traction is happening and conversion of vehicles across whether it is passenger or the commercial takes place. So we are seeing good traction. And the consideration is always saving plus various corporate objectives on climate change or emission commitments.

[Operator Instructions] Next question is from the line of Yogesh Patil from Dolat Capital.

Sir, considering a two zonal tariff structure, what would be the impact on your gas cost at a company level? And if we break down the gas sourcing, then could you please share the details how much portion of a gas comes in the Zone 1, Zone 2 and Zone 3, if possible?

So Yogesh, first, I think I must thank you for being a regular participant. Invariably, we see you coming. And also more important, I see that you raise your hand first, you ask a question. And I would encourage you to ask as many questions as you want to ask so that others also get the full benefit and keep asking such tough question as you are asking now. I think on the zonal tariff side, the tariff clarity is yet to come. Currently, the existing regime is continuing. PNGRB has notified that August month will continue to have a similar arrangement as it is hitherto, and they may come with a new tariff, which regulation they have passed. Now you are aware that from 3 zoner, they have now -- the regulations have been modified to now put in place 2 zones. So the third zone has gone away, Zone 1 and Zone 2. And the good news is that they have also stated in the same notification that for CGD, for a home PNG as well as CNG, which is the priority segment for which we get APM, there will be only one Zone 1 tariff irrespective of a distance. So it means even if I take the gas now from Gujarat to, let's say, even the -- our Bhadrak, Odisha areas or any geographical area, which could be distance of, let's say, 1,000-plus kilometer, the tariff will be Zone 1. So this is a good news for the CNG segment that PNGRB has taken this very noble cause besides MOPNG and the government supporting CGD growth. This would be a positive development for us. However, we are yet to see what is going to be the revised zone tariff, if at all, they are going to revise. Currently, you are aware the zone tariffs around INR 42. So we need to see what tariff comes. Depending upon the tariff regime, we will -- and largely, in our case, largely volumes are in Zone 2 which is, I think, around -- what's the tariff Zone 2? INR 80, roughly around INR 80. Now we need to see what tariff comes for a special Zone 1 tariff for CGD. But we are expecting a moderate increase from current INR 42, and it will be a very good development for a CGD segment to grow. And we -- as we have stated, we are always looking forward to make it CNG and PNG more and more affordable, where our focus, as everyone is aware, is to drive volume and wider base our consumer base.

Sir, as you mentioned, this would be a positive for us considering most of the volume is shifting into the Zone 1. Could you quantify any amount which you in-house estimate that would be a kind of a saving on the gas cost side because the gas cost will come down? If you...

So I think, Yogesh, as you understand that as a publicly listed company, it will be not right to hazard a guess. We don't know what is the revised tariff, which is going to be coming. But we also know for sure that INR 42 and INR 80 difference is quite wide. And we are expecting as we get engaged with all the stakeholders, we are expecting there will be some moderate increase because ultimately, everybody's interest has to be taken care. The volume from Zone 2 will shift to the special zone. So I think it's still a lot of working is required to be done. PNGRB is working. I would urge you and all the participants to bear some patience with us. We would come back with correct implication positive for us as we receive the numbers, finality of our numbers through the PNGRB notification. That would be the right way. Today, if I give you some number, it will be preempting what PNGRB is going to be doing it as per our assessment, which may bias the entire thing.

Okay. Sir, next question is your PNG sales volume is only 6% has grown compared to the last year. Are we facing a volume growth challenges on the PNG industrial due to propane? And if we get the PNG industrial and the PNG domestic volume breakup, that would be really helpful.

So I will -- Yogesh, it's a very good question you asked. I will hand over this to Parag and Ravindra. But prior to that, I'll tell you, CGD being a last mile connectivity to several type of a customer, domestic commercial industries, is there also is a seasonality which plays. The past 6 months or the past quarter was a bit of a winter month where we have a lot of consumers using water heating through a gas geyser that enhances the consumption. So that had some implication in this quarter. So seasonally, if you see, there is a good growth. Quarter-on-quarter, you will see there will be some sort of an attraction, which is not supporting because of this seasonality part. On industries, you are absolutely right. This is -- the alternate fuels are certainly playing its role, and we are also continuously working to bring several marketing interventions, including developing our robust gas sourcing so that we continue to work. We definitely feel optimistic that given what we are doing now on the gas sourcing side, we would be better competitive as we have always been, and we will be able to give a good value offering to our industrial consumer as well. But yes, many of our consumer who resorts to use coal or solid fuels, it will be difficult to compete with a solid fuel. If the customers are deciding to use more cleaner fuel, ATGL will be the choice for them in our geographical area because our supply is -- our pipeline infrastructure is now very well laid across all geographical area. I will actually give it to Parag and Ravindra to add and give you a breakup.

Thank you, Yogesh. So I think as was explained, I think we continue to see a Y-o-Y growth as far as even the PNG segment is concerned. Whilst, of course, winters tend to get a little higher consumption. So the immediate quarter preceding analysis may not give the complete correct picture due to seasonality correction. Overall, PNG segment has grown and industrial more specifically has grown by a little over 5%. So that's the growth rate that we've seen even on a Y-o-Y basis on the industrial segment. Similarly so, commercial and domestic segments have also been growing. And that's where we see this traction coming in. Yes, as I said, seasonality plus a little bit of an alternative fuel, and we continue to keep engaging with the customers to see how this can be accelerated.

Sir, sorry, but can we get the absolute numbers of the PNG industrial, PNG domestic and PNG commercial? If we get it, that would be helpful for the quarter, Q1 FY '26?

Yes. So for Q1, close to about 69% is CNG and the balance 31% is within the PNG segment. 70% of this is actually dominated by industrial segment only, whilst about 24% is domestic and 6% is commercial.

Okay. And the last, just wanted to clarify on that zonal structure, 80% to 85% of our volume lands into the Zone 2. Is that a correct understanding? You can correct me.

I would say not 80% to 85%, but roughly around 60%.

[Operator Instructions] Next question is from the line of Kirtan Mehta from Baroda BNP Paribas.

We have registered a very strong 21% growth in CNG...

Kirtan, sorry to interrupt you. Can you please speak through the handset?

My question was regarding the 21% CNG growth that we have seen this time. It's a very strong growth. Is it possible to give us some more color in terms of how the growth we are seeing in the mature GAs? How is it different into the new GAs? So is it possible to break down this growth into sort of across different category of GAs? That was one part. And second is, is it also possible to break down the growth across different geography in terms of how you are seeing the traction developing?

So I think, Kirtan, I think very, very, very insightful question. So overall, if you actually look at the volume of ATGL and as we have maintained, as the infra of the newer geographies is being built, the volume contribution from the newer geographies is also beginning to add to it. Today, our composition is close to about 65% from the existing geographies while about 35% is from the newer geographies. So that's the overall contribution. Coming more specifically in terms of the CNG growth rates that we've seen, we continue to see double-digit growth rates even now as far as the existing geographies are concerned. So adoption continues to be there as far as the existing geographies are concerned. As far as newer geographies are concerned, the growth rates are far more significant higher because of the -- simply the addition of newer network, newer stations, which are getting operationalized. So if I were to see from a Y-o-Y, 30% plus is actually in terms of newer CNG growth rate, while 12% is from the existing geographies in terms of CNG growth. As far as the geographies and a little more insight of that is concerned, amongst the newer geographies that are contributing now, as I mentioned to you, around 35% primarily the ninth round, 10th round geographies are beginning to add to this contribution. Eleventh round, as you are aware, we are still under the CapEx phase. In some of the cases, we are yet awaiting the national connectivity as we continue to execute works there. So within the 9th, 10th round geographies, the contribution or I would say the ones which are the larger contributors are Kheda, Udaipur, Surendranagar as well as Diwan. So these are the 3, 4 geographies which are contributing from the newer geographies to the overall volume.

The second question was about when you look at the planning the CNG infrastructure for next 3 to 5 years, what kind of the growth you are assuming to develop your CapEx estimate? And what is it that your current plan entails in terms of investment, particularly on the CNG side for next 3 to 5 years?

So Kirtan, like we've said, whether it is in terms of volume or for that matter, in terms of CapEx, we actually incur in terms of a calibrated manner as far as our CapEx program is concerned. This year, we are likely to incur a CapEx of somewhere in the range of about INR 900 crores to INR 1,000 crores. So that's the CapEx that we're intending to do for this year. As far as the next 2 to 3 years are concerned, we will land up doing a CapEx of INR 3,500 crores to INR 3,700 crores. So that's the kind of CapEx that you will see over the next 3 years. Primarily, this CapEx is aimed towards the network creation, especially of the 11th round geographies. And we've always preceded the CNG stations over the PNG and the domestic connections in terms of incurrence of CapEx. So really, the significant part of this CapEx will be core network of steel and to add to that...

Right, sir. Just one more follow-up around this. In terms of our earlier discussion, I think you had mentioned that we'll probably look at sort of maturing the CNG infrastructure to the extent of 20% penetration levels in each of the geos, keeping being sensitive to the potential EV competition that can arise. So does that dimension still remain around 20% penetration levels to target? Or are we looking for a different number at this point of time? I think this is the last question from my side.

So Kirtan, actually, again, I'm glad that you asked this question. It's 20% or higher. The key for us is to expand CNG volume in each of a geographical area, untapped potential of currently used vehicles, which are being used, also promote along with OEMs, new vehicles which are being purchased. So that is what the very calibrated strategy, if you see in our geographical area, we had tied up with Maruti, giving several marketing intervention and incentives to consumers to buy CNG vehicles. Similarly, we are working with retrofitters. We are working with trucker associations, bus operators, fleet operators, tourist operators. So I think our efforts is to make sure that whatever is the potential which is available, we build infrastructure to cater and give a good message of chicken and egg that we will take first step. This is a supply-driven market. We will, to some extent, do a supply-driven. And once supply-driven is put in place, we will expect demand comes up and demand-driven development takes place. So I think it's our robust strategy, which is in place and which is being seen by you all through our results, as Parag also stated, our optimism is that we will maintain a double-digit growth in CNG side. And that we are also seeing the traction through OEMs interaction, CRM interaction that people are opting for CNG. So rest assured, it is 20% or more, we would be definitely investing and putting our capital in all our geographical area for CNG wider basing of the consumers. I hope you are happy with the answer, Kirtan.

Thank you for the detailed responses.

[Operator Instructions] As there are no further questions, I will now hand the conference over to Mr. Priyansh Shah for closing comments.

Yes. Thank you all the participants and the management for sharing their insights. In case of any further questions, you may please write to us. Thank you. Have a good day.

Thank you very much. On behalf of Adani Total Gas Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.