Gujarat Energy Limited (GUJGASLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Gujarat Gas Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sadashiv Vishnu from Anurag Services LLP. Thank you, and over to you, sir.

Good afternoon, and welcome to the Q4 Financial Year '24 and Financial Year '24 Earnings Con Call for Gujarat Gas Limited. From Gujarat Gas management side, we have Mr. Ravesh Sivadasan, who is the Chief Financial Officer; Mr. Sandeep Dave, who is Company Secretary; Mr. Dipen Chauhan, Head of Industrial Marketing and Business Development; and Mr. Vikas Gangal, Head of Domestic and Commercial Segments. We will begin the call with the opening remarks from the management side, post which we will have a Q&A session. Thank you, and over to you, Mr. Sandeep Dave.

Good afternoon, ladies and gentlemen. A very warm welcome to Q4 FY '23-'24 Earnings Call of Gujarat Gas Limited. I'm Sandeep Dave, Company Secretary of Gujarat Gas Limited. To give you a brief background about Gujarat Gas, Gujarat Gas is the largest city gas distribution company in India. The company is operating in 27 geographical areas, spread across 6 states and 1 union territory. We have a good mix of matured and emerging CGD areas. We have developed a pipeline network of more than 39,000 kilometers, which provides natural gas to more than 21 lakh households, 4,400 industrial customers, 15,200 commercial customers. We also operate more than 800 CNG stations and serve approximately 4 lakh vehicles per day. I would like to give you a brief update on the business side for Q4. Happy to inform that we have achieved highest-ever CNG volume of 2.89 mmscmd in Q4 FY '24, which is 14% higher than Q4 of previous year. Consistent with our strategy for focusing on increasing gas volumes, we achieved average industry volume of 6.84 mmscmd for the month of March 2024. GGL's contribution during financial year has been recognized by some of the reputable institutions. Just to take you through some of them, GGL won the SKOCH Award 2024 in ESG category, which recognizes our contribution on ESG front. GGL was ranked among the Top 150 Wealth Creators 2024 by Dalal Street Investment Journal. GGL has been recognized as the World's Most Trustworthy Companies 2023 by Newsweek amongst the listed firms in energy and utility category. GGL is listed in Dun & Bradstreet's flagship publication, India's Top 500 Value Creators 2023, where GGL was ranked 20th. Won IEI Industry Excellence Award 2023 for commendable performance in the category of engineering, manufacturing and processing. And we have been recognized as a Supply Chain Champion by Institute of Management in oil and gas industry. GGL aims to deliver affordable, reliable and cleaner energy by operating responsibly and performing with excellence while considering environment, social and government factors. As part of our commitment to ESG initiatives, we have taken various measures, which includes hydrogen blending of -- hydrogen blending pilot project, which we have completed with 5% blending. Now we have increased the percentage level from 5% to 8%. We are aggressively setting up CNG infrastructure to promote use of clean and green fuel. We also started injecting biogas into GGL system. This project has already been rolled out in 3 different locations we have been injecting biogas. Company has embarked on major digitalization drive across various business operations and processes, which cover our PNG, CNG, LNG tanker movement, billing, collection, vendor invoicing submission, which have been digitized or are in the process of being digitized. As a part of our commitment to the environment, we have planted more than 2,100 sapling trees on the Environment Day, reducing use of combustion and polluting fuel. Our major contribution to the environment is that by virtue of promoting use of PNG sales to industrial consumers, we have reduced burning of approximately 13,750 metric tons of coal per day. And through our CNG sales outlets, we have reduced combustion of approximately 2,700 kiloliters of petrol per day during this financial year 2023-'24. At Gujarat Gas, we adhere to highest standards of safety and a strong culture of safety. GGL is an ISO certified organization for integrated quality, occupational health, safety and environment management system. At Gujarat Gas, we adhere to the highest standards of HSE and maintain a strong safety culture. We build and maintain a safe and reliable gas network in our areas of operation. With this brief background, I now ask -- I now request Mr. Dipen Chauhan to share details about new business initiatives of GGL. Over to you, Dipen.

Thank you, Sandeepji. Good afternoon, everyone. I shall start with an update on the industrial segment. We have achieved an increase of 8% in the industrial volume. That is from 5.36 mmscmd in corresponding quarter previous year to 5.80 mmscmd in current quarter this year. This increase was on account of focused efforts on business development activities for customer segments of ceramic as well as non-ceramic industry. Morbi volumes have increased to 3.82 mmscmd in current quarter compared to 3.4 mmscmd in same quarter of previous year, which is an increase of 11%. GGL has been able to achieve the highest-ever industrial sales in financial year 2023-'24 of 6.84 mmscmd in March 2024. Further to that, GGL has published an EOI for supply of natural gas to ceramic customers of Morbi and Surendranagar areas. GGL has received good response for the same and execution of agreement with customer is in process. In non-Morbi market, the pipeline infrastructure development in the key new industrial GAs of Dadra and Nagar Haveli, Thane, Ahmedabad Rural, Pitampura, which is near Indore, Kutch West, is in advanced stages of development. And we expect to tap additional volume of 0.2 to 0.3 mmscmd from this market. This is a brief update on the industrial segment. Now I shall provide updates for CNG segment. The company is currently operating 808 CNG stations across the geographies. We have added 33 CNG stations across the GAs of Gujarat and outside Gujarat. And we have achieved average CNG sales of 2.89 mmscmd for quarter ended in 31st March 2024, with a growth rate of 14% over the same quarter previous year. This has led to achieving highest-ever volume of CNG sales in quarter 4 FY 2024. We continue to see increase in company fitted CNG vehicles and anticipate further CNG sales growth. The growth has been achieved on the back of investment in CNG station infrastructure coupled with favorable government policy. In the coming quarters, results award of first round of FDODO scheme will be declared. This will help us in developing CNG infrastructure in the GGL authorized area in coming years. Historically, we are growing at around 11.50% CAGR on CNG sales in Gujarat region. Especially, Ahmedabad Rural region has grown CNG volume by 51%, the highest in Gujarat region. Outside regions have grown CNG volumes by 23% year-on-year. In turn, overall volume, Gujarat region contributes around 87% and other regions contribute 13% presently. One interesting thing, we have signed MoU for MS and HSD and CNG FDODO with OMC. That is HPCL, BPCL and IOCL. The key areas of the MoUs with these OMCs are OMC providing liquid fuels and lubricants at GGL outlets. This will add additional revenue source at our CNG outlets. Same time, setting up CNG facility at OMC outlets as this will be a win-win proposition. We will be able to capture foothold in OMC outlets also. This is a brief update on CNG side. Finally, I shall provide update on LNG for transportation segment. GGL being an integrated energy company is well poised to take lead in decarbonizing transportation. GGL's presence in and across LNG value chain is a major strength in taking a lead in LNG fuel retailing for heavy and medium commercial vehicle. This is a business update. Now I will request our CFO, Sri Ravesh Sivadasan, to share details about financial performance of the company.

Thanks, Dipen. Good afternoon, ladies and gentlemen. I'm Ravesh Sivadasan, the Chief Financial Officer and the Head of Investor Relationship at Gujarat Gas. I welcome you to the earnings call, and I would like to thank all of you for attending the call today. I trust you all would have gone through the -- our financial results for the quarter as well as the full year for the financial year 2024, which has been reported on 6th of May 2024. We have been able to grow total volumes of 9 -- at 9 percentage from 8.86 mmscmd for the quarter ended on 31st of March '23 to 9.69 mmscmd for the quarter ended 31st of March '24. For the quarter ended 31st March 2024, the overall volumes increased by 6 percentage as compared to the previous quarter of the current year. During the year, the company has added additional 1.87 lakh new domestic connections. The company has also achieved a volume of 0.7 mmscmd for the year as compared to 0.68 mmscmd for the year with respect to domestic customers, a growth of close to 4.4 percentage on a year-on-year basis. During the year, the company has invested approximately INR 812 crores in the gas infrastructure. The company is presently having more than 39,300 kilometers of PE and steel pipeline along with more than 800 CNG stations, which is the backbone of our business. In terms of the revenue, the company has registered a revenue from operations of INR 4,294 crores during the quarter ended 31st of March as against INR 4,074 crores for the same quarter in the previous year. The company has reported a profit after tax of INR 410 crores compared to INR 220 crores in the previous quarter of the current year, a rise of approximately 86 percentage. The company's EBITDA for the quarter stands at INR 605 crores compared to INR 410 crores in the third quarter of the current year, a rise of 48 percentage. In terms of rupee per scm, the EBITDA margin is close to around INR 6.86 per scm in quarter 4 compared to INR 4.87 per scm in quarter 3 of the current year, which is the highest in the quarterly basis for the financial year. We are closely monitoring the propane future trajectory for our near term and medium term, and accordingly, we stick to our strategy to calibrate and strike a balance between volumes and margins for the quarters to come. The company has registered an EBITDA of INR 1,919 crores and a PAT of INR 1,143 crores for the financial year and -- for the financial year 2024. The various state governments are taking initiatives for reducing VAT, which is helping the CGD companies to grow volume. The VAT in our geographical area that's the union territory of Dadra and Nagar Haveli has been reduced from 20% to 6%, which will help us in the growth. Apart from this, the company has declared a dividend of INR 5.66 per share for the financial year '23-'24 as compared to INR 6.65 per share in the previous year. The dividend payout is approximately 34.09 percentage of the PAT compared to 30% of the PAT in the previous year. The company's credit rating stands at AAA/Stable and A+ from CARE, CRISIL and India Ratings, which shows the holistic consensus and the trust on the operational capability of GGL. We have already uploaded our investor presentation on GGL website. We hope you have gone through the same. With this, we open the floor for Q&A.

[Operator Instructions] The first question is from the line of Vivekanand Subbaraman from AMBIT Private Limited.

Could you tell us an update on the adoption of your tender and how much of the FY '25 volume has been secured through this tender already among your customers? That's question one. The second question is on the non-Morbi areas. You seem to be -- your volumes seem to be between 1.9 mmscmd to 2 mmscmd on the industrial side in non-Morbi areas as well. I understand that in Morbi, you have faced challenges. Could you give us some details on the business development efforts that you've put in, especially in the non-Morbi areas, and any regulatory or NGT-related tailwinds that are there?

First, I'll answer your question on Morbi. I think we have received very good response to our EOI in Morbi. Basically, we would like to compete with the propane in the Morbi market, and this EOI is especially targeted towards that only. We have just closed the process. All EOI is under scrutiny. And it looks like, I think, in this month or latest by early month, we complete the scrutiny of more than 150 EOIs. So that is the Morbi market. Regarding our marketing efforts and business development efforts in non-Morbi area, first of all, there are so many areas where natural gas is comparatively new for you, especially geographical areas outside Gujarat. So we are conducting many customer education workshops. At the same time, we are very much in touch with the industrial associations of this different GAs. And apart from that, even though we are -- our pipeline network development will take some time, we are providing gas through various other solutions like DCS and through cascade and everything, and customers are happy with our efforts and kind of marketing activities we are doing for the outside Gujarat area also.

Okay. Just one follow-up. You said that you had around 150 applicants. So does this mean that out of the 700-odd industries, the ceramic industries in the cluster, 20% chose to respond to this tender? I mean how should we think about the response here and the volume scalability for you in Morbi given that now you have shown willingness to compete with propane on pricing?

It's something like this. You know the Morbi is a very large industrial market. And whenever you introduce some new concept or new scheme in the market, it will take one time or at least I would like to say at least 1 or 2 quarters. People generally or customers generally observe each other, I mean how these guys are doing and what are the implications and everything. Once they are clear, and I think we are very confident that customer will accept our new scheme wholeheartedly. And I think when next time or soon, I think, within 2 more quarters, once again, we'll come out with a new EOI. We'll get to fantastic response once again.

The next question is from Probal Sen from ICICI Securities.

Just staying on this whole tender thing, forgive me for asking a basic question, but how is the scheme different from the approach to signing contracts that we have been following till now? If you can just kindly give us a little bit of color in terms of how this thing works differently and why you think that this is a better approach to secure customers.

Sorry, will you please repeat your question? You are not audible properly.

Am I audible now, sir? Is this fine?

Yes.

Yes. I was saying, sir, with respect to this tender, I just wanted to understand how is the tender different from, let's say, the approach we have been following in Morbi all these years. And if you can just throw some color on why you think this is a better approach and why this will be a more attractive option for customers. Anything, any color you can share would be appreciated.

Mr. Sen, this is basically to attract the customers who have switched on the propane. And whatever the price, policy and the terms of the GSA is basically to attract those customers back to natural gas. So this is -- I would like to say that we are targeting propane customers to switch back to natural gas.

Okay. The second question, sir, was a little bit of a housekeeping one. This quarter, if we look at the blended realization on a per scm basis, it actually was up slightly compared to Q3. If my numbers are correct, it was around INR 46.6 per scm. I'm talking on an overall volume perspective. And this quarter, it was INR 46.9 per scm. I was just trying to understand given that we reduced our prices by more than INR 3 at least in Morbi in March. Just wanted to understand how the realization has actually gone up on a Q-o-Q basis, sir.

The realization goes up on account of 1 or 2 factors. One is the price at which we are procuring the gas. And the other thing is what is the amount of discount I'm giving to the customers over there. So basically, we were able to source gas at a better price. That's the reason.

Okay. And last question, if I may. Sir, the CapEx this year was at around INR 812 million or so -- sorry, INR 812 crores, which is slightly lower than the run rate we have seen in the last few years. Any guidance, if I can get, for CapEx and the volume growth also for the next couple of years? Anything you can share?

Yes. See, you need to understand that basically, we have -- for the CNG stations, we are going with the FDODO models. So there will be no new CNG. Except for a few, the majority of the CNG CapEx would be done by the third party. With respect to other CapEx, basically, we will be investing close to around INR 1,000 crores on a yearly basis with respect to the steel pipelines, the PE pipelines, et cetera, for the development of the infrastructure. That INR 1,000 crores still remains.

And any volume guidance, sir, we can give? That's my last question.

Volume guidance?

Yes.

It will be almost the same guidance at 10% from the current volumes.

The next question is from Amit Murarka from Axis Capital.

Also, like could you kind of size the current Morbi market right now? Like I believe earlier it used to be close to 8 mmscmd. So has it gone up? That is what I wanted to check.

It remains the same.

Okay. Okay. So the growth that you mentioned Y-o-Y that you had is more like market share gains in that case?

Yes, yes, of course.

Okay. And also like when you say that this EOI tender is aimed at getting customers back from propane to natural gas, so are you essentially saying that like it will get a discount to propane? And what happens to the investments that some of those customers might already have made for the propane handling facilities?

I think it's a bit early to comment on that, but it will be more or less at par with propane. That's what we plan.

Okay. Okay. So customers could then basically work with flexible switching options then.

Absolutely.

Right. And sir, what is the gas sourcing mix right now for you?

Pardon? Will you please repeat?

What is the sourcing mix -- the gas sourcing mix in terms of LNG and also the APM that you're getting?

Yes. I think for the last year basically, the APM was close to 30 percentage. And basically, short term was close to 20 -- sorry, the short term was 42 percentage. And the long term, which was there, was close to 28 percentage.

Next question is from Somaiah V. from Avendus Spark.

First question is on Morbi pricing. So we've had the spread between propane at a point in time close to INR 5. And we also -- I think in the last quarter, we're more or less on par. So how is the volume sensitivity in terms of this price gap? So what we think is a good price gap which can meaningfully swing volumes, sir?

Yes. The customer will always ask for a price which is lower than propane. That's their wish list. So practically, if you look at the price reduction which we gave, we are almost there with the propane. So that's the reason for the increase in the volumes which happened in March.

So the full quarter was around 3.8. What would have been the volumes in March?

It's 4.9.

4.9. So is it a right reading that then we're almost on par? So far, we are seeing volumes getting back up to 4.9?

Yes.

Understood, sir. And when you say 8% to 10% volume guidance, so what is the extent of Morbi volumes that we are factoring in this? I just want to understand the growth between CNG and industrial in this 8% to 10%.

We are talking about 10% on an overall basis. See, Morbi demand is subject to the prices, which is dependent on the LNG prices, which is there. So there's a fluctuation which happens on a seasonal level. So that has been factored into when we tell that the overall 10 percentage growth would be there for an average volume increase for the company.

So within this, I mean, CNG would be growing much faster? I mean I just want to understand of this 10% growth...

Yes. Definitely, CNG will be going at a higher rate because if you look at this last year also, CNG has grown at a higher rate. It has grown at close to, I think, 12% -- 14% last year.

And also, could you just help us with what is the average cost of spot LNG procurement last quarter and the quarter prior?

It was close to $11.50 to $12.

The last quarter. And the previous quarter, sorry, previous quarter?

Previous would be -- it would be higher because at that time, spot was higher.

I just want to understand, I mean, the current spot, whatever that has declined. So we've got the full benefits of it or it's still something is yet to come. So I just want to understand because spot has now come down to close to $10. So the full benefit of this has got reflected in the last quarter itself or it's something is yet to come?

In the last quarter, there's been only -- there's a gradual decline which happened from March to April. So yes, March would be there and almost -- April would be almost at the same rate. The spot was almost at the same range. So that benefit will be applicable for this quarter also.

Got it, sir. And just one final question. So your EBITDA guidance earlier, you were given 4.5 to 5.5 per scm. So that still stays?

Yes, that still stands, yes.

Next question is from Yogesh Patil from Dolat Capital.

Sir, as per our understanding, Gujarat Gas has provided a PNG industrial pricing formula for the Morbi ceramic player, which is linked to the Saudi propane prices. I have a few questions related to this. Considering this formula, how much discount will be assured to the ceramic players compared to the propane prices in the long run? Second one, if you are providing a discount, then do you have cheap gas sourcing, which will protect your margin, EBITDA margin in a long run? And have you recently tied up or any plan to tie up in the near future for the long-term LNG?

I think I have only very short and sweet answer to all your questions, and answer is yes.

Couldn't get it, sir. I mean can you please elaborate a little bit?

Yes. We have a selling price in the formula, and it's highly competitive with the propane pricing, number one. That is the formula you are talking about. What was your second question, sir?

Sir, second question, if you are providing a kind of a discount based upon that formula compared to the propane, then do we have a cheap gas sourcing, which will protect our EBITDA margins in the long run?

Yes, that is true. We will source gas in such a way that will profit our margins.

Okay. And the last one, have you recently tied up or any plans to tie up for the long-term LNG?

We are continuously exploring that. And so the answer is yes.

Okay. And sir, recently, Saudi propane prices declared for the June month are lower, $580 per tonne, so which will be applicable from the June month, so which will be at par with our PNG industrial prices and propane prices at Morbi. So are we planning to cut down the prices on the PNG industrial side in the month of June? Any indication?

I think we are working on it. And by last week of May, we'll be very much clear about the June pricing.

Next question is from Sabri Hazarika from Emkay Global.

Sir, I have 2 questions. Firstly, I mean, your CNG outlet, I mean, you've mentioned around 808 in the presentation this year. And it was 808 mentioned last year end also. So your net addition has been 0 in the last 1 year?

No, that is not the idea. There is an addition of close to 33, and there is the surrendering of around 33 because of the -- this APTEL order, et cetera. So we added 33, and that's the reason there is no increase. There is no increase which is shown, but actually, there is 33 CNG stations of addition which has happened.

And cancellation happened because of -- you said APTEL order. What exactly is that?

There are certain -- we have certain CNG stations which were located in the area not belonging to Gujarat, yes. So we have closed down those CNG stations, and that's what we are talking about. Most of them were low-volume CNG stations, so anyway, has hardly impact on volume. You see the volume, the volume has significantly increased in spite of this closure of certain CNG stations.

Okay. And -- okay. So is there, I mean, any difference in the dispensing station -- number of dispensing station and the format of these outlets that you were able to like record good growth despite your network remaining same on a net basis?

Yes, you're right. We are setting up the CNG stations in a market where -- which is nearby to already developed CGD areas. And apart from that, we are getting very good response in the states like MP and Rajasthan, where CNG growth is picking up.

Okay. Got it. And what would be the guidance for this year in terms of CNG station addition?

This time -- this year, we are very bullish and because more than 25 CNG stations we are planning, and apart from that, because of the -- our FDODO scheme and if we'll manage it properly and our construction work then is in line, I think we won't be surprised if we reach more than last 2 years even.

Okay. So -- okay. And the net will also be like similarly this time. I think whatever realignment was to happen, that has already happened, right? So it could be like 25 to 30 net addition also which might happen, right?

It could be more than that.

Okay. And second small question, if you could say what is the current volumes, I mean, given that we are like in May, I think the economics are like largely okay. So what is the current volumes for the company?

It was 11.

11 mmscmd. And this is like because of Morbi only that is going up?

Other areas also.

Other areas also doing well. Okay. But you are saying that still we should take a 10% sort of like volume growth for FY '25 on an average basis. Is that right?

Yes. See, the reason is basically, we have a fluctuation which happens on a quarter basis. So basically, we need to take into account that.

Okay. So versus last year, we should basically take -- I mean, the average for the last year, we should take a 10%, right, rather than the exit rate? Is that right?

Yes, you are right.

Next question is from Maulik Patel from Equirus.

Just one question is on the propane. Now as you entered for this 150 customers and start supplying the propane and gas at a propane price, will it create more volatility in your gross margin? Because what we understand, that during the June to the November period, propane prices are significantly lower than the remainder of the year. Now we start supplying at a lower price, probably the cost of supplying gas will be much higher than the propane price, and you will incur some loss or probably at no profit. Is that assessment correct?

Maulik, I think that will be decided once we reach that. See, ultimately, you need to understand the objectives of this proposition in which the company has made. One is to have a stability in the volumes which the company has and also provide a price to the customers which practically is preferring as the best alternative to them. So basically, in that process, basically, that there will be -- there can be a sacrifice of margin to some extent, not to a great extent because we will be doing on a back-to-back basis.

I understand that. So I think primary goal for us, and I really appreciate that we are looking to regain whatever we have lost in Morbi in the last 3 years. And I think this is in the right strategy. Just understanding that will it impact significantly to the gross margin or not. Even if we regain the volume, which is more important for not only as in Gujarat Gas but also it will benefit the entire value chain, including the including GSPC, including GSPL and the group's commitment at LNG terminals, which they are built the capacity. So just saying that if today you have been doing probably 1, 1.5 mmscmd volume, as that number of volume that increased substantially, let's say, after a couple of months down the line given the success we may have, then that the -- managing that volume and the impact on that margin will be much higher because today you are doing probably 10% volume of overall for that 12-month contract. 6 months down the line, probably this number goes to 3 mmscmd. Then again, that the proportion increases, the volatility in the market will increase. That's what I want to understand there.

See, Maulik, there are 2 things. One is you know the number of -- I think Dipen has told you the number of customers who have tried to enter into this agreement. So that percentage is much -- that's not the entire universe of Morbi which is coming in. So that thing is already taken care with respect to that. And that's the process of learning, which we'll be doing, wherein this thing will be happening, and over a period of time, this -- the margin protection, et cetera, which will be happening, which would be happening on a back-to-back basis where we'll be also sourcing the gas on a competitive basis and even to the extent of hedging it towards alternative fuel also. So that basically reduces my risk with respect to the gross margins which you are trying to tell.

So what I understand is that...

It's a new thing.

You will have one on the sourcing at a lower price. And second, you will grow in the market and hedge your exposure also, which will reduce this volatility.

Yes.

Okay. And the second question on the CNG side. Obviously, you are having one of the best CNG growth among the large players with almost 12% volume growth. The number of CNG systems were pretty much flat last year because of some addition and what you mentioned. What kind of addition we are looking for this financial year, FY '25? And if the government has reduced this APM location in CNG or it has been static in terms of the allocation, I think you do combine this almost around 3.6 mmscmd, 3.7 mmscmd. So that APM allocation has been static in Q4 compared to Q3 or it has reduced further?

It has reduced further.

So what is the number now?

It's 2.7. The gap is around -- it's between 25 -- 30 to 20 percentage.

Okay. But this 2.7 in earlier quarter was 2.8?

Yes.

Okay. And currently, it's around 2.7 for the month of April, May? Or it has been further reduced?

It's almost same. See, ultimately, it is the gap of volume which the government has to give on a concessional basis and the quality which we are selling. So that gap is already there. That's close to 20% to -- 25% to 20% is the gap which is there. So you can calculate the numbers from there. So that is being supported by the spot or the long-term LNG which we have.

Okay. Got it. And just one bookkeeping number. That kind of a CapEx outlay we are looking for FY '25 in terms of rupees crores?

It will be around INR 1,000 crores.

INR 1,000 crores. Okay.

The next question is from Sangeeta from Cogito.

My questions really refer to Slide 14, where what we're really seeing is that over the last 4 to 5 years, the performance of the company in terms of ROE has actually come down. That has been almost static despite a fairly healthy level of CapEx, which you continue to do to expand your territories and the business. Would it be possible to understand why that has happened? And are we likely to be at the bottom of that cycle, whatever we have led to it, either in terms of volumes or margins?

Yes. See, our thing is basically, we have been investing over a period of last 3 years in the CNG business, mostly in the steel pipeline and the CNG outlet business. So that risk practically is being shown with the growth of CNG volumes which has happened in this financial year. And that is going to grow over the next few years also because we have the infrastructure and the network in place to basically cater to the CNG growth also. If you look at the CNG vehicles being coming out of the -- in the market, that the percentage is gradually increasing also. So practically, we as a CNG -- as a gas company, we have practically the best place to cater to this requirement, especially in the areas which we are operating. So yes, in the previous year, we had an exceptional profit. So that's the reason this was higher. And gradually, yes, we are not -- we will be moving ahead in this. And I think we expect the ROE numbers would change.

Okay. So if I look at Slide 12, what I noticed is that whatever -- a large part of the gain that you had in CNG volumes actually was met by a reduction in the industrial volumes, right, particularly from FY '22 onwards. So is that likely to now start reversal? Because your gains in CNG really didn't show up because the industrials were declining, right? So are you likely to see the reversal in industrial? And also at a company level, are you likely to see improvement in margins? Because the margin trajectory has also been downward.

Yes. So if you look at the previous years, practically, the investment into the CNG and the infrastructure has been towards increasing our volumes in CNG. So that is practically taking off now because we have seen a volatility in the industry volumes, which practically we need to reduce. That's the reason we are coming up with a new pricing formula, et cetera. So going forward, as a part of the infrastructure strategy, we are putting more efforts into the CNG because the margins are also better in CNG. And the volume growth is also coming from the government policies also.

Right, right, right. And on the industrial side, you're trying to deal with the volatility through the new formula that you put in place, better sourcing, et cetera?

Yes, yes, ma'am.

Okay. So can we expect margins to start picking up also?

I think we remain with our guidance which we have given.

The next question is from S. Ramesh from Nirmal Bang Equities.

My first thought is you've given an exceptional item based on the reversal of provision for trade margins. So what is the impact of this in the EBITDA per scm and the top line you reported for fourth quarter? And what is the reduction in the trade commission payable to OMC that you have achieved based on this reversal? And is it something which you can sustain in the future in terms of your pricing and markets?

Yes, I think the EBITDA will not be affected because it's an exceptional item, and we have not taken that for the EBITDA per scm calculation.

I'm saying the thing is if you reverse that, there will be some benefit of that in terms of the commission of trade to OMC in your fourth quarter operations, right, compared to where you were...

No, we have reversed the provision. Actual credit notes will be issued in this financial year. So we have entered into an agreement with them for settlement of the previous dues, which was there. So that settlement has occurred. Accordingly, the effect for that has been given in the financial accounts.

So if you're saying that hasn't impacted your realization or EBITDA per scm, how...

That is already impacted in the current year. That -- this was for the previous year.

Yes, that's what I'm asking. So how much of that -- so if you look at the fourth quarter, your margin is the highest. So how much of that is because of the reduction in the trade commission? Is it possible to explain that?

No, it is -- I understand that this provision was created in over a period of last 3 years, not even this financial year. So we are just reversing that provision which was made. So already the changes with respect to the margins have already been -- OMC has already been paid in the same margin for the current financial year.