Gujarat Energy Limited (GUJGASLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gujarat Gas Limited Conference Call hosted by Ernst & Young. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from EY. Thank you, and over to you, sir.

Thank you, Ezekiel. Very good afternoon to all of you. I appreciate the time taken on a Saturday to come and listen to this call. Welcome to the GSPC Group's investor and analyst call to discuss the recent corporate announcement of the scheme of arrangement. To discuss the transaction, we have with us the senior management represented by Mr. Milind Torawane, Managing Director; Mr. Rajesh Sivadasan, Chief Financial Officer; and Mr. Sandeep Dave, Compliance Officer and Company Secretary and also the key members of the management team. Please note that the investor presentation and the press release are already available on the stock exchange and on our website. In case any of you have not received it, please do write to the Investor Relations team, and we'll be happy to send it over to you. Please note that today's entire discussion will be covered the cautionary statement, as mentioned on the Slide #2 of the investor presentation. It's my privilege to hand over the call to Mr. Milind Torawane for his initial remarks, post which I'll open the floor for question and answers. Just a brief reminder, in the interest of all, during the Q&A session, we request analysts and investors to stick to the maximum of 2 questions in the first round before which they can come back for a follow-on questions. With that said, I'm handing over the call to Mr. Torawane. Over to you, sir.

Thank you, Mr. Diwakar. On behalf of the Board and my entire team, I would like to thank you all of you for joining today's call at short notice. I again warmly welcome all of you for this conference call to discuss the scheme of arrangements that we, the GSPC Group announced to the stock exchanges yesterday. I do hope that you have a chance to go through these presentations. While we have tried to share key highlights of the complete scheme, this call gives opportunity to go through various details of the scheme. And later on, queries will be -- queries will also be answered. Before I go to the scheme, in particular, let me give some highlights of the business, that the GSPC Group is. As we know, in the last 4 decades since formation, GSPC Group has experienced remarkable growth and operational success. This group is having firm presence across the natural gas value chain over the years. It has also navigated to a period of rapid growth, adapted to changing markets, global geopolitical dynamics, and most importantly, it has consistently delivered operating and financial performance over the year. Each of the companies enjoy leadership market position in the respective domains and inherent synergies are present amongst each of the companies. During this time, the group comprises of GSPC, GSPL and GGL that has evolved immensely contributing to the overall group success. Let me also share that over the years of interaction with the investors and analysts, we are receiving, and we were receiving many inputs from all of you. One of that being the constant demand of simplification of the group structure, and we have also taken into consideration various other options registered by our investors. Now we believe it is time for strategic shifts. And as we look into the future, there are various opportunities and challenges, the group should be ready for all of that. Today, I'm pleased to announce that the Board of Directors of GSPC, GSPL and GGL have unanimously approved the scheme of arrangement for the 3 companies with the prime objective of simplification of the corporate structure. This decision has been taken after careful consideration of the challenging and changing dynamics of our industry and the opportunities it presents. Let me run through the highlights and rationale of the scheme of arrangement, after which we will address any queries that you might have. I'll start with the key transaction highlights and direction of the scheme. But before going into the details of the scheme, I would like to mention that the Group has taken professional support in this entire matter. Ernst & Young has advised the Group on this restructuring. Further, Ernst & Young along with SSPA & Company and Chartered Accountants has carried out the joint valuation reports. Upon these valuation reports, our GSPL fairness opinion has been provided by Fortress Capital Management and the fairness opinion for Gujarat Gas Limited is obtained from Saffron Capital Advisors. We also have legal advisers engage in this procedure. Shardul Amarchand Mangaldas & Co has been the legal advisor for this process. With this, I will go to the GSPC, which is second largest national gas trading company, and it is a key player in developing with Gujarat as the gas-based economy. It will merge into Gujarat Gas Limited as it has higher business synergies with GGL. GSPC has recorded a cumulative revenue of more than INR 1 lakh crores and the PAT of more than INR 6,500 crores in the past 5 years. This merger eliminates related party transactions between the GSPC and GGL and shall contribute to further improvement of GGL's profitability, and return ratios going forward. The shareholders of GSPC will receive 10 equity shares of GGL for every 305 equity shares of GSPC. Simultaneously, we're talking about GSPL, which is India's second largest natural gas transmission company. It merges with GGL. The shareholders of GSPL will receive 10 equity shares of GGL for every 13 equity shares of GSPL. In order to keep up with the regulatory requirements, as a part of the same scheme, gas transmission business will be demerged from GGL into a new company name GSPL Transmission Limited, which is GTL. Pursuant to such a demerger, shareholders of GGL will receive 1 equity share of GTL for every 3 equity shares of GGL. The scheme will be subject to all necessary approvals to be obtained and is expected to be completed by August 2025. The scheme of arrangement is expected to firmly empower GGL and the resultant GTL to independently pursue their growth strategies with sharper focus and to avail internal synergies and ultimately, to increase their scale of operations. The scheme entails value unlocking for all the shareholders and will enable independent market-driven valuation. I'll speak a little about the benefits and future business growth. The management business growth projections for GGL estimate it to be -- it to become one of the India's largest integrated player with presence of gas trading and city gas distribution business. GGL will be able to better leverage the combined assets and expanded capital base all put together. It will enhance its profitability and return ratio on account of various gas sourcing portfolios which the GSPC is bringing along with it. The cash flow generated by the combined businesses can be deployed more efficiently in future to fund organic and inorganic opportunities, which are going to rise in the expanding energy market. It shall become the only CGD company having access to access and also in-house expertise to various sourcing portfolio directly from domestic as well as international market. It also has regasification capacity tied up, resulting better business synergy. The combined entity will benefit from a stronger market presence, enable better pricing power and the ability to capture a larger share of the growing demand for natural gas. I would summarize that the ultimate objective of the scheme of arrangement is to simplify the layer group structure; second, merged various interlinked businesses into one entity. We are also looking towards eliminating related party transactions. The scheme of arrangement will also unlock value for our shareholders. We expect our shareholders will have far greater transparency into the performance of their respective investments. And this will enable them to make informed decisions and assess the performance more accurately. I take this opportunity to reiterate that our commitment to responsible corporate governance remains steady. This strategic decision represents a giant step forward in our pursuit of sustainable growth and increased shareholder value. With this, I shall propose to hand over the call to the moderator to open the floor for questions and answers. Thank you once again.

[Operator Instructions] The first question is from the line of Probal Sen with ICICI Securities.

Congratulations on the move to create such an integrated energy player from the existing holdings of the GSPC Group. I had 2 or 3 questions. One, the ownership in GSPL India Gasnet and GSPL India Transco, the JVs that we have, this JV, is it safe to presume will also shift to GSPC transmission, the carve-out that will happen? Or will it stay with the resulting company or the merged entity? That was my first question.

Yes, it will remain with the new GSPL -- GTL, GSPL Transmission Company.

So it will be part of the carve-out basically?

Yes. Demerger, subsequent demerger it will happen.

All right. And similarly, sir, the Sabarmati Gas will obviously remain -- become a subsidiary of the new resulting company, correct?

Yes. You're right.

Will there be a move to merge this also with Gujarat Gas, I mean, rather the merged entity at some point of time?

That's a decision we'll be taking subsequently.

But as of now, it will basically be part of the CGD business portfolio of the resulting company as a subsidiary, right?

Yes, you're right.

Okay. And the third was, sir, in terms of the sourcing or in terms of the performance of GSPCs gas trading portfolio as per the presentation, it has seen a little bit of a decline in the last 3 years from about a peak of 19 MMSCMD that one could see from about 11 MMSCMD for the last 2 years. Of this number, how much is basically tied up with Gujarat Gas itself?

Close to 45% to 50% is with Gujarat Gas.

So around 5 MMSCMD would be with Gujarat Gas itself, the contract, right?

Yes. Right. You're right.

And any reason why the trading business has seen a little bit of a decline, sir, in the last 3 years?

It is basically because of higher spot LNG prices that we have declined. But if you see the recent gas prices scenario, we expect a lot of liquefaction. Can you hear us?

Yes. Yes, sir. Please go ahead.

Yes. If you see, there's a lot of liquefaction capacities, which are now coming online and by 2026, we can see huge liquefaction plants coming online. And so basically, there is a lot of LNG that will be available in the market. You must have read about one contract being signed in India at around sub-12% level, sub-12 percentage of Brent. So we expect LNG prices to be much more reasonable. And so we expect volumes to be back at that point of time.

The next question is from the line of Amit Rustagi with UBS.

Yes, sir, there are minority concerns in Gujarat Gas that we have merged gas trading business of GSPC into Gujarat Gas. Now how do you think that what will be the total number of shares for Gujarat Gas? And how we have valued the GSPC in this concern, in this case, while giving a value of around INR 22,000 crores to GSPC?

Yes. I think the valuation which we have taken for GSPC is close to INR 21,000 crores. And of that, close to 35% is with respect to the gas trading business. Basically, the valuers have taken a number, which is a lower number to the industry average, which is there, that our peers which are there is lower than that. Basically, if you look at our previous year, EBITDA number for gas trading is around INR 1,100 crores. So if you compare the number with respect to the multiple, it's a little bit lower than the market which is there. It's multiple is around -- between 6.5 to 7, that's the multiple we have taken. If you look at the industry benchmark, it's around 8 to 9, that's there. And I think we have taken a reasonable number. We have cash to the extent of INR 2,300 crores. And we have valued other businesses, that is GSPL and our other investments is close to INR 10,600 crores, of which GSPL is close to 89% -- 89% of the total valuation of other investments.

Sir, can you give us a breakup of this? How you have like INR 10,500 crores you are saying value of GSPL and...

Not, INR 10,500 crores. No, no, I'm talking about the entire investments in GSPC. That includes GSPL, Sabarmati Gas and the power sector companies and the listed -- 1 of 2 listed companies. I'm talking of the entire -- of that INR 10,600 crores of that already 89% is with respect to GSPL.

Okay, okay. And second thing, when you merge this entity because there will be removed. So what will be the total number of shares of the new company for GGL?

It will be close to INR 90 crores, INR 94 crores.

INR 95 crores?

INR 94 crores.

INR 94 crores.

Yes.

So at the current price, we are saying like INR 56,000 crores market cap of the new entity at the current price?

I think that's for the market to decide.

Okay. Okay. Okay. And sir, how much of GSPC profit will be eliminated -- sorry, just from my side. Yes. How much of the GSPC profit will be eliminated?

Yes, I think my earlier colleague answered that we are selling gas to Gujarat Gas to the extent of 45% to 50% of my portfolio. So that's on a related party basis. That's on a arm's length basis we are selling. So that's a margin which is a little bit lower than the market -- what can I earn from the market itself. So that's the thing which is there.

Mr. Rustagi, we request that you move to the question queue again. Sir, there are several participants waiting for their turn, please. The next question is from the line of Yogesh Patil from Dolat Capital.

So sir, we wanted to understand the valuation of GSPC in this amalgamation of Gujarat Gas Limited, so.

You are not audible.

Sir, the line for the current participant has dropped. May we move to the next participant. The next question is from the line of Mr. Vishnu Kumar from Avendus Spark.

I just wanted to understand your vision for the E&P and the CapEx requirements for the current GSPC entity and whatever the future plans that you have there?

See, I think you need to understand over the period of last 5 years, basically, we have gradually moved out of E&P in the sense that all the loss-making assets of E&P has been farmed out. Presently, we are having around 11 blocks which are profit-making and they are all onshore and marginal fees, and we wish to continue with the operations over there.

So we see that in FY '23, we made about INR 700 crores, INR 800 crores of CapEx. And what is the run rate that you are expecting in that entity?

No, I don't think so we have invested INR 700 crores on CapEx.

Okay. So there will not be any major cash requirements at this entity?

No. No. These are all onshore fields. So the only thing is we'll be incurring CapEx to maintain the production over there. Other than that, there is no major CapEx, which is being planned with respect to new field development plans or anything like that.

Okay. So you mentioned this INR 10,000 crores, INR 500 crores valuation for investments and INR 7,350 crores is what you mentioned for the core GSPC. Is that's what you mentioned?

Yes.

And balances is for the net debt?

Pardon?

And balance is for the net debt?

There is no debt. There is cash. There's INR 2,300 crores of cash and dividend. Yes, yes.

Got it. Sir, finally, under the -- when the GTL carves out, you will have the current GSPL, you'll have the Gasnet business. These 2 entities will alone go. CGD assets of this -- that you have in GSPL, that will remain under Gujarat Gas.

There is no CGD assets in GSPL as of date. I think we carved out it 2 years back.

The next question is from the line of Yogesh Patil from Dolat Capital.

Sir, we wanted to understand the valuation of GSPC in this amalgamation with the Gujarat Gas Limited. So as per our calculation, and you just mentioned that the GSPC is valued at INR 21,000 crores closer to that amount. But our calculation suggests that it is valued closer to 16x of FY '24 EBITDA. Please correct me if I'm wrong?

Yes, you're wrong. I tell you the EBITDA for gas trading business is close to INR 1,100 crores in the previous year. So if you look at the multiple, it will come to around 6.8.

Okay. And sir, you have gas trading volumes close to 11 MMSCMD. Can you give us a little bit a breakup of how much is contracted volume and how much is the spot volumes? Any breakup if you could share, that would be helpful.

See we have -- basically, we have a 60-40. 60-40 is the ratio of the business in between the long-term and the short-term volumes.

The next question is from the line of Mayank Maheshwari from Morgan Stanley.

So sir, in terms of Gujarat Gas, which will be, I suppose, taking over the long-term contract that GSPC has on LNG. Can you just give us an idea of what are the size of your long-term contracts? How -- what are the lens, what are the quality something around that? If you can give us more details around that?

So basically, you're talking about GSPC or Gujarat Gas?

So I think, is it correct to say that Gujarat Gas will be taking over most of the long-term contracts of GSPC?

All of them. All the contracts will be taken over by them.

So I just wondered, all of the contracts will come to the Gujarat Gas now. So I just wanted to understand what is the quality of those contracts? How long term are they? What are the kind of oil linked, Henry Hub linked? Can you give us more details around that because that will obviously determine how you're thinking about your multiple on your trading business, correct?

So we have 2 long-term contracts. One is valid till 2029 and -- sorry, 2030, and the other one is till '28 April. So the -- both are oil link contracts. And the one which is valid until 2020 -- 2030 is approximately 1.5 million tonnes, the other one is 0.3 million to 0.4 million tonnes. These are all oil-linked contracts. And so these are the 2 long-term contracts we have. Other than that, we keep on buying on a term basis from domestic fields, for example, Vedanta and Reliance-BP, fields in Kakinada, and the rest is all spot.

Got it, sir. So sir, in these long-term contracts, how much are full cost plus kind of contracts with the consumer side?

Can you repeat, please?

Gujarat Gas or is it more than that?

Could you repeat question?

How many of these contracts -- yes, how many of the contracts on the long-term side are basically cost plus model. Some of them, I suppose, are with Gujarat Gas and the long Gujarat Gas long-term cost-plus models on some of these contracts?

Yes, these are all -- so the one with Gujarat Gas are basically cost plus and the rest one may not necessarily be cost plus. So it depends on the market where we are selling.

So how much percentage will that be roughly?

Sir may we request that you return to the question queue for follow-up questions. Sir, there are several participants waiting for their turn, sir. Thank you. The next question is from the line of Maulik Patel from Equirus.

Congratulations to management for thinking about creating a long term value for the shareholders. Shareholders were asking for a very long period of time and essentially solved a lot of problem in order to simplify the structure. Just a couple of things. Are there any tax liability is that because of this merger when you ship the asset from the GSPL to the Gujarat Gas, any tax liability involved?

There is no tax liability involved.

And what kind of tax losses is to be claimed in the GSPC in the current company?

We have a tax losses of INR 7,200 crores approximately, which will be carried forward to the consulting company.

Okay. Does that imply that for the next 2 to 3 years, let's say, this merger got effective from FY '25, I think you mentioned about '24, so for FY '25 and '26 on the combined profit of GSPC and Gujarat Gas, you will not pay any tax?

Yes, that's how the tax loss says that.

And till how long this tax credit is valid?

It will have a period of 8 years.

From which year onwards?

I think we have this Section 72, which talks of mergers and acquisitions, where the tax losses are carried forward. So that gives us a benefit.

Okay. And second question. And when you're merging the GSPC into the Gujarat Gas, all the assets of the GSPC are getting merged, right, particularly the gas-based power plant and the windmills and other things also?

Yes. The gas-based power plants are in the form of investments and the windmills are directly held by the GSPC.

Yes. So that is also -- that investment is also getting shifted to the new company, correct?

Yes, you're right.

So you will be holding close to around 700-megawatt of the GSPC power plant where you are almost 100% stake?

Yes, almost 100%. 98% is held by GSPC.

Correct. And then the stake in the GSPC also, which is around 53% stake?

Yes, you're right.

Okay. And that LNG investment, which the both of the companies, Gujarat Gas made some INR 50 crores or INR 100 crores of investment last year and also GSPC made some investment. So what would be your resultant entity's stake in our Mundra LNG Terminal?

I think it will be close to 14% is the combined stake of GSPC and Gujarat Gas put together.

Okay. So you will be still a minority investors for that?

Yes, you're right.

The next question is from the line of Vikas Jain from CLSA.

I wanted to check, you've just given details on the volumes, about 7 MMSCMD appears like long-term LNG contracts so that you mentioned expiring in '28 and then you said '30, then how much is the contract of this from KN -- sorry, from Vedanta or Reliance, how much would that be roughly? It is a shorter 3-, 4-year contract, right? Or is it an annual one? What do you have?

So it's a short-term contract. It's valid till 2025 March. From Vedanta 1.5 million and Reliance-BP, we have a few volumes expiring in December this year. And the rest of the volumes are up to May 2026. This is around 0.5 million.

So that's a total of 7 -- yes. So after FY '25, it will be 7 plus about another half or so, 7.5 or so, remaining of the current 12 the run rate is about 4.5, 5 is what is roughly the spot part of it?

Yes. So -- and we are also -- just to add, we are now also in the advanced stage of executing a few long-term contracts. So right now, the portfolio is mostly oil. So now we'll be going on a hub basis, which is the U.S. Henry Hub gas. So we'll be executing 2 long-term contracts, the volumes of which will start somewhere in middle of 2026.

Okay. And what are your other commitments that you have in terms of user pay agreements that you've signed? There's something with Petronet, of course, but are there anything else which you must be aware of? And also you did mention that there's some ongoing limited CapEx, but ongoing on the upstream business? What is that kind of regular CapEx likely to be?

Yes. Basically, it will range from -- maximum it would be INR 50 crores to -- INR 75 crores to INR 100 crores would be the CapEx. But that will be only one time, maybe for us to maintain the production levels at the same level and to drain the results. That level -- but that will be maybe once in 2 years or 3 years, that type of investment, not a continuous basis.

Mr. Vikas Jain, may we request you to join the...

Sorry -- my question isn't answered. The user pay agreements that you have?

So we have 2 regas contracts with Petronet LNG. And so where we are utilizing the capacities. And we are confident that we'll be able to use those capacities in the future years. I don't think there will be -- and the other contract is that we have it is one. But as of now, it is not operational. And so there is this break water issue, which keeps on coming. So right now, it's not operational.

Mr. Vikas Jain, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you, sir. The next question is from the line of Varatharajan Sivasankaran from Antique Limited.

You gave the detail in terms of what kind of valuation...

Sir, may we request you that you use your handset, please, you are not clearly audible, please.

Is it better?

Yes, sir, please go ahead.

Yes. You gave the details in terms of how you value GSPC. Similarly, if you can share your valuation basis for GSPL as well in terms of the pipeline assets and the other assets.

I think the valuers have taken a -- they have used several methods for the valuation, basically the BCF method and the company comparable multiple methods. So they have taken a weighted average of both the things to arrive at the value of GSPL. So that the holding company discount can be resolved with greater extent.

So the core business valuation, if you can actually highlight I think.

I think -- yes, GSPL has 2 -- I think the valuation of GSPL has 2 parts. One is there is own business, which is going on. And the other part is basically the investment which is holding on.

Yes. The core business, which we are currently running, the transmission business, what kind of valuation you have?

Yes, for the core business, the valuation is close to around INR 3,500 crores to INR 4,000 crores. INR 3,000 crores -- close to INR 3,500 crores, and they have a cash of around INR 1,700 crores. So that's the core valuation. And for the investments, our valuation is close to INR 24,000 crores -- INR 25,000 crores.

Fair enough. As far as the liabilities are concerned, specifically in the form of GIGL, GITL any kind of debt payments which are pending as well as any kind of pending payment too.

Your voice is not clear.

Any pending payments for -- in terms of debt repayments and in terms of GIGL, GITL as well as Petronet.

I think GIGL, GITL that will be taken care from those companies itself. So the valuation has taken care of -- after the valuation has been arrived for those companies after taking into account that.

Okay. And Petronet, what is the outstanding on that?

Pardon?

Any take-or-pay payment pending with Petronet?

No, no, that I think -- we have already done, we have already had some discussions around that, and there was a settlement that was there in the past. And as of now, we don't expect any payments to be paid to Petronet LNG.

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

In terms of the GIGL and GITL, could you highlight the valuation that you accorded to those 2 steps, will it be taking care of -- will we have to sort of furnish some of the rate required in terms of -- because the volumes are probably lower than the debt servicing requirement?

I think the valuers have given that all the consideration has been taken into consideration for valuing GITL and GIGL and the reasonable valuation has been given for GIGL and GITL.

Will you be able to share the valuation number?

For GIGL, it's close to INR 2,000 crores. And for GITL, it's close to around INR 181 crores.

Right, sir. And second question was about...

Sorry, that's 100% valuation. So basically, we have to come up for the 52% stake of GSPL in that.

Sure, sir. Second question was about -- you have given a detail about your gas sourcing contract, would you be also able to share your contract terms on the customer side? How many of them are long term and how many of them are short-term volumes and what are the tenures there?

So the contracts with Gujarat Gas are till 2025 and the fertilizer contract are there till 2028. So there are other contracts, which are valid till 2027 and some are valid till 2029. And -- so yes, most of the fertilizer contracts are till 2028. And that's how it is right now.

And the way you said 60-40 was long-term short term. Was that only on your sourcing side? Or was that also applicable here on your customer side as well?

Yes. Yes. So 60% would not be there on the customer side.

We'll have a shorter tenure so that we can benefit from the differences, is that the way.

Yes.

The next question is from the line of Soumit Sarkar from BCCL. Soumit Sarkar, your line has been unmuted. Please go ahead with your question. I would request you to unmute your line from your side. As there is no response, I would request that we move to the next participant. Next question is from the line of Raj Kiran Gandhi from SBI Mutual Fund.

Sir, on the gas side, what is the scope of ramp-up of these gas-based assets? If you could just throw some light on that? And how have they performed in the recent 2 years because we've seen some of the gas-based power plant ramp up. So have these been able to take benefit of the recent power shortage?

Yes, you are talking about the power plants, gas-based power plants you're talking about?

Yes, which will come into the new.

Yes. I think in the last quarter, the Q1, they have ran around close to 44% of the PLF because there wasn't any direction from the government to run the power plants and they were taking gas from us. I think that situation will be staying during the seasonal time, that situation will still remain, and I think it will be operational to that level.

Okay. So both the plants on an average ran at 45% PLF.

Yes, that's for this quarter because of this exceptional seasonal effect.

Okay. Okay. And way these plants have been constructed, do they get money based on plant availabiity and in a short written kind of a business? Or they are more running on a spot model, if you could just?

No, no. These are PPAs with the government of Gujarat. That's the GUVNL. So basically, they get the fixed costs.

Okay. Okay. So what is the -- and you mentioned both these power plants effectively company has 100% stake, right? And then that...

No, no, no. In GSPC Pipavav, we have a 98% stake. And in -- that is GSPC Energy generation is 54% stake.

Okay. So what is the fixed cost earning of these entity?

See, presently, they are into an agreement with GUVNL wherein they cover the debt part and debt servicing part, that's principal and interest as well as the normal maintenance part. So that's practically getting covered now.

Sure, sure. And sir, on the gas trading now, if we were erstwhile doing the 11, 12 MMSCMD. Just briefly '21/'22 volume jump to 17 and is now back 11, 12. So if you could help us -- pre-COVID we were doing 11, 12 interim jump to 17. So if you could just throw some light in terms of what led to that jump from 11, 12 to 17? And have we lost some volume, which we can regain or something in that sense? From that 11, 12 MMSCMD we were doing much before and now also we are doing 11, 12. So is it broadly the customers are the same or we have lost some because of the price sensitivity and how much of that can come back?

Basically, before COVID, we were doing 17, 19 kind of numbers. That is, yes -- 17, 19 and then because of domestic gas from KG Basin, some of that went to fertilizer plants, which switched from LNG to domestic gas. And so these contracts are valid till 2026. Post that, they will again come to the market. So we'll have an opportunity to tie up those customers again. So basically, because of domestic gas, we lost a few customers and our volumes have come down. Our volumes have also come down because of higher spot LNG prices because of Russia-Ukraine war and Middle East situation because of which these prices are higher than the alternate fuel, which is there in Morbi, which is propane. But again, as I said earlier, we expect prices to be much more reasonable going forward. And we would see that the -- we would be able to retain not only the fertilizer customers but also the volumes in Morbi will be much more consistent going forward. So we are in the process of executing long-term contracts which are linked to oil, and since propane is also -- propane prices are also linked to oil, we expect Morbi to be much more consistent going forward. And also, we will be able to retain some of the fertilizer customers, which we have lost.

Sorry to interrupt Mr. Gandhi, may we request that you return to the question queue for follow-up questions as several participants are waiting for their turn, sir. Thank you, sir. The next question is from the line of Sanjeev Agarwal from Avigna Investments. Mr. Sanjeev Agarwal, may we request you to unmute your line from your side and go ahead with your question please. As there is no response, we move to the next question, which is from the line of S. Ramesh from Nirmal Bang Equities.

So if you look at your slides 18 and 20, you're talking about improvements in the performance of Gujarat Gas based on cost savings and the benefits of gas sourcing will improve your profitability and return. So can we get some insight into what are the synergy benefits or tax savings will get also integrate the gas sourcing from GSPC and Gujarat Gas? And secondly, what are the other levers will help you improve the margins, including the competitiveness of the Pipavav natural gas versus propane?

See, I think the biggest advantage with this merger is practically the direct sourcing is happening in Gujarat Gas. So basically, the related party aspects with respect to the margin coming in between moves up. So basically, the margin to Gujarat Gas with respect to that improves a lot. And with respect to -- and basically, it also gets expertise or sourcing gas, which is GSPC is doing for the last 15 years. And most of 50% of the same is being sold to Gujarat Gas itself. So basically, you say leverage to Gujarat Gas to optimize its procurement costs going forward. And what was the other question?

So in terms of this savings on the margins, is it possible to quantify in terms of how much it can help you improve your EBITDA per SCM or percentage one?

I think we have disclosed GSPC's margins as well as Gujarat Gas margins. And basically, we have also indicated the numbers which are there. So that's a clear indication of what the margins are going forward.

Okay. But otherwise there are no other tax benefits in terms of reduction in the PAT?

No, that will automatically come in. See, when GSPC is selling to Gujarat Gas and now directly sourcing it, that automatically that those benefits will definitely come into Gujarat Gas.

Okay. And secondly, in the slide on the Gujarat Transmission Limited, in Slide 21, you are talking about the potential for adding new customers and new sources, geographic expansion and capacity expansion. Now can we get some insight in terms of how you will grow the volumes? And to what extent an increase in volumes and capacity expansion can help you achieve growth in revenue and earnings at the current reduced tariff as per the latest tariff order?

I think, see, ultimately, the plan is to have a dedicated company, which really looks at the Gas Transmission business. I think the Gujarat -- GSPL is in plans to do the expansion, and they are in the process of putting the CapEx in place. And automatically, they have an area of entire Gujarat, which is the most expanding area in respect to the gas demand is concerned. I think they are poised to basically expand their volumes based on the infrastructure they will be developing going forward.

Yes. The question is how it will benefit because at a reduced tariff it is -- the regulator is using a denominator of 31 MMSCMD. You would want to get that benefit for 5 years. So what happens after that? So the question is in terms of long-term growth, if we can get some insight in terms of what is the CapEx, how the assets will grow and how the profitability improve it will be useful. You can come back on that after some work is done. And finally, on the tax, sir, if you can give us some insights in terms of what exactly is the tax savings in rupees crores in terms of gas transfer from GSPC to Gujarat after merger? That would also be helpful.

First let me do the tariff part of GSPL. Tariff calculates a function of 3 aspects: CapEx, OpEx and volume. So with increasing CapEx, the tariff will not remain static. The more the CapEx, the tariffs will also increase significantly. And that's -- the tariff revisions will happen over a period of time. In fact, the current tariff order is also under challenge. That's something which is not final on GSPL and binding. We do expect that we have made out a good case, and we should get some positive outcome, not only on the existing tariff. But also going forward, tariffs will increase with increasing CapEx. Can you repeat the second question about tax part?

Yes. So when we're receiving the cost savings after the merger between GSPL and Gujarat Gas, you are referring to some tax advantages. So can we get some insight on the actual cash savings in rupees, crores that will accrue to Gujarat Gas after the merger?

In terms of indirect tax, the sourcing will be done directly by GGL. So that automatically that benefit would get in. So practically today, whatever Gujarat Gas is sourcing to the extent from GSPC that doubles -- to some extent, the double taxation, et cetera, will be taken care of. Yes, in terms of numbers, we need to come back to you.

Mr. Ramesh, may we request that you move to the question queue for follow-up questions as there are several participants waiting for their turn, sir. The next question is from the line of Nitin from PhilipCapital.

Sir, I just wanted some clarification on the transaction structure itself. So how many shares actually are getting issued and to which stakeholder? And also, would there be creation of treasury shares or extinguishing of certain shares so we can throw some light on that? Related to that, again, what is the role of GSPC Energy Limited in all this? What is the entity doing? What is there business and why are they involved in this transaction? So that would be the first one. Please help us understand that structuring of the transaction.

Yes. I think the transaction is basically GSPC merging into Gujarat Gas and GSPL merging into GGL and one more entity that is GSPC Energy Limited, that's a subsidiary which GSPC has created for trading gas outside the state, that getting merged -- that has the subsidiary of -- it has a subsidiary of GSPL Transmission Company. So ultimately, the demerger of the transmission and business is going to happen in GSPL Transmission Company. So that's the reason that merger is separately happening. And that's how that transaction of the demerger -- GEL is being talked about.

And sir, like how many shares are getting issued to which entity? So how many shares are getting issued to stay shareholders of GSPC and how many shares are getting issued to shareholders of GSPL, Gujarat Gas share? And is there a creation of treasury share or extinguishing of shares also making, please also explain that?

No, there is no treasury shares, which is being created. So I think the swap ratio is already mentioned in the scheme itself. So accordingly on proportionate of...

That's okay, sir. Swap ratio is something which is there in your presentation and press release as well. I'm looking at specific number of shares which are getting issued. That's what I'm asking for.

I think we'll get back to the exact numbers you are asking for because I think based on the holdings and the swap ratio, anybody can come out with the numbers with respect to the swap and the numbers which individual is going to get.

So how many shares are outstanding for GSPC then? And who are the stakeholders other than government of Gujarat?

Yes. The Gujarat -- in GSPC, between 93 percentage basically has been held by government of Gujarat and government of Gujarat entities. The Governor of Gujarat holds close to 55 percentage. The GSIL is there, the investment of arm of government of Gujarat that holds on close to 35 percentage. And rest is held by the government of Gujarat entities, and we have close to 6% is being held by IDBI, IFC and SBI.

IDBI and SBI. And the number of shares you said, sir, which are outstanding for the GSPC?

Number of shares outstanding is close to INR 1,000 crores, INR 1,071 crores -- INR 1,075 crores, yes.

INR 1,075 crores.

That's a INR 1 share.

Understood, sir. And second question, sir, is related to the management of these entities. So right now, like there is a GSPL management, there's a Gujarat Gas management. So post like this transaction takes place would there be any changes in the management, who is going to manage basically the GTL business? And then Gujarat Gas, of course, the Gujarat Gas management would be there, but just like you know if you can help us understand would there be any management changes as well?

No. Ultimately, there is a synergy between the businesses, which is there, right? We don't envisage any change in management as on date.

But GTL would be a new entity, right? So who would be managing GTL, the transmission business of GSPL?

No. No, I think you need to understand that the transmission business today also is being done by a separate set of management team.

Yes, of course, that's GSPL management, right?

Yes.

So once -- so they will continue to manage GTL is what you are saying?

Yes. GSPL management currently there's the same set of employee and management team for GSPL will move and they will continue to look after GTL part as well. So there will be no change in management with respect to existing GSPL.

The next question is from the line of Sabri Hazarika from Emkay Global.

Two questions. Firstly, this GSPL valuation, so you mentioned INR 3,500 crores is the value of the core business. So this is based on what kind of methodology?

I think the valuer has used the discounted cash flow as well as the CCM method, and they have given a weighted based on the market practices, and they have arrived at this value.

Okay. And what is the CapEx that is for GSPL for the next 2 years annually.

Approximately INR 3 crores to INR 3.5 crores -- INR 3,500 crores is what we are envisaging in the next 2 years.

Okay. INR 3,500 crores in the next 2 years. Okay, sir. And second question is other than -- I think your promoter shareholding will be around 26% in the demerged Gujarat Gas. So other entities will also have around 25% to 30% stake, right, other Gujarat goverment entities?

Yes, you are right. You're right. Basically, that's the government of Gujarat direct holding, which we are talking about 25% -- close to 25%.

So these will be like quasi promoter only.

Promoter, yes.

The next question is from the line of Bhavin Ghandi from DSP.

Sir, can you quantify the 1Q profitability of GSPC's trading business?

Could you come back, I could not -- we cannot hear you.

The 1Q profitability of GSPC's trading business, 1Q FY '25?

You want the profitability of GSPC's gas trading business for the previous year?

For 1Q, sir. For the first quarter.

First quarter. First quarter, we have earned close to INR 683 crores.

Okay. And sir, the second question is that post the transaction, GGL would have 2 separate divisions, one being the CGD and the other being trading. And the volumes that you are supplying to GG, to Gujarat Gas, is subsumed within the CGD business? Is that the correct understanding?

Yes, that's right.

The next question is from the line of Mihika from Nirmal Bang.

My first question is on a qualitative point of view. I just wanted to get a sense of your growth expectations for the new entity?

Madam, pardon us, we could not get your line.

My first question is on the qualitative side of things. I just want to get a sense of your growth expectations for the 2 new entities that will be formed post the scheme of arrangement?

We are looking -- you're talking about the growth in which company, the gas trading company or the...

2 companies, one will be the Gujarat Gas new entity and one will be the Transmission business that will be demerged.

Yes. See, ultimately, see Gujarat Gas, with respect to the CGD business, the growth potential is already being known to the market, what's the growth which is there. With respect to the gas trading, basically, we are looking at a growth of close to a 9 to 10 percentage going forward. And with respect to the transmission business, you know the GSPL or the growth which is there with the volumes which grow, which is there.

Yes. And sir, I just wanted to cross-check, one, you've mentioned the core and the investment valuations for GSPL. So that comes around INR 26,000 crores for GSPL valuation?

Yes, you're right.

And will you have INR 98 crores or INR 94 crores of outstanding shares by -- after the transmission business is demerged?

It's close to INR 9,382 crores. That's the number.

INR 9,382 crores. Okay.

The next question is from the line of Hitendra Gupta from Systematix.

My question is related to the Slide #12, wherein we are talking about the promoter stake in GSPL being 55.65 and they have a holding in 37.63 -- holding of 37.63 in GSPL and 54.1 in GGL. But if you see Slide #14, you are directly saying the promoter stake is 25.86. But what I understand the economic interest of Gujarat government should be around 11% plus 6%, around 17%. So can you please help me with the math, I guess, from 17% to 25%, how it has increased?

Yes. You referred to the 12 Slide, 12 Slide talked about the promoter stake GSPC by 55% and GGL was 6.53 percentage. Then with reference to that, you are talking to Slide #14, where you are saying, it is coming to 25 percentage.

Yes, yes.

So what is the issue over there?

So I was just asking, so what is the math between like if you see the economic interest of Gujarat government over here. So if you say like 55%, if you multiply it by 37% and 54%, it's around 11%. And even if you take 100% of that 6.53% and then 11% plus 6% is around 17%. So that's what we understand about the economic interest of Gujarat government in the new entity in GGL. But what we are seeing in page number -- resulting in shareholding structure, we are seeing like 25.86% is the promoters. So can you just help me with the overall -- how we have arrived at this number 25.86%.

See, ultimately, the shares of the GSPC shareholders that the government of Gujarat will be getting the share of GGL in the ratio of the swap, which is available, okay. And that's basically -- see, just as I told you, the Governor of Gujarat -- and Governor and GSIL holds close to 55% and 35 percentage, okay? So we are just talking about that swap ratio, which practically reduces the government of Gujarat's direct stake to 25.86% but the other holders of the government would be in the category of 74 percentage because they are not the promoters of the company.

Okay. We will be qualified into this public shareholders?

Yes, you're right.

And I think one more question I have is with respect to the GSPL valuation, which you talked about the INR 30,000 crores. In that INR 24,000 crores is for the GGL, right? And core business is...

No, no, the valuation of the GSPL is close to INR 26,000 crores.

Okay. And of which INR 24,000 crores of GGL, right?

See, I think the valuers have taken a weighted average of a discounted as well as the CCM method. So based on that, even one of the methods they must have taken the entire value without the holding company and the other method, they have taken the market values. So they have given a weighted average of both the things, and that's how the INR 26,000 crores has been arrived at.

Mr. Gupta, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. [Operator Instructions] The next question is from the line of Varatharajan Sivasankaran from Antique Limited.

If you can share some details as to the E&P reserve numbers which you might have?

Yes, we have been -- practically we have 11 blocks, which are in operations of that 6 blocks being operated by GSPC. With respect to that, the results numbers it's -- the oil reserve is close to 5.5 million barrels of oil is there. And basically, with respect to the gas, it's practically 4.4 Bcf.

And second, on the GSPL valuation, again, you gave some numbers. If you can give us the breakup in overall scheme of things with the INR 26,000 crores that's across other...

Varatharajan, your voice is breaking. It's not clear.

So this INR 26,000 crores for GSPL, if you can give us a break up across all the businesses conventionally. You have been giving parts of it, if you can give the entire -- all the entities?

No, only thing is basically to see, once I give you a part, then basically, we'll have to do a weighted average of all the things. So that's the reason it's INR 26,000 crores. So that's why I told you the valuation on individual terms with Bcf method is close to INR 30,000 crores. And with respect to the market method, it's close to INR 22,000 crores.

Mr. Sivasankaran, may we request you to return to the question queue, please. The next question is from the line of Maulik Patel from Equirus.

Yes. So once you have this merger and where the incremental capital because...

Sorry to interrupt you, sir. May I request you to use your handset, sir. Your audio is not clear, sir.

Sure. Sure. So once the merger is completed I think the cash flow will be significant for the entity, right, Gujarat Gas I am talking about. So where the incremental capital will go? Will you invest in more into the CGD business? Or we will diversify to some other areas of the energy segment?

This is a good question. In fact, the overall scheme of arrangement, if you look into that, if you look into that, the first objective is to do the simplification, but the other objectives they are following subsequently are to have the leveraging position and to take up the opportunities, which are emerging in the energy sector. So the Gujarat Gas will have the strengthened position in the CGD sector. It will not only look into the retail PNG customers, but it will also have GSPC business coming to it. The related party transaction will be taken off, so it will enjoy higher cash flows. So naturally, the management is definitely looking forward towards other energy sectors, more diversification. But at the appropriate time, the call will be taken. This is the first stage at which we'll be consolidating and simplifying. And once this is done, with due diligence, as all of us know, the energy needs are growing and there are various other forms of energies which are emerging. So in the right step, as an integrated company, the Gujarat Gas will be having renewables coming to it. It is having the gas-based power plant. And with that, there will be other energy options, which we'll be also looking too. But with due diligence at the appropriate time, the decisions will be taken.

We move to the next question, which is from the line of Vishnu Kumar from Avendus Spark.

Sir, on the GSPC EBITDA of INR 1,300 crores on that. Did you see the reverse impute it's almost coming to about a $1-plus per MMBtu of margin. Firstly, is this whole number for the trading business? And what we understand is some of the other competitors that the fixed marketing margin probably would be about 25%, 30%, rest of it would just be trading. Just trying to understand this excess delta that we are getting, is it a bit more stable? Or is it more of a transitory period? Or just it would be helpful if you could give us a clarity on this.

Yes. I think you need to -- we need to be corrected on one part is the EBITDA with respect to the gas trading margin is close INR 1,100 crores, not INR 1,300 crores because the INR 1,300 crores includes the other income in the form of dividends and interest. So that's INR 1,100 crores. And basically, if you look at the last 5 years, we have been making a margin of -- consistent margin of close to 9 percentage with respect to the gas trading business. So it ranges from 6% to close to 12 percentage. So that's the margin we have earned consistently over a period of last 5 years. That's the track record we are having. And we have been having this gas trading business for the last 15 years. And basically, we have developed an expertise with respect to that. And so we have a consistent profit which has come in the books which has been there.

We move to the next question, which is from Kishan Mundhra from Antique Research.

Two questions, sir. You mentioned that GSPC made a profit of almost INR 680 crores in 1Q. So did it have any seasonality because of higher throughput in the gas-based power plants?

Yes, there is an effect of the business. 2 things, one is basically, the gas prices were subdued in the first quarter, which led to the increase in demand with respect the power sector as well as the city gas distribution companies. So that's the seasonal effect, which has come in, in the first quarter.

Okay. Understood. And sir, the second question was you mentioned about you entering into a couple of contracts with -- based on U.S. Henry Hub. So if you could mention what is the quantum of contract that we are looking at? And what is the -- what is your expectation of the landed price based on current commodity prices?

So basically, this would be like 6 cargoes a year, and landed price would be close to I would say, around $9 per MMBtu input. This is the DS price, I'm talking about.

We move to the next question, which is from the line of Kirtan Mehta from BOB Capital Markets.

In terms of the valuation of the GTL business, would it be similar to INR 3,500 crores that we are assuming for the core business of the transmission? Or would there be any other moving parts there?

No, I think it's for the entire transmission business.

We move to the next question, which is from S. Ramesh from Nirmal Bang Equities.

Yes. Just a follow-up on the GSPL CapEx, you've indicated a INR 3,000 crores to INR 3,500 crores. So on the asset created, what is the expectation in terms of the returns will generate? Will it be at the current reduced tariff? Or will you be able to get a price tariff order on this base on the 12% return on capital employed. How would the returns work on the new CapEx?

I think it will be on the 12 percentage return.

We move to the next question, which is from Raj Kiran Gandhi from SBI Mutual Fund.

Sir, you mentioned some of the accumulated loss that GSPC has will be used up in the gains reported in this transaction, right? So net of that, what is the net carry forward loss available to the new NPV?

That's which we told you that's close to INR 7,200 crores of tax losses are available in the books of GSPC. Which would be -- yes.

We move to the next question, which is from the line of Hitendra Gupta from Systematix. We have Mr. Sanjeev Agarwal from Avighna Investments.

Am I audible?

Yes, sir, please go ahead.

Yes. My only question was, one, what is the full year profit for GSFC financial year '24?

GSFC or GSPC?

GSPC, sorry.

For financial year -- last financial you're talking about?

Yes.

We had a profit after tax of close to -- I think we have mentioned it within the presentation itself, Slide #6.

Okay. I will check say that. And what would be the estimated savings on the bottom line of Gujarat Class Limited post this entire transaction?

Savings in terms of?

In terms of the cascading assets of obviously, the taxes getting reduced indirect taxes and also the other operational expenses being reduced.

With respect to operational expenditure side, I think there is not much of operational expenditure we're getting into Gujarat Gas books on GSPC. And with respect to indirect taxes, we'll come back to you because that's basically all that trading will happen from Gujarat Gas going forward. So that automatic benefit of double taxation lease would be eliminated. At exact number we need to get back to you.

The next question is from the line of Vikash Jain from CLSA.

So the INR 7,200 crores of accumulated losses. I have 2 questions. This is as at the end of FY '24, number one. Number 2 is, at what time do we need to kind of recover the profits on the back of this? I mean how much -- because these losses might be -- might have started -- might have come to the books 2 years ago. So the 8-year period is from which date, just to understand that.

Yes. Just to give you a background, we had these tax losses, which came in '18/'19 and these tax losses as on 31st of March 2024 is close to INR 7,200 crores. We are doing the merger as per the Clause 72A of the Income Tax Act which has necessary provisions for the tax losses to be carried forward or to be adjusted.

The next question is from Vishnu Kumar from Avendus Spark.

Sir, just on the EBITDA on the GSPC trading, which you just mentioned of INR 1,100 crores. So is this high because are we -- for Gujarat Gas, we are charging a little bit and others -- marginally lesser for the other customers or we have a benefit on the overall pricing. And once we merge with the Gujarat Gas, so you did mention in one of the calls that we only show the rest of the ex Gujarat Gas volume. So this pool of profits will directly sit in Gujarat Gas' EBITDA, just to give us some -- on this overall picture, if you could give some clarity.

Yes. See, ultimately, we are governed by the related party transaction rule. So where we have a restriction of charging exorbitant profits on Gujarat Gas as on date. So basically, that restricts us from charging much to Gujarat Gas. With respect to the margins which are earning from others that automatically comes and resides in GGL going forward.

The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities.

Just a clarification on the scheme of arrangement.

Sir, may we request you to use your handset please, you are not clearly audible.

Okay. Am I audible now?

Yes, sir. Please go ahead.

So just a clarification on the scheme of arrangement. If I'm a shareholder of GSPL, what are the shares of GGL...

Sorry to interrupt sir, your audio is not clear, sir, may we request that you return to the question queue, sir. We cannot hear you, sir. The next question is from the line of Soumit Sarkar from BCCL.

Just one simple question. Given the fact that there is a huge equity dilution happening for Gujarat Gas shareholders, nearly 36% will this deal be EPS accretive right from day 1? If you could give us just some perspective on that front. And if it is EPS accretive how much percentage?

We are unable to get you clearly.

I was asking whether is this deal EPS accretive from day 1, given the fact that there will be a huge equity dilution for Gujarat Gas shareholders around 36-odd percent and if it...

Yes, the EPS will increase for Gujarat Gas shareholders.

The next question is from the line of Mayank Maheshwari from Morgan Stanley.

Sir, just a follow-up on the earlier question. In terms of your gas consumption that is going into the power plants for fiscal '24 and also 1Q '25. Can you give us that on a proportionate basis, that was there for GSPL.

GSPL?

At the GSPC level, sorry.

See, with respect to the gas consumption in the previous year, I think power sectors are marginally there, maybe 5% to 10 percentage only went to the power sector. Most of them went to the -- close to 50% went to the city gas distribution, then the fertilizer and then the refineries and the other companies over there.

Sir, I was referring to your own power plant that I was referring to, sorry for that.

Yes. I think, see, last year, they did not run in the manner because they did not have demand coming in from the -- because of the higher gas prices, which were there. The power plants were not operating with respect to that. The only thing is in the last quarter because in the summers, basically, there was a direction, there was an energy shortage and there was a direction from the government to run the power plants and they were able to purchase the gas at the prices which are in the market. So that's the reason they had a higher PLF in the last quarter.

45% PLF, what was that?

Sorry sir, you are not clearly audible, sir.

So in Q1, in GSPL, we transported close to 5 to 7 MMSCMD volumes in power in Q1 '25.

The next question is from the line of Krunal Shah from Enam.

My question is on the GSPL CapEx, INR 3,500 crores, which pipelines would this be catering to?

So basically, we are developing 7 to 8 projects in totality. Out of this, we'll be doing the Dahej-Bhadbhut, which is basically into Bharuch from Petronet LNG business. And we'll be doing Anjar-Palanpur, basically connect the GSPL and GIGL networks. Then we have one pipeline connecting Rajpipla, which is Amboli-Vanthevad. Then we have on connecting the Jamnagar-Okha, which will basically connect the upcoming gas discovery, which has happened in -- is about to be announced in Okha region. It's basically an offshore block and this is very promising block, just a quarter of a year from the market. So these are the main projects. There are other few 3 to 4 projects like Morbi-Mundra -- Mundra-Mandvi and a few more projects. So basically, 7 to 8 projects in all and approximately INR 3,000 crores to INR 3,500 crores of investment.

And this is in the next 2 years?

Yes, next 2 years.

The next question is from the line of S. Ramesh from Nirmal Bang Equities.

So you have this GSPC LNG, which has been losing money and there's a high leverage on the balance sheet. So can you share us some numbers in terms of what is the March '24 revenue and loss? How it's doing in first quarter? And what's your plan to improve the utilization and improve the performance of this? And to the extent that it may require some additional investments, any further cash outflow required to revise this from Gujarat Gas post merger?

I think the last quarter, the capacity utilization was close to 29%. And with respect to the previous year, the provisional numbers in terms of revenues are close to INR 235 crores, and they have an EBITDA close to INR 137 crores.

And what about the loss?

Loss. See, I think it depends on the utilization, which will be done. So practically, the utilization and increase in this year. So that will be taken care with respect to capacity utilization, which will be happening this year.

You're expecting the company to report positive profit this year?

Yes. Because ultimately, you had the higher prices of gas in the previous year, which is practically provided the number of cargoes to be brought in over there. So in the first quarter itself, they are clocking around 29% of capitalized -- capacity utilization.

The next question is from the line of Bhavin Gandhi from DSP.

Sir, what is the -- out of the INR 1,100 crores trading EBITDA for GSPC, how much is attributable to the volume supply to Gujarat Gas?

See, I think it's a portfolio of gas which we have, maybe 30 percentage or something.

30%. Okay.

That's just an approximate number.

The next question is from the line of Hardik from ICICI Securities.

So can you share the cash provision of GSPC as on FY '24 and as on June '24?

I think cash position, GSPC, I think we are having a cash balance of close to INR 2,300 crores.

Okay. And as on June -- this is as on June, right?

This is as on June, yes.

The next question is from the line of Krunal Shah from Enam.

The Mehsana-Bhatinda pipeline, we've been in operation for a couple of years, but volume ramp-up has been very slow. So what's your outlook? How do you see the volume ramping up over the next 3, 4 years?

So yes, volumes have been low, but volumes have also been low because of the nonoperation of the Rohtak-Panipat pipeline. So recently, there have been a lot of positive developments around that, and we expect authorization to be awarded for the Rohtak-Bhatinda pipeline very soon. Once that happens, volumes will ramp up fast in GIGL because we already have a firm and binding the gas transportation agreement with IOCL, Panipat. The volume ramp-up is from 1.5 million to 3.5 million over the next 2 years or so. So yes, we would be able to get the authorization very shortly on the regulator. So basically, yes, the volumes would start ramping up very soon there.

The next question is from the line of Soumit Sarkar from BCCL.

My question remained unanswered. Whether this deal is EPS accretive right after completion? And if yes, by how much percentage, can you just give some light on that?

Yes, it will range between 50 percentage acreages will be there, increase. Because the entire gas trading business is coming into GGL. So practically, that EBITDA number of GGL will be affected in the year.

But there is also, the equity dilution of 36% happening, sir. Still 50% accretive.

Yes, yes. We have taken into consideration that also.

Mr. Soumit, does this answer your question?

Yes.

The next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities.

This is just a clarification. So the scheme says that if I'm a shareholder of say, GSPL, I get shares for GGL and both that there is a demerger also, then I get shares of GTL also?

Yes, you will. You will get the shares of -- yes, that is true. I will give an example. If you are a shareholder of GSPL holding shares -- 130 shares of GSPL. So with the merger, the -- in the new setup, 100 shares will be allotted from GGL, and again, from the new entity, GTL, 33 shares will be allocated. So for 130 shares of GSPL, the shareholder will get effectively 100 shares of Gujarat Gas Limited plus in addition, that is there 33 shares of GSPL Transmission Limited, the new entity, GTL.

The next question is from the line of Sunil Sarda from Sarda Foundation.

One gentleman had asked a query about the economic interest with government of Gujarat has into GGL. That was not answered. See, effectively, what we want to say that government of Gujarat holds 55.65% to GSPC, and then GSPC, GSPL and GGL put together. If you work out the economic interest, the government of Gujarat get some 11.34% stake into GGL, plus 6.53%, they are directly holding. So it becomes close 17.83% stake. But if you see the revised holding, result in shareholding structure, it is coming to 25.86%. So is the 8% is the extra shares getting allotted to the government of Gujarat? Number one. Number 2 is, again, the same query, Mr. Hitendra Gupta has asked that you have valued this GSPL close to INR 26,000 crores. Out of that, INR 22,000 crores-odd is the basically investment value of Gujarat Gas. INR 3,500 crores you are giving core value to a business. Core business value is INR 3,500 crores, a company which is earning INR 1,250 crores is valued only at INR 3,500 crores for a core business value. So these are the 2 queries that we have, sir.

So to answer your first query, GSPC is owned to the extent of 94% by government of Gujarat and government of Gujarat owned entities. So that is the direct shareholding pattern so far as government of Gujarat is concerned into GSPC. Also, it has direct ownership to the extent of 6.53% in Gujarat. So that is already there, right? So I think somewhere you suggested 55%, 55% is direct ownership and another 40-odd percent through government of Gujarat owned entities. So now if you apply this swap ratio, you will eventually get the result in shareholding of government of Gujarat to the extent of 25%.

Sir, that we only get if we take the institutional holding also into account, you said that institutional holding would be classified as public and not as a promoter. So it is only government of Gujarat holding has to be taken, not the Gujarat government entities are promoters, okay?

See, the entire structure needs that -- the structure and the new structure has been derived based on the valuation carried out by 2 independent valuers who have give a joint valuation report by applying the standard method, which are utilized for valuation purpose. Over and above these 2 valuations, there were 2 categories, 1 merchant bankers who carried out fairness opinion, and based on this, the valuation for each of the company has been derived. And based on this valuation, the post-merger scenario, the holding has been determined. So comparing the shareholding, which is there currently with the post share -- post-merger shareholding is something which is not directly applicable. You have to see it in the perspective of valuation, which has been carried out by 2 independent valuers as well as fairness opinion by them. Plus, there is -- this is what -- this is how we are also deriving as the simplification of the layered shareholding structure.

Okay. Second query I asked about the valuation of providing 3 multiple to a company which is earning INR 1,250 crores PAT.

I think the INR 1,250 crores you're talking about is before the tariff reduction. So once that 50% tariff reduction is being affected into. And going forward, see most of the CapEx -- most of the tariffs were determined earlier based on the CapEx, which was incurred in future, which practically has been recovered. So going forward, that practically will come as a bottleneck for an increase in the tariff going forward. So that has been factored into we could come out with the valuation going forward for the enterprise.

The next question is from the line of Manikantha Garre from Franklin Templeton India. The current participant has left the queue. May we move to the next question. That is from the line of S. Ramesh from Nirmal Bang Equities.

This is a follow-up on GSPC LNG. So the balance sheet has a very high debt. So in terms of the thought process on restructuring the balance sheet and the debt. Do you expect the operating performance this year to help you replace some of the debt? And going forward, how do you see the overall balance sheet shaped up for GSPC LNG?

I think there's an independent management to basically take care of the operations over there, and we will ensure that the balance sheet is sustained enough, and they will have operating profits over there. And especially this is not part of the structure over which we are talking about today.

The next question is from the line of Harshad Borawake with Mirae Asset.

I think the initial one of the answers, you said that of the INR 10,600 crores value given to GSPL, Sabarmati and power assets, roughly 89% of this is GSPL. Can you just break this INR 10,600 crores value in these 3 separate assets?

Which assets? Sabarmati Gas is close to 7.3 percentage. And what is the other asset you talked about?

So you said of the INR 10,600 crores value given, 89% you said is GSPL.

Yes, you are right.

And then in the last 1 or 2 questions, you also said that GSPL values roughly INR 3,500 crores. So I'm slightly confused there. What is the exact number.

I have not said INR 3,500 crores.

Okay. So of the INR 10,600 crores 89% is GSPL, right?

I think what you're talking is you're referring to the GSPL valuation, that's the confusion. I think with respect to GSPC valuation, we are very clear. It refers to INR 10,600 crores close to 89 percentage is basically GSPL and close to 7.3 percentage is Sabarmati Gas.

The next question is from the line of Manikantha Garre from Franklin Templeton India.

Out of the INR 3,500 crores CapEx which you have mentioned for GSPL over the next 2 years, how much CapEx has already been approved by PNGRB? And I have just one more question. On the inorganic opportunities that you have mentioned and you said you will do both organic and inorganic. The inorganic part will be across the business in GGL, the combined GGL, that is LNG terminals, CGD and the power assets too? Those are my questions.

So the first part, out of this INR 3,500 crores, almost 60% has been approved by PNGRB, and the rest final is in advanced stage of approval from PNGRB. Can you repeat the other part?

Okay. The remaining 40%, sir, when do we expect that approval to come to us?

It will be very shortly.

Okay. The second one is about inorganic opportunities, which you mentioned, right, the improved cash flows from the combined GGL, you look for both organic and inorganic opportunities. On the inorganic part, I wanted to understand, you would be thinking about all the businesses that is LNG terminals, CGD and the power assets too or is predominantly focused on CGD only?

You are talking about the expansion part?

Yes, sir. I think the growth -- on the growth side, you said you'll think...

No. I think -- yes, on the growth side, CGD would be there as NSR managing the sector, we are also looking at other opportunities as organic as well as inorganic growth. That will practically come up over a period of time where we'll be disclosing it to the investors also.

Right. The point which I'm trying to understand is would you be thinking about the power assets too?

No, no, I don't think the -- I don't think it's on the power asset as on now because we already have 2 power assets. But any renewables or anything with respect to that, the power assets were may be part of it, but not an expansion on the power assets.

We take the last question from Vikash Jain from CLSA.

I could not finish my question earlier. So INR 7,200 crores again coming back to that tax that was mentioned that accumulated losses. So this was for FY '19. So you have time till FY '27 to recover that. So basically, once the merger is over, most likely sometime in the middle of FY '26, unless there is a huge jump in profits from that, broadly, we can assume that FY '26 and FY '27, the most Gujarat entity will not be paying any taxes, income taxes?

Yes. I think one correction over here. I think the -- see I think I mentioned there was Section 72A, which talks of mergers and acquisition where there is a provision of carry forwarding of the tax losses in the merged entity. So the tax is getting expired in this financial year, that is on 31st of March. So basically, as a part of the merger and as per the tax rules, whatever the tax losses will be carried forward would be carry forward for next 8 years.

So you get a fresh lease of 8 years after the merger is done.

I think that's what the tax loss is about.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

From the management of GSPC for this call conference on the amalgamation and demerger scheme, composite scheme, I thank you all of you for joining the conference with a short notice. I thank you for your queries, very well-thought queries, and we tried our best to respond it. I hope that you are satisfied with the answers we are giving. I again, thank you all of you for your support and trust in us. Thank you once again. Over to moderator to close the conference, please.

Thank you. On behalf of Ernst & Young, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.