Indraprastha Gas Limited (IGL.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indraprastha Gas Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari. Thank you, and over to you, sir.

Thank you, Good day, ladies and gentlemen. On behalf of PhillipCapital India Limited, I welcome everyone to Indraprastha Gas Limited First Quarter FY '26 Earnings Call. Today from the management team of ICL, we have the pleasure of having with us Mr. Kamal Chatiwal, Managing Director of IGL; Mr. Mohit Bhatia, Director Commercial; Mr. Sanjay Kumar, CFO; and Mr. Manjeet Gulati, VP Finance. I shall now hand over the floor to the management for their opening remarks, which shall be followed by a question-and-answer session. Over to you, sir.

Good evening, ladies and gentlemen. I'm Kamal Kishore Chatiwal, Managing Director of Indraprastha Gas Limited. It's a pleasure to welcome you all to our Q1 FY '25-'26 earnings call. Thank you for taking the time to join us today. For the benefit of new participants, I would like to begin with a brief overview of IGL Infra Gas Limited is one of India's leading city gas distribution companies with a strong presence in 12 geographical areas across four states. Our mission is rooted in delivering safe, reliable, sustainable energy solution across industrial, commercial, domestic sector as well as the urban mobility segment. We operate through a balanced portfolio that spans both mature and emerging geographical areas, providing us with both stable returns and exciting growth opportunities. On the infrastructure front, IGL continues to strengthen its network. We now operate a steel pipeline network exceeding 2,400 kilometers, complemented by an MDP pipeline network of approximately 28,000 kilometers. This infrastructure enables us to supply natural gas to over 3.1 million households, 5,300 industrial units, 7,000 commercial establishment. In addition, we operate more than 955 CNG stations across our area of operations. Operational and financial highlights for quarter 1 are as follows. In Q1 of FY '26, we recorded a healthy 6% year-on-year increase in overall volumes, driven by 6% growth in CNG segment and 10% growth in PNG segment. It is worth noting that CNG volume growth of 6% was achieved despite a reduction in sales in DTC and DI buses, which are gradually transitioning their fleet to EV. If we exclude DTC volumes, our CNG growth stands at around 9% year-on-year, which is highly encouraging considering the high base. While volumes in Delhi remained stable, we experienced robust double-digit growth in our operations outside Delhi, reaffirming the strength of our expanding geographical footprint. One of the key growth drivers was the rise in CNG vehicle adoption. On a 12-month rolling basis, we saw a 17% increase in new and retrofitted CNG vehicles with an average addition of 18,500 vehicles per month during the quarter, up from 15,900 a year ago. On the PNG front, the total sales volume rose to 2.34 million standard cubic meter per day, up from 2.18 million standard cubic meter per day with growth evident across all business segments. Domestic PNG sales grew 11%, supported by the addition of 1.81 lakh new connections per household, the connection consumption remained steady at industrial PNG volume rose 8%, backed by 419 new industrial connections and a 9% increase in the billed industrial base. Commercial PNG sales increased by 14%, aided by 909 new commercial connections. Expansion of our customer base continues to be fundamental lever driving PNG volume growth. I would also like to highlight a significant regulatory development that you may be aware of. The PNGRB has recently notified that the transmission tariff for CNG and domestic PNG segment will now fall under a single zone tariff network. While pricing details are awaited, this structural reform is expected to benefit the CGD sector immensely, especially in the hinterland. We believe this change will positively impact our cost structure and margins in the near term. With this, I now invite Mr. Mohit Bhatia, our Director, Commercial, to share additional remarks.

Thank you, Mr. K.K. Chatiwal, and good evening to all our investors, fund houses and analysts. I'm Mohit Bhatia, Director, Commercial at Indraprastha Gas Limited, and it's a pleasure to speak with all of you today. So let me take you through some of the key financial highlights for the quarter. The total sales volume for quarter 1 stood at 831 million standard cubic meter, registering a growth of 6% year-over-year. This is translating into an average daily volume of 9.13 million standard cubic meter, which is up from 8.64 million standard cubic meter of last year. The revenue for the quarter reached to INR 4,317 crores with an increase of 11% year-on-year. The EBITDA stood at INR 512 crores, reflecting an 11% decline over last year, primarily due to the reason in the per STM gas purchase cost. This was largely the result of reduced allocation of APM gas. The profit after tax PAT for the quarter was INR 356 crores as compared to INR 400 crores of Q1 of the previous year. However, a sequential analysis provides a clear picture. In Q4 of '25, there was a onetime impact of INR 114 crores related to settlement with oil marketing companies. Adjusting for that, EBITDA per STM has increased by 33%. And currently, it stands on Q1 closure that is INR 6.16 per STM. In terms of sales volume, while our Managing Director mentioned that Delhi was flat, but the NCR region, particularly Gautampur, Nagar, that is Noida, Greater Noida and Ghaziabad geographical areas registered 11% growth, whereas the other areas outside Delhi and NCR registered a 23% growth. Our associate company, Central UP Gas Limited has continued its steady growth. During the quarter, CUGL sales volume stood at 0.34 million standard cubic meter per day as compared to 0.3 million standard cubic meter in the corresponding last year with an increase of 13%, reflecting healthy operational performance. The company also improved financial outcome with a profit registering PAT of INR 17.6 crores, up from INR 15.6 crores in the same quarter of the previous year. Our other associate, Mahanagar Natural Gas Limited has continued to maintain robust operational performance. During the quarter, MNGL recorded a sales volume of 1.85 million standard cubic meter per day as compared to 1.56 million during the corresponding quarter of the previous year, with an increase of almost 18%, reflecting consistent demand and network expansion. The profit after tax stood at INR 131 crores as compared to INR 145 crores in the same period last year, largely impacted by pricing dynamics. Despite this, the company remains well positioned for sustainable long-term growth. As our Managing Director mentioned, we expect further upside in EBITDA margins for IGL once the tariff rationalization takes full effect. With this, I would like to conclude the opening commentary and would now request open the floor for further questions. Thank you.

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

Two questions from my side. Firstly, in terms of the gas sourcing mix, if you can let us know what was the exact APM gas percentage for this quarter, excluding new gas for the CNG segment and also the volumes that we got from Brent-linked long-term contracts as well as Henry Hub-linked contracts for the quarter?

APM as of the second fortnight is around 3.08 CBM. -- out of the total 6.79, so that is close to around 42%.

And what would the other sources?

Others is that we have got new gas, then HPHT, even IGX, we have the HPHT priority. So you can say 2/3, we are getting the domestic gas that includes your APM, New well, HPHT, CBM. So these domestic sources constitute around 2/3, 1/3 is RNG.

LNG is primarily on contractual basis, sir? Or do we have any spot as well in our portfolio?

We have more than 100% contracts. So I would say medium and long term is there. There is no spot volume requirement.

The second question was with respect to the tariff rationalization that you mentioned. Is it possible to get a sense of how much of our volumes today in the domestic and CNG are actually on Zone 2 versus maybe -- or Zone 3 as the case may be? And what kind of a per SCM...

Yes. Total, we have around 83% of our volumes are in that zone. So 83% goes to CNG, transport and that's the number. So -- and around 85%, 87% is in zone 2, 13%, 14% is in Zone 3.

Got it. So 87% of our domestic and CNG volumes are in Zone 2, right?

Yes.

And sir, is it possible to share your estimate of what kind of cost savings will occur if these volumes were to move to Zone 1 tariff?

I think actually, final numbers are not there, but whatever is available from various sources, we feel that INR 1 per SCM plus/minus INR 0.30.

INR 0.70 to INR 1 roughly a range is what we expect...

INR 1.30 should be the range.

One last question, if I may squeeze in, sir. Any change in guidance? I believe earlier also you had mentioned that you would strive to maintain EBIT -- volume growth would be at around 7% to 8% or 6% to 8% and EBITDA would be in the range of INR 6.5 to INR 7. Is that a fair guidance to assume...

No, no, no. We are -- basically, the EBITDA margin should improve. And the long-term guidance has always been 7% to 8%. So we should be in that range, I think even some of the tax rationalization discussions are going on with some states. So we are hopeful that we should be in the upper range of that going forward, and we should end the year at around 10 million.

So volume growth, sir, any long-term guidance for the next 2 to 3 years on an annualized level?

I think 10% to 11% is the guidance for next 2 to 3 years. That includes the TS that we will be acquiring. And based on that, we are seeing that.

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

Sir, again, can you give us a detailed breakup in terms of MMS CMD of our gas sourcing volumes like APM, you have already mentioned 3.08, but could you please give us NWG, HPHT, Henry Hub,rublink and the spot?

WG right now is at 0.9 kind of numbers, 0.9. And HPHT, you can say -- I mean, some of the volumes are on a very short-term basis. On a monthly basis, we are getting on the exchange. So -- but long term, if you say it's 0.43 is long-term 1-year contracts. But every month, they come out with some volume. So we -- as you know, the CNG transport segment is on priority list. So we get the first priority and whatever we bid, so 15% to 20% of that, we definitely get. So 0.3 to 0.4 from there. And CBM volume is 0.12.

Henry Hub, any idea, sir?

So Henry Hub, we have contracted around -- I mean, 67% of our 4.22 million portfolio. 2/3 of that is Henry Hub linked.

Okay. Sir, second question, again, related to volume growth. You have been guiding a volume growth of 8% to 10%, 10% in FY '26. While reported volume growth is in the range of 6% on year-on-year side, what would be the key drivers which will drive our volume growth to the 10% in the remaining 9 months? Can you just throw some light on that side?

Actually, some of our new GAs, even in the existing GAs, we see a strong growth in the OEM car space, passenger vehicle space, which is growing at around 37% as we speak. The last month's numbers were out and petrol has come down below 50% first time and 37% is CNG. So that's a very healthy growth. And we are also augmenting our stations, not only outside of Delhi, but even in Delhi, we are augmenting stations very aggressively. And wherever we can find space even in the existing stations, we are increasing that. So with that, what we plan to do is give some -- increase the customer experience, which should aid us in our conversion.

5 Sir, how many CNG DPC buses are right now flying inside Delhi? And how much is their consumption?

And second is maybe some of the GEs, I mean, we may do some acquisition and all. So those volumes will also come in.

Okay. So sir, next question is related to number of CNG DTC buses in Delhi as of now. And how much is the CNG sales volume nowadays?

You see DTC is around 87,000 is remaining. So you can say 1.5%, 1.7% of the total volume. So that is not a significant number. And our sales are exceeding currently, we are exceeding 51 lakh, 52 lakh kg per day.

Okay. This is 85,000 kgs per day. Is that a correct understanding, sir?

Yes, yes. This is all on kgs because we sell in kg and then we convert it into SCM.

Okay. And how much time it will take to completely phase out of all these CNG?

I think it is -- I mean, we -- it is dependent on the Delhi Transport Corporation, how quickly they can deploy the electric buses. So in next 2 years, we are expecting those buses to go out, whatever is remaining, very less buses are there.

[Operator Instructions] the next question is from the line of Sabri Hazarika from Emkay Global.

So two questions. Firstly, what was the CapEx for Q1 FY '26? And how many CNG stations did you add?

So see, we have taken like on the core business for the annual -- the financial year around INR 1,400 crores to INR 1,500 crores for this year. So we had incurred around INR 290 crores during the Q1...

INR 290 crores.

Yes, INR 290 crores. So on the CapEx incurred was INR 290 crores. So as you know that like in the first quarter, normally, we plan to put up the CNG stations and all. So we have a plan for commissioning of 102 stations during the entire year. So first quarter, it's all in the execution stage. So number -- not much numbers get commissioned during the first quarter. But for the entire year, we have a plan of 102 target for commissioning.

Okay. Second question is, what is the industrial and commercial PNG realizations for Q1 and also the average for FY '25 last year?

Yes. So for Q1, we had a double-digit growth basically in industrial and commercial sector also. So industrial sector grew by around 8% to 10%, roughly 8% you can take. And the commercial grew by 14%. It is slightly better than the last year average. And now we are clogging a daily average volume of around 0.86 million per day in case of industries. And in terms of commercial sale, we are clogging around 0.24 million SCM per day. So almost around 170 commercial customers and around 100 industrial customers during this quarter, we have added also.

But I also wanted to know the realizations, the pricing, pricing. Pricing. Industrial and commercial price for Q1 as well as FY '25?

So for Q1, our average price, if you see is around INR 49 to INR 50 in case of industrial and around INR 60 for commercial.

And last year also, it was like this only?

No, we have increased the prices slightly INR 1 in domestic and INR 1 or INR 2 in industrial and commercial. Industrial is a very dynamic thing based on the alternate fuel. So we have to somehow sometimes compete with that. So that is a very dynamic space, but commercial is stable at 60 and domestic at 50. So we had increased the prices there.

The next question is from the line of Lokesh Manik from Vallum Capital.

Sir, my query was we've seen a significant increase in O&M expenses, specifically in power and fuel in the last couple of years. And we have not seen a throughput in sales to that extent. So any color on what is the nature of this power and fuel expense and what is driving this increase?

I think we'll be happy to share with you that your concern is right, and we are -- we have been working on this. So this quarter, we have, in fact, reduced the power and fuel cost per SCM. So there has been as compared to, say, quarter-on-quarter also or sequential also from -- there is a INR 5 to INR 6 improvement in power and fuel cost, and we continue to work on that to reduce it further. Second area is the repair and maintenance cost also. There also, we have improved by INR 0.8 per [indiscernible] per SCM from INR 1.5 per SCM to INR 1.42.

Sir, but why is this cost going up? We are laying the pipelines, is it for that...

Going up, it is not going.

I'm asking why did it go up because the GAs were developing, so you had to transport through road. Is that the reason this cost was going up?

Actually, power and fuel, those GAs, that is a separate head. What happens is when you commission a station, initially, the capacity utilization is slightly less than what you would normally want. So it takes time to -- the full capacity utilization to take effect. So there is some bit of operational inefficiency to begin with. But then if you rationalize once you scheduling and all those things, there are a few strategies we have deployed to reduce that. Even the sourcing of power is one issue that we are aggressively working on to source renewable power because in some places, the cost of power is also very high. In addition to that, the fuel cost also the gas because now RLNG is the major component of the fuel. So sourcing that also is important.

Just to add one more clarification here. This power and fuel cost is mainly for the operation of compressors, which we have to utilize for dispensing the gas, CNG to the vehicle. So this is mainly -- power and fuel is mainly on that account.