Indraprastha Gas Limited (IGL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indraprastha Gas Limited Q4 FY '21 Earnings Conference Call hosted by Antique Stock Broking. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. [indiscernible] Rajan from Antique Stock Broking. Thank you, and over to you, sir.

Thank you, Manav. A very good evening to everyone on the call. I'd like to extend a very warm welcome to all the participants and the management of IGL to this call. The management is represented by Mr. Kamal Kishore Chatiwal, Managing Director; Mr. Mohit Bhatia, Verite Commercial; Mr. Sanjay Kumar, CFO; and Mr. Mandeep Singh, VP Finance. Once again, welcome, everyone. I'd like to hand over the floor to the management for the initial remarks. Over to you, sir.

Thank you, a very good afternoon to all of you. I'm Kamal Kishore Chatiwal, Managing Director Indraprastha Gas Limited, and I welcome you all, and thank you for joining IGL's earnings call for FY '23, '24. I'm happy to announce that IGL has achieved the highest ever annual sales volume of 8.43 MMSCMD and also the highest single day C&G sale of INR 5,200,000 in FY '23, '24. The company has shown remarkable growth and achieved the highest ever EBITDA of INR 2,367 crores and profit after tax of INR 1,748 crores during the year. The company has celebrated its silver Jubliee in this year and has been on top of continuous growth. We are targeting the growth in sales volume and are setting a sales target of 9.5% MMSCMD for FY '24, '25. With special focus on increasing CNG sales in the new GA along with increase in sales in the industrial segment. The company is focusing on LNG and CBG to improve the volume and profitability. Further, we are also evaluating the opportunity to diversify in the area of renewable energy. This will also help in bringing reduction in the power costs to captive consumption in the solar power. As discussed earlier, we are in the process to set up small-scale LNG plant in our GS, to utilize the idle capacity of CNG stations. This will boost LNG availability at the stations that are being set up by the company. I now request our CFO, Sanjay Kumar, to make his opening remarks.

Good evening, everybody. [indiscernible] for IGM. Just to inform that our direct commercial Mr. Mohit Bhatia could not attend the call, so he is not available. As far as IGL retails are concerned, the major highlights for the financial year '23, '24 are as follows. The PAT has increased 21% to INR 1,748 crores. Sales volume grew by 4% to [ 8.43 ] million cubic meter per day, which was [ 8.09 ] million cubic meter per day last year. EBITDA has shown a growth of 17% and EBITDA per SCM has increased from INR 6.86 to INR 7.67 per SCM as compared to the previous year. Profit before tax at INR 2,307 is the highest one to date. And the company has been [ fair ] in conversion of vehicles and on an average. The financial year '23, '24 monthly vehicle addition to CNG pool was around 15,500 vehicles per month, which was around INR 14,000 during '23 -- during '22, '23. It's a growth of almost 11%, which is a healthy growth. And automobile manufacturers are now coming with new variants of company fitted CNG models and which is adding to our sales volume as the CNG vehicles -- the numbers are increasing day by day. I'd also like to inform that the -- in our GA is the penetration of CNG vehicles has reached around 27%, 28%. The company strategy is to maintain a balance between the volume growth and profits, and we'll keep focusing on new GAs for volume growth. We are also looking for diversification, as our MD told, renewables is one area where we are focusing. And as far as the CapEx was considered -- concerned, last year, we added 19 new CNG stations and 3.3 lakh new domestic connections. Along with that, in terms of physical infrastructure, we added 187 kilometers of steel pipeline. And almost 3,000 kilometers of MDPE pipeline. So with this, I welcome everybody to this earnings call -- Annual Earning Call of IGL, and we have [ the floor ] we can start the Q&A session.[Operator Instructions]. We have our first question from the line of Probal Sen from ICICI Securities.

A couple of questions. Number one, with respect to the sales target of 9.5% MMSCMD. If I look at the average volumes that we have done in FY '24, that translates to a fairly ambitious 14% growth that we are targeting in FY '25. So I did mention that it could be done through focusing on industrial segment as well as new GAs. Is it possible to start giving a little bit more granular details in terms of how much growth we are expecting from new GA and which GAs we are referring to specifically? How much from industrial and how much from a our core area? [ Quoting ] the broad range would certainly be very, very appreciative.

When we say new deals, we are talking about deals outside of Delhi and [ CR ] that is, [ Outer Delhi, ] Gautam Budh Nagar and Ghaziabad. So that is 90% of our business presently comes from these 3 GAs. And [ 10% ] comes from the other [indiscernible] GAs. So that is the new GAs we are targeting about, which we got in '16, '17 onwards. That is the segment we are focusing on. Second is that industrial volumes were flat last year due to the pricing pressure of the alternate fuels. So this year, we feel because the fourth quarter, we could see uptick in that industrial sales, we grew by 10%, both sequentially as well as quarter-on-quarter compared to last year. So that, we feel that we still have scope for improving that further, in that direction. As well as the -- in the sales in the new GAs.

Right. So sir, this 9.5% is the average volume that you're targeting, or that's the exit rate that we are looking to do for FY '25?

That is the average we are targeting.

The second question, sir, was with respect to this NCV and [indiscernible] segment. Are we seeing any traction in the commercial vehicle segment with respect to our CNG segment? And if so, what kind of volumes do we expect? I mean, is it material enough or will it turn material in the next few years, in your opinion?

CNG commercial segment definitely is growing healthy. Last year, the conversion was, say, around 15,500 average per month as compared to 14,000 earlier years, and most of them was in the commercial segment. So 10%, 11% growth we have seeing. Only the bus segment, especially the DTC segment, there is a degrowth there, but that is being made up through passenger vehicle as well as the commercial segment.

For the commercial vehicles, if you see the monthly addition to the CNG, [ fold ] is around 2,400 approximately in the recent months. It used to be around 1,800, 1,900 kind of number. So we see uptrend in the commercial vehicles, which are being added to -- through CNG.

Understood. Sir, the second question is with respect to margins. Now we have seen some moderation, obviously, in terms of spot LNG prices. But at the same time, the priority sector allocation continues to go down. So just 2 parts. One was what was the allocation of APM or domestic gas capacity segment this quarter? And what is the guidance you have for next year? And what sort of spot LNG -- how much of spot LNG is our overall sourcing as of May?

The current mix would be around, say, 72% domestic allocation, including HPST, and 28% percent is RLNG. So that's the mix. And with the softening of prices, the gap between the domestic as well as the RLNG has reduced. I mean, now 10%, 12% that is there. Like 27%, we are able to -- the landed cost of domestic gas is around 27%, 28%. And we are able to get some contracts at 31%, 32%, the landing cost, in terms of RLNG. But that is -- the RLNG spot is slightly volatile levels now. So sometimes it gets favorable. We have lined up medium and long-term contracts to reduce the volatility. So going forward also, we feel that the domestic allocation with the increase in domestic production should not go down much. However, we also feel that increase is also a challenge given the fact that new GAs will come on stream. So domestic allocation going up would definitely be a challenge. And in case that does so, that will be a pleasant surprise to us and we'll be happy to pass on the benefit to the consumers.

So one last question. In that backdrop, sir, are we -- I believe you had given a margin guidance of somewhere around INR 7 to INR 7.5 in terms of EBITDA. Should we still maintain that for '25 and '26? Is that a sort of a reasonable level to assume?

Yes, INR 7 to INR 8, INR 8.5 is a range that we feel would be a reasonable EBITDA [indiscernible] range.

That's quite a rate. So INR 7 to INR 8.5 is the range that we should be looking?

Present -- last year, we did INR 7.67

[Operator Instructions]. We have our next question from the line of Maulik Patel from Ikura Securities.

So 2 questions. You mentioned that the areas outside Delhi and Outer Delhi, which is approximately 7% of your CNG volume, right? Am I right?

So 90% comes from Delhi, Gautam Budh Nagar and Ghaziabad and 10% is from the outside GAs, presently.

You said at what rate did they grew in the particular quarter?

I think the Delhi was flat. But other than that, Gautam Budh Nagar, Ghaziabad, they grew at around 10%. And outside GAs, the base is very low. So the number, if I tell you grew, say, for example, outer GAs grew at 149% but that doesn't make any sense because the volume. The base is very, very low. So an increase there will not be appropriate that -- to capture the growth. Similarly with Kanpur that grew at 123%. [indiscernible] grew at 60%. So overall, we can say that 10% to 15% growth is there in the new GAs at reasonable estimate. Once the good numbers come and then you grow at this level. So that will make sense. Right now, the base in a couple of is not capturing -- I mean it could be -- its normal to say that they are growing at 150%, 160%. But the base is very wrong.

Sir, in terms of current CapEx, what we have done around INR 1,200 crores this year, is that a large part of the CapEx is going towards the new GAs, which are the areas like, Kashmir, Karnal, Kanpur and Uttar Pradesh.

Around 40% is going through our this Delhi and [indiscernible] area, and then 60% is going to the new GAs.

Sir, can I just suggest something, a suggestion from our side. Sir, in terms of volume going on forward, if you start giving the Delhi volumes separately, that probably is considered as Zone 1, Zone 2 might be Gautam Budh Nagar, [indiscernible] Gugaon. And Zone 3 can be your new GAs. If you start giving the 3 numbers separately, it will be easier for us to track the volume growth on each of the 3 geographies. I understand that all the GAs in the [indiscernible]. But 1 number across its new GA category will be very helpful from a forecasting perspective, Sir.

Thank you, sir. We have our next question from line of [indiscernible].

So first question is on the growth. So if I look from an exit of this quarter, Q4 versus next year, it looks like a 1-year MMSCMD kind of a growth. So this 1 MMSCMD in the entirely or say, 80%, 90%, you're expecting from newer GAs? Or is there something that you're building in Delhi and CR also?

You see the industrial commercial and the P&G segment, if I say, the domestic industry is commercial. So that will continue to grow at around 15%. Our belief is that and since the reasonable base is there in Delhi and in CR. Delhi we have around 6.65 million domestic. So that -- we will continue to add around 3 lakh connections. As DC also, we are targeting. So that is around 15%, 16% of the total connections. So that growth will continue like that. CNG, whatever -- I mean the impact is there of BTC. We will see how we can absorb that and continue to grow in Delhi. NCR, Gautam Budh Nagar, Ghaziabad, Rewari and other regions, Gurguram. So they will continue to CNG, so CNG will continue to grow. At 10% to 15%. That is our expectation that they should continue to grow.

So I mean, Delhi, NCR, you are looking at 10% close kind of growth in CNG this year is the right understanding?

For Delhi, 10% would be a challenge because the base is also very big, 70% CNG sales is from Delhi out of 50 lakh kg per day. We do around 35 from Delhi. So that growing at 10% would be a challenge. I mean, would be say, 4% to 5% growth there. But outside of Delhi, including Nada, Ghaziabad Gurguram, everything will grow at 10% to 15%.

Second question is on the newer GAs. So what we have won in the last few rounds. So what is the total CapEx on a per year basis, what we need to spend to get that fully ramped up? And in how many years do we expect this CapEx to be largely complete?

So we are ahead of our minimum work program deal. So whatever the minimum requirement is there, that we are fulfilling because if you don't do that, then there will be a challenge to retain the GAs. So that obligation we are doing. But -- any expense that we are doing GA wise, we are doing it judiciously so that the asset utilization is there. I mean, we don't want that we invest money and that the asset is not utilized, it's not giving returns. So for that, a conscious call is there that wherever we can charge the areas, wherever gas is available, we can charge it. So there, we are spending. Fortunately, in most of our GAs, other than, say, the new ones like Banda, Mahoba, Chitrakoot and Ajmer, some areas. Other than that, charging gas to those areas is not an issue. We have the [ turn ] pipelines as well as the connecting lines ready. So -- we are a little bit judicious in spending in our new GAs. So that nothing is idle. So in that sense, Ajmer, we have spent and now we are a little cautious in expanding aggressively in those GAs.

So the current CapEx run rate that we have. So just to keep up with the minimum work program. So -- or what on the next couple of years, we'll continue to spend in a similar pace? So what is the CapEx outlook for the next couple of years, very broadly?

No. This year, we are targeting INR 1,800 crores, INR 1,700 crores to INR 1,800 crores. We did last year INR 1,270 crores. Now this INR 1,700 crores, INR 1,800 crores is mostly in our core areas as well as some amount in LNG and CBG. So other than that, most of the CapEx would be in the core area. And in case any opportunity of, say, anomaly growth or some new renewable opportunities there. So that is not included in that INR 1,700 crores, INR 1,800 crores.

So just one last question...

Yes. So basically, around INR 1,200 crores, INR 1,300 crores is what is going in our core area as of now. And for this year, we are expecting that we'll be able to -- towards diversification in LNG and CBG sourcing, we'll spend around INR 300, INR 400 crores or something like that. And this amount is something which is spent not specifically on MWPs, it's much more than -- a little more than MWP. Because we have to basically build -- basically trust in selling all the new GAs. And as the amount in different GAs are concerned, different geographies have different challenges and the size of the GAs are different. So from that perspective, comparison among the different GAs would be difficult. But from our side, we are basically focusing on whatever infrastructure we have already built to consolidate it and then try to cater to the needs of the customers.

One question on the opportunity set on these new GAs.

Sorry to interrupt, I would request you to rejoin the queue as there are [ others in the turn ]. We have our next question from the line of Nitin Tiwari from Phillip Capital.

Sir, it would be helpful if you can provide some more color on the vehicle addition part. So if we -- you gave the vehicle edition numbers for the full financial year. So what is the number for the fourth quarter? One is that, and in also a breakup in terms of different vehicles? And how has the trend been in terms of a monthly progression? I mean if we look through January, February and March, so how has the vehicle addition proceeded? So that would be my first question.

So if I tell you about the conversion numbers, April number, the latest one, which is available is 15,500. I'm talking about total, including retrofits. March, the number was 15,700. February, it was 16,800. January was maybe because of the 2 years, it had -- the new models were available. It was 19,000. Before that, December and prior period was 13,000 [ to ] 15,000 kind of numbers. If you talk about -- specifically if you're referring to impact of EV. So if I talk about specifically the Taxi segment. That number is basically moving up and it has been 2,100 in April. March also, it was 2,000. February, it was around 1,950 and before that January, it was 2,300. December, it was 1,700. So it is kind of moving like that.

So basically, the segment is not looking impacted to you in terms of [indiscernible] because of the EV policy or the interest rate, right? At least for now.

At this moment, we don't see any negative impact of the EV policy on Taxi [indiscernible].

And sir, my second question is related to the other volume opportunities you were exploring with respect to interstate buses and dumpers. So would be it would be [ helpful ] if you can provide some update in terms of -- there is any progress in terms of conversion of dumpers or interstate buses? So that would be my second question. And also in terms of DTC versus how many more are remaining of our conversion to EV as of margins.

With regarding this conversion of dumpers. So we have sanctioned a pilot study in one of our GAs, Banda. In [ Hamirpur ] area, that's the mining and sand area. So there, we will be demonstrating 2, 3 dumpers conversion and then demonstrating the benefits of conversion to the transporters there. So that should be on stream in another 1 year -- 1 month or so. In addition to that, regarding BTC. So we have around 1,200 buses. They have gone off road and our 13 stations have been the commission. Balance is, I think, another 1,800 or so -- 1,700, 1,800 buses, including some spare that they have. This is including the spare capacity that they have with 1,700, 1,800. That we feel will go away in the next 2 years' time. And what was another question?

So it was on dumpers and interstate buses. So you were...

We are in discussion with Uttar Pradesh and [ Rajsamand ]. So they have agreed to buy some pilots with 200 odd buses, Uttar Pradesh has agreed and Rajasthan with 20 buses and [ Rajsamand ] [ Muzaffarnagar ] also with 200. In addition to that, it's 1,200 also, I think, lowered the tax on your CNG buses. So there were some news items regarding that. So as you are aware that [ CAP ] mandate is there that within Delhi NCR, only the Euro 6 compliant and CNG vehicles or buses are allowed. So that is helping us when we discuss with the roadways, the state roadways. So they are positive about converting to CNG. And we have told them that -- and look, we can provide them the refilling facility. So with this 200-, 300-odd buses from the UP and [indiscernible] and [ Rajsamand ] also with 20 buses. They'll be able to demonstrate it to them. And hopefully, in future, more conversions will take place.

So sir, any sense on like what the [ prior ] consumption of these versus could be the interstate rate business and taking it in terms of dumpers also. So what is the feedback from the dumper operators when you're interacting with them? Because this would be a significant cost for them -- for you -- for them to convert their dumpers. So are there basically any early signs of any interest from the dumper operators?

I think if they have 1, 1.5 years payback time for the INR 10 lakhs, INR 12 lakhs that they have to spend. So they are positive about that, that they are willing to experiment with that. And once we show them the -- what is the average and what is the filling time, everything. And right now, our infrastructure also is that [ the stations ] stays there. So we have to set up some big CNG stations for refueling those dumpers and all. So that work is in progress. But for demonstration, we can demonstrate in our stations that we have commissioned. So that we can do. And as also the interstate buses...

[indiscernible] interstate buses because the bank and government has already bought. And I think around 150 or 200 is in the pipeline.

Sorry, how many buses they've already deployed [indiscernible] ?

160 they have already bought.

And 200 are in pipeline? And their per day consumption or any broad understanding on the consumption that they have?

I think normally, if you say 3 to 4 average and 80 to 100 kg consumption is there per day basis [ they run for ] 300, 400 kilometers. [ 80 kgs ] per day.

We have our next question from the line of -- we have our next question from the line of Raj [ Gandhi ] from SBI Mutual Funds.

This DTC, CNG buses which are going off the pool, can they be redeployed on by any of the -- these guys in these interstate buses who have to be replaced in all this old diesel? And also, they can immediately be put to use elsewhere that will kind of reduce the time to add bus also?

No. actually, their life has, I mean, whatever, 10, 15 years life is there. So that life is over. So they cannot be redeployed. So in case DTC wants to deploy CNG, they have to purchase new CNG buses.

Okay. Okay. Sure. Sir, I was just wondering if these buses could be put to use to for these interstate routes and all where they are using older diesel?

[ There's not ] any new CNG buses, whatever CNG buses they purchase, the life is getting old and now they are purchasing the electric business.

Okay. Okay, sure. And sir, just some feedback we got was that this LPG and all initially, it was restricted to [ Morbi ]. But now increasingly, even in the entire northern belt in the industrial LPG and all the value chain is kind of making the distribution and all of that. So what kind of competition you are seeing in that sense?

Yes, the pricing advantage is still there as far as the commercial segment is concerned with respect to LPG and natural gas. There are some advantages, but in industrial, bulk industrial consumers, they offer some bulk discount. So that will be at par. So we have to bring out some strategies to counter that, that we also offer some bulk discount to make it more favorable. We are working on some policy [ tricks ] in that direction.

Thank you sir...

[ And more ] input is there. But recently, there is some favorable because of the [ group ] movement, there is some 5% to 7% advantage. Clearly, we don't know because it's a volatile commodity. So the present advantage is there.

Recent quarter, I think our volume growth of industrial has gone up probably -- this is also reflective of the CNG and the price has been cheaper. Some price advantage is there now. And if it continues, then that will see a higher growth in the industrial segment.

We have our next question from the line of Yogesh Patil from Dolat Capital.

Sir, my question is related to CNG absolute growth in the last 1 year, from quarter 4 of '23 to quarter 4 of FY '24. The CNG addition is only [ 0.16 ] MMSCMD. But based on the CNG vehicle additions of 15,500 per month, vehicle additions with the daily consumption of 3.5 [ MMSCMD ] if we try to calculate it, it gives us a number 0.65 MMSCMD CNG volume. But actually, CNG volume growth is only 0.26 MMSCMD in last 1 year. Is it because of...

[indiscernible] The growth in the DTC segment

That is -- is it because of DTC conversions to EV impact? Or this vehicle addition is the gross number and the net additions would be a little bit lower, which is creating a lower [ we were thinking of ] volume growth additions?

No, BTC has definitely gone down last year from 3.5 kg per day that we are selling to, say, 1.85 to 9 right now what we are doing. So that is one impact. Second is the new additions, the sales impact maybe in the next quarter, whatever additions are there. So they make that full benefit of those current numbers will come in the next quarter.

You may be right because the numbers which you are telling is a gross number. The vehicles which are going out of the system once their life is over, that number, that data is nowhere available. So we cannot really comment how many vehicles have gone out of the system. Some impact might be there as well because CNG industry in Delhi is almost 20 years old. So some vehicles might be going out of the system.

My second question is related to -- if you could share the non-APM gas sourcing breakup. I mean, how much volume you are sourcing from the Reliance PVD and LNG tire?

The 28% breakup, 60% is Henry Hub linked and 40% is brand JKM-linked. So that's the broad vehicle I can give you.I just don't want [ misreport the quantity ] that we are sourcing.

2.5 MMSCMD, right?

Yes.

Okay. And the last one, sir, as per our understanding, the royalty or the trade margins on the sale of CNG at a retail outlet of OMC issues have been settled. So can you give us an idea now total royalty you need to pay them per unit basis? How much it has increased?

The issue is, I mean, not settled as far as we are concerned. So we are disputing, especially the Delhi. Delhi and Mumbai, there is some dispute left. Other than that, it has been settled.

Okay. And currently, how much royalties we are now paying in CNG?

Delhi, it's around more than INR 5 and INR 5.5 and a little lesser than that in other geographical areas. So exact number, it would be difficult to share. Yes. That kind of number is there. And the question you were asking about the HPST gas. So during the quarter, 0.38 million was the number for HPST.

Okay. And is this a tied up gas? Or are we getting on -- based upon the demand required?

It's tied up.

Thank you, sir. [Operator Instruction]. We have our next question from the line of Amit Murarka from Axis Capital.

Just wanted to check like for DTC buses [ that were ] diesel. So how many have already been retired and converted? And how many are left to be done? And is there a time line to complete that process?