Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indraprastha Gas Ltd (BOM:532514, Financial) achieved the highest-ever annual sales volume of 8.43 MMSCMD and the highest single-day CNG sale of 52 lakh kg in FY23-24.
- The company reported the highest-ever EBITDA of INR2,367 crores and profit after tax of INR1,748 crores during the year.
- Sales volume grew by 4% to 8.43 million cubic meters per day, and EBITDA per SCM increased from INR6.86 to INR7.67 per SCM.
- The company added 90 new CNG stations and 3.3 lakh new domestic connections, along with significant infrastructure additions.
- Indraprastha Gas Ltd (BOM:532514) is focusing on LNG and CBG to improve volume and profitability and is evaluating opportunities in renewable energy to reduce power costs.
Negative Points
- The company faces challenges in maintaining a balance between volume growth and profits, especially in new geographical areas (GAs).
- The industrial volumes were flat last year due to pricing pressure from alternate fuels, posing a challenge for growth in this segment.
- The conversion of DTC buses to EVs has led to a significant reduction in CNG sales, with further reductions expected as more buses are converted.
- The company is experiencing competition from LPG in the industrial segment, which could impact its market share and profitability.
- Operational expenses increased due to one-time costs related to CSR activities and employee incentives, affecting the overall cost structure.
Q & A Highlights
Q: With respect to the sales target of 9.5 MMSCMD, can you provide more granular details on how much growth you're expecting from IGL, which GAs we are referring to specifically, and how much from industrial and core areas?
A: When we say new GAs, we are talking about areas outside of Delhi NCR, such as Delhi, Gautam Budh Nagar, and Ghaziabad. Currently, 90% of our business comes from these three GAs, and 10% comes from the 8 new GAs. We are focusing on these new GAs and industrial volumes, which were flat last year due to pricing pressure from alternate fuels. We saw a 10% growth in industrial sales in the fourth quarter, and we believe there is further scope for improvement.
Q: Are we seeing any traction in the commercial vehicle segment with respect to our CNG segment? What kind of volumes do you expect?
A: The CNG commercial segment is growing healthily. Last year, the conversion was around 15,500 vehicles per month, compared to 14,000 in the previous year, with most of the growth in the commercial segment. The bus segment, especially the DTC segment, saw a degrowth, but this was offset by growth in passenger and commercial vehicles. Recently, the monthly addition to the CNG pool for commercial vehicles has been around 2,400, up from 1,800-1,900.
Q: What was the allocation of APM or domestic gas capacity this quarter, and what is the guidance for next year? How much of spot LNG is our overall sourcing?
A: The current mix is around 72% domestic allocation, including HPST, and 28% RLNG. With the softening of prices, the gap between domestic and RLNG has reduced to about 10-12%. We have lined up medium and long-term contracts to reduce volatility. We expect the domestic allocation to remain stable, but any increase would be a pleasant surprise.
Q: Can you provide more details on the vehicle addition numbers for the quarter and the trend in monthly progression?
A: The latest conversion numbers are around 15,500 vehicles per month. In March, the number was 15,700; in February, it was 16,800; and in January, it was 19,000. Specifically, for the taxi segment, the numbers have been moving up, reaching 2,100 in April, 2,000 in March, and 1,950 in February. We do not see any negative impact from the EV policy on taxis at this moment.
Q: What is the total CapEx on a per GA basis for the new GAs, and how many years do we expect this CapEx to be largely complete?
A: Around 40% of CapEx is going to Delhi and Noida, and 60% to new GAs. We are ahead of our minimum work program schedule and are judiciously spending to ensure asset utilization. This year, we are targeting INR1,700-1,800 crores in CapEx, mostly in core areas and some in LNG and CBG. The CapEx for new GAs will continue at a similar pace for the next couple of years.
Q: What is the plan for the LNG segment from FY25 and FY26, and what quantity data can you provide?
A: We have already commissioned one LNG station and are planning five to six more this year. We also have an MOU with Concor for their captive consumption, setting up stations in Noida and Bangalore. Currently, Concor has a fleet of around 100 buses, and they are open to increasing this number based on their experience with LNG trucks.
Q: Can you explain the commercials of the LNG business in terms of price per liter or kg and compare it with diesel prices?
A: LNG is priced INR10-12 lower than diesel per kg. For example, in Ajmer, where diesel is INR96-97, LNG is priced at INR82-83. This pricing strategy helps recover the initial CapEx and provides a margin similar to CNG.
Q: What are the plans for CBG plants, and what benefits can we expect?
A: We are expecting to add around 10 CBG plants this year with a CapEx of INR200-300 crores. Each plant will produce around 20 metric tons per day, adding approximately 2 lakh CMD to our source. This will reduce transportation costs and provide cheaper gas compared to APM gas, along with savings on Gujarat VAT.
Q: What is the status of the hydrogen pilot study with IIT Jodhpur and IIT Delhi?
A: We are conducting a pilot study on hydrogen's impact on the network and transportation segment. The study is expected to yield results in FY24-25, and further actions will be based on these findings.
Q: Can you provide more details on the OpEx increase and whether it will revert to normal levels?
A: The OpEx increase in Q4 was due to CSR expenditure being booked in the last quarter and employee incentives for the silver jubilee celebration. Additionally, some adjustments were made due to Ind AS changes. These are one-time expenses, and we expect OpEx to normalize going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
