GAIL (India) Limited (GAIL.NS) Earnings Call Transcript
July 31, 2024
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the GAIL Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Nigam. Thank you, and over to you, sir.
Yes. Thank you, Sejal. Thank you, everyone, for taking out time for GAIL's First Quarter FY '25 Results Call. We have with us from the management, Shri R. K. Jain, Director Finance of the company, along with other members of senior management. And now without any further delay, I'll hand over to management for opening remarks. Over to you, sir.
Thank you, Abhishek. A very good morning to you, my colleagues present here, dear friends from investors and analyst community. Once again, good morning, and a very warm welcome to GAIL's earnings call for Q1 '25. At the outset, I thank you for all of you to attending this earning call. It gives me immense pleasure to share with you this GAIL received NIL comments from CAG for financial statement for the financial year '23/'24 as this is 15th year in row. GAIL has advanced its net zero carbon emission target for Scope 1 and Scope 2 emissions to 2035 from earlier stated target of 2040. GAIL's results for quarter ended 30th June 2024 have been declared yesterday. I would briefly touch upon the major highlights for the quarter, and then certainly, we can open the session for question and answers. Financial highlights. GAIL's turnover increased by 4% to INR 33,627 crores in Q1 financial year '25 as against INR 32,250 crores in Q4 financial year '24. And this is mainly due to robust physical performance in gas transmission segment, increased natural gas marketing volume in domestic market and higher natural gas prices. Profit before tax increased to INR 3,642 crores as against INR 2,842 crores in Q4 financial year '24. And this is up by 28% and mainly due to increased transmission volume and better gas trading margins. The profit after tax during the quarter increased to INR 2,724 crores as against INR 2,177 crores in the Q4 financial year '24. Again, there is an increase of 25%. On a comparative quarter basis, GAIL clocked turnover of INR 33,626 crores as against INR 32,138 crores in the corresponding period of the last year, an increase of 5%, mainly on account of increase in gas transmission volume and natural gas prices. Both PBT and PAT increased by 93% to INR 3,642 crores and INR 2,724 crore as against INR 1,889 crores and INR 1,412 crores, respectively, and reasons are same. Physical performance during the quarter Q1 financial year '25 as against Q4 financial year '24, gas marketing volume during the quarter was 99.47 MMSCMD, it is almost flat if you compare with the previous quarter, where it was 99.90 MMSCMD. Overall volume, as I said, is flat; however, there was an increase of 5 MMSCMD of volume in domestic market, and this growth is mainly driven by power. Natural gas transmission volume was 131.79 MMSCMD in Q1 Financial year '25 as against 123.65 MMSCMD in Q4 financial year '24. The average capacity utilization was 63%. Polymer production was down by 86 TMT to 162 TMT in Q1 financial year '25 as against 248 TMT in previous quarter, due to annual turnaround, which is normal phenomena. In our case, we normally take annual turnaround during the period of April every year. LHC production was 216 TMT as against 265 TMT in previous quarter. The decrease is also due to annual turnaround activity at Pata, C2C3 Vijaipur and Gandhar units. LPG transmission was 1,065 TMT as against 1,114 TMT in previous quarter, the capacity utilization was [Technical Difficulty] during the quarter. Consolidated financials for Q1 financial year '25 as compared to Q4 financial year '24, the consolidated turnover in Q1 financial year '25 stood at INR 34,822 crores as against INR 32,833 crores in Q4 financial year '24, which is up by 6%. The profit before tax in Q1 financial year '25 stood at INR 4,114 crores as against INR 3,099 crores in Q4 financial year '24, and this is again up by 33%. The profit after tax is INR 3,183 crore versus INR 2,469 crores in Q4 financial year '24, up by 29%. As you know, GAIL also have 6 CGDs along Jagdishpur-Haldia pipeline, so we have an infrastructure of, under those CGDs, 189 CNG stations and 3.4 lakh DPNG connections. During Q1 financial year '25, 700 new DPNG connections were added. The physical volume is 0.3 MMSCMD during the quarter. In the next 2 years, we will target to add around 50 new CNG stations and around 1,20,000 new DPNG connections. As you know, we have GAIL Gas at 100% subsidiary. Now I will take you through the GAIL Gas financial highlights for Q1 and also their plan for next 2 years. Gross turnover stood at INR 2,987 crore as against INR 2,853 crores in Q4 financial year '24, increase of 5%, and this is mainly on account of an increase in revenue from CNG segment by 4% and Bulk Trading segment by 7%. Profit before tax stood at INR 149 crores as against INR 121 crores in Q4 financial year '24, and there is an increase of 23%. Profit after tax stood at INR 110 crores as against INR 92 crores in Q4 financial year '24, increased by 20%. The physical volume increased to 7.11 MMSCMD in Q1 financial year '25, increase of 3% mainly on account of increase in CNG sales and 14% -- sorry, increase of 3% mainly on account of increase in CNG sales and 14% bulk and trading by 4%. During Q1 financial year '25 GAIL Gas along with its JV subsidiaries had added 27,467 new DPNG connections and 2 CNG stations having infrastructure of 10,03,000 DPNG connections. In the next 2 years, GAIL Gas targets to add 170 new CNG stations and around 5 lakh new DPNG connections. I will take you through the project performance. As you know, Mumbai-Nagpur-Jharsuguda pipeline, we are laying. That's a length of 1,755 kilometer. Activities for laying this pipeline are in full swing, and we expect this pipeline to be completed during current financial year. Regarding Jagdishpur-Haldia Bokaro-Dhamra pipeline. This is pipeline of 2,986-kilometer. Out of total pipeline, 2,986 kilometers has already been laid out of 3,289 kilometers, and remaining part is expected to be completed progressively by March '25. Srikakulam-Angul main pipeline, this is 421-kilometer pipeline, work is under progress for main line and spur line, and 320 kilometers is already completed, and rest of the pipeline is expected to be completed during the current financial year. Gurdaspur-Jammu natural gas pipeline, this pipeline having a length of 160-kilometer likely to be completed by July '26. Other projects. PDHPP at Usar, capacity is 500 KTPA. Project cost is INR 11,256 crores. Mechanical completion is expected by April '25, and we expect commercial production by October '25. Till date progress, the progress is 69.5%. Polypropylene plant at Pata, capacity is 60 KTPA. Project costs is INR 1,299 crores and expected to be completed during the current financial year. And project progress is 87.4%. IPA at Usar, capacity is 50 KTPA, project cost is INR 530 crores. Completion date is 24 months after licensor selection. Currently, we are in the process of selecting the licensor. We have acquired one JBF Petrochemicals. How we call it as GAIL Mangalore Petrochemicals. Capacity of this plant is INR 1,250 KTPA. Project cost is INR 4,200 crores. We expect to be completed by June '25. With respect to CapEx, during Q1 financial year '25, we have incurred a CapEx of INR 1,659 crores, and this CapEx is mainly on pipeline, around INR 500 crore; petrochem, again, of around INR 500 crores; CGD projects, INR 30 crores; and CapEx on other -- operational CapEx and others is around INR 400 crores. Estimated future CapEx for financial year '24-'25 is INR 11,450 crores, including the equity contributions and '25-'26 is INR 10,129 crores, again, including the equity contribution. Now I will take you through the segmental outlook. As you know, that we have marketed almost 100 MMSCMD of volume in the Q1 financial year '24-'25, and we have been giving guidance to you that this year, we expect to grow by approximate 5%. We are on that course. We've also given you the guidance regarding the marketing margin for the full financial year. We have said that whatever situation comes, we are expected to earn around INR 4,000 crores to INR 4,500 crores of marketing margin. We have given the kind of range to you this time. And we are on the course of achieving those targets. In Q1 '25, we are already almost INR 1,994 crores of marketing margins from this segment. And we expect to surpass the current target given to you INR 4,000 crores to INR 4,500 crores. And for guidance purpose, you may consider now INR 4,500 crores as a minimum target for this financial year. Gas transmission volume, we have been giving guidance for now almost 3 years and we are on course. The guidance we have given for this financial year that we will transmit gas marketing around 130 to 132 MMSCMD of volume. You can see from the physical performance of Q1, we have transported almost 132 MMSCMD, to be precise, 131.79 MMSCMD. With respect to outlook for '25-'26 and '26-'27, maybe coming 2 to 3 years, we expect to grow our transmission volume by 10 to 12 MMSCMD. Polymer production stood at 162 TMT as against 248 TMT in the previous quarter. And this is -- as I explained to you, this is mainly due to normal plant shutdown, which we take normally in April and this year also, we took in April. We are expecting an upside in this segment here on. As you know, the price are almost stabilized. The natural gas prices also softened. We expect to earn when we close this financial year a reasonable amount of profit from this segment during financial year '25. Liquid hydrocarbon. Production stood at 216 TMT in Q1, and we have posted a PBT of INR 229 crores. The production is lower side in comparison to 265 TMT in Q4 financial year '25. Again, this is primarily due to turnaround activities at Pata. The production levels have been regularized since May '24, and we are on course of achieving our capacities as we did in last year and maybe more than that, both for petrochemicals and LSC. That's all from my side. Regarding the over performance and projects, the management of the company is available now with you. We would be glad to clarify any questions that you may have. Now I hand over to you, Abhishek.
[Operator Instructions] The first question is from the line of Puneet from HSBC.
My first question is on the gas transmission volume business. You've already touched 132 million cubic meters a day now. Are you expecting some bit of reduction in the current quarter given that the power demand from the gas station might slow down a bit? Or are you still seeing the same number flow through? And in which case, is there an upside to your 132 million cubic meters guidance for fiscal '25?
There is no upside as of now we are communicating. We maintained our guidance of 130 to 132 MMSCMD on a full year basis.
And currently, this is still running at 132 or has it come down?
As on date if you are talking to me, we are on average, 131 for 4 months.
For 4 months. Okay. That's really helpful. Secondly, on the marketing side, you're almost halfway through the guidance and now you're guiding for INR 4,500 crores to be lower end. What should one assume higher end of the guidance given the current hedging that you would have done so far?
As you know, we have been giving guidance for many months. And there is a reason for that because in order to maintain that we take a lot of positions in the market. We also do a lot of optimization activities in terms of swaps, shipping swaps. And whatever we have been able to lock as of now, the guidance is based on that. That's why we say, it's a minimum guidance. And I can only say, at this point of time, we are going to achieve the minimum guidance, and we will revise our guidance based on the results of Q2 during Q2 results -- earnings call.
Okay. That's very helpful. And lastly, on your marketing volume increase that you're guiding for 5 million cubic meters additional, can you talk about what customers are you looking at?
So that is -- one is a normal growth in the country, which you have been witnessing, everybody's witnessing that gas market growth is there. The normal growth, which comes from city gas distribution, almost 4 to 5 MMSCMD volume is growing. We expect that at least 2 MMSCMD, we are -- which is our market share. I'm not giving any upside on that though we have the ability to even surpass that. So we expect at least 2 MMSCMD may come from there. And there is a sea change in the power demand. Last year, we saw there was a demand from power, but this year significantly it has come up. And we expect that demand to continue, at least to me, with peaking demand, there is a change. So that's another thing. Third, as we are laying the pipeline, concluding the -- commissioning the pipeline, the customers along those pipelines, maybe City Gas Distribution customers, maybe small consumers are coming up, that is third thing. Fourth, the fertilizer plants, which were commissioned during last year did not take the volume on an average basis to the extent they could have taken, that will come up. So we expect overall, there should be demand. I'm talking on domestic market, at least that will grow. And we continue to play in international market as we have been doing for various regions.
The next question is from the line of Probal Sen from ICICI Securities.
Congratulation on a good set of numbers. This was with respect to the polymer shutdown. Can I get a sense of how many days the shutdown was for? And what is the current run rate of petrochemicals that you're seeing in Q2 so far?
Shutdown was almost for a period of 1-month, 30 days, 28 to 30 days, to be precise. And if you talk of a current rate on a proportionate basis, it's 105%.
I am sorry, sir, what does that mean, proportionate basis?
Means if we delete the month of April and then we work out the proportion for 3 months on pro rata basis, we are running at a rate of 105%. It means we are going to achieve our capacity of 810,000 rather we target to surpass that.
Okay. So despite the shutdown and 1-month not being there in terms of production, you still expect to somehow get to that 800,000 to 810,000.
This is a part of design of plant, right? So this is not a unique activity we are carrying out. So that is already factored in. So we expect to not only touch our capacity, but we expect to surpass that.
Understood, sir. Understood. Sir, the other thing is the guidance that was given in your briefing when you mentioned transmission volumes of 10 to 12 MMSCMD that was for basically every year we expect to add that or the collective addition by FY '26 on FY '24 base?
'24-'25, we have given 130 to 132. '25-'26, we have already given 140 to 142. Now we have the ability to give you even '26-'27, we expect that again to increase around by 10 MMSCMD.
Understood. Sir, one last small question, if I may. With respect to Dabhol's breakwater facility in your project update, apologies if I did not get that. Any update on the time lines and progress on that side?
Actually, Dabhol, as we said during the last earnings call, should have been commissioned for all-weather terminal before this monsoon. But because of some issue of -- there, we could not complete before this monsoon. But now activities are on its course. We have sorted out the issue of -- there was issue of way to take, [ a trip over ] through actually the site. And now we have got resolved that issue. So after this motion, we will be able to complete. And this year, after this monsoon, it will be an all-weather terminal.
So next year, we should not expect the stoppage that happens for 4 months? So safe to say.
Actually, this was unanticipated. There was some issue with local people so that has been sorted out now.
The next question is from the line of Yogesh Patil from Dolat Capital.
Congratulations on the great set of numbers. Sir, gas transmission, volume has increased close to 8 MMSCMD on quarter-on-quarter. Can you give us an idea how much of this was from the gas power plant? As per our knowledge, you are directly supplying gas to the gas power plant. So you will have a better idea on that, sir.
Around 4 to 5 MMSCMD for quarter.
And that is still sustaining in the month of July?
Gas power plant is one thing, which has come up. But there are fertilizer plants, which were under shutdown during quarter 1. Had those plants been running, we would have even crossed 132. So we are still maintaining a 131 run rate that I said to the -- answer to one of the question raised by another participant.
Yes, I have a second question. In the last call, you mentioned that there is no APM gas allocation to the gas transmission segment. And despite that, your gas cost has declined sequentially, I mean, quarter-on-quarter. Any thoughts on this side, sir?
This was supposed to be declined. We also said during those earnings calls that the allocation for APM gas was reduced all of sudden in gradual manner from 16th August 2022, if I remember correctly. And then gradually, it was reduced. By the end of March '23, the allocation was totally stopped. Is that, right, '24?
'23.
'23. So it was totally stopped. So since it was done all of a sudden, so we were -- and that period was -- geopolitical situations were not favorable for gas marketing -- gas price. So during that period, we were required to purchase a high-price gas in order to operate and maintain our pipeline. And slowly, slowly, gas prices have started softening. So certainly quarter-on-quarter, that impact, which we faced during '22-'23 started coming down. And now we are almost at a normal level of gas prices for the purpose of consumption in compressor.
Okay. Sir, recently, the PNGRB has revised upwards the LPG pipeline tariffs. Just wanted to understand the impact on the LPG business on the GAIL. And if you could also share rupees per tonne increase in LPG transmission tariffs, would be helpful.
The impact on GAIL is around INR 120 crores to INR 140 crores of profit of GAIL, the profit before tax, right?
INR 120 crores?
INR 120 crores to INR 140 crores on an annual basis. Since this is being implemented from 1st August, this will be proportionate for this year. And on an annual basis, I have given the figure, around INR 120 crore you can take. Regarding your question how much it will increase, it will increase by 3.4%. The amount of tariff increase by PNGRB, we believe that it will increase the cost per tonne by 3.4%.
Okay, sir. And the last question from my side on the petrochemicals. Could you please share the cost of gas used for the petrochemicals and outlook for the Petrochemical business in FY '25-'26 on the utilization level mostly.
Actually, cost of gas sharing is a very difficult one because it's not that we give a particular gas to the petrochemical plant. We have ability to source various gases at various points of time. Whatever cheapest gas available, we'll try to source and due to petrochemical plant. So it's not a thing which is a very, very, very kind of always that prices will be there. But regarding your question of profitability, I will not be able to give you a number, but I can give you one confidence that this year, we are going to have a reasonably good profit from petrochemical business. And Q1 results are showing that despite being we were not operating for 1 month, we have almost breakeven. We have a loss of INR 42 crores, and almost breakeven. So we will be now -- here on we'll be picking up and at the end of the year, we have reasonably good marked profits.
The next question is from the line of Nitin Tiwari from PhillipCapital.
Congratulations on a very good set of numbers. Sir, my question is related to your gas trading segment. So while we did see increase in the gas transmission side, our gas trading volumes are rather flat and the operating profit increase is largely driven by margins. So my question basically had two parts to this. How should we look at the gas trading volume number going forward? Are we expecting while you're guiding for a 5 MMSCMD increase, but it has not happened in this quarter and what would be contributing that increase going ahead and also in the years to come? And sir, generally, like on the gas trading margin side, how do we see this gas trading margin number? Because I suppose there are a few contracts, which have fixed margins but few contracts have open margins. So what is a broad range where we can probably look at this margin if we have to look at it in per unit terms? So that would be my first question.
So our overall number remained flat as compared to Q4 '24 and Q1 '25, we are almost flat. But one thing I actually shared last time, but let me give one again. Those numbers of Q4 includes 10 MMSCMD of volumes we marketed in the international market. In view of increased demand in the domestic market, we brought those volumes to India. Now in fact, in domestic market where we have more delta available in terms of margin, volume already has increased to 95. And I also said during the answer to one of the questions that we continue to be there in the international market to do various optimization and, therefore, from there, that volume increase will come. So 4 to 5 MMSCMD or 5 MMSCMD increase, which I said is available already. And the further increase if you were to see, it is coming for power, as I explained, is coming from City Gas Distribution, the fertilizer plants, which we did not take the volumes -- full volumes last year, which they have sales contract with us, purchases contract with us and the normal growth, which is coming up along the pipeline, which are being commissioned. So we expect 5 MMSCMD of volume should be achievable, and let us see. We are on the course as on date. And in terms of marketing margin, I have already given the guidance that in last analyst meet, we said INR 4,000 crores to INR 4,500 crores. We have given band. Now we are saying minimum INR 4,500 crores we will earn this year, and we will revise our guidance based on the progress in another 3 months during Q2 financial year '25.
So sir, if I understood this right, I mean, your gas trading mix is changing with more overseas sales now turning towards India. So you're selling that volume within India and that is also leading you to earn better margins. That's what it is, right? So that's right interpretation?
Yes, you're right.
So -- and what I was actually asking is per unit terms was that if we calculate your gas trading margin on per unit of gas sales, it comes to about $0.70 per MMBtu. So that's what I was asking that. How do we look at this number? I mean, is it like going to be at this...
Actually, you should not calculate this $0.70. Leave it on us because we have ability to change $0.70 to $2. We have ability to make it $2.5. Last month's close price for Henry Hub was $1.90 per MMBtu. The Henry Hub price sometimes reaches $3. We do the paper trading. We take the benefit of arbitrage. If you maintain $0.70 on average side, it looks good, but let us do that and we'll give you the results.
Sure, sir. And sir, my second question is regard to your petchem segment. So like the way you've given a guidance for gas trading, would it be possible for you to share some guidance in terms of what kind of profitability we can expect from this segment in this year and next year when your other capacity would also get commissioned? Maybe if you can give us some color over there.
Actually, I said in the answer to earlier participant question, we may not be able to give any number. We'll be -- at this instance, I will be sharing that we will be earning a reasonably good profit because Q1 result, if you compare with the corresponding year of last year, you can work out, it is far better where we lost significantly last year's Q1 and primarily region with the gas price. The polymer price remain at this level only if you compare last year versus this year. We are able to source cheaper gas, as I said, in answer to one of the questions. Your question only with respect to gas marketing margins, we have ability to provide the cheaper gas through various sources including the paper trading. We are doing even for PATA Petrochemical. We continue to maintain our guidance that this year we'll end with a reasonably good margin.
Understood, sir. Just that like I wanted to understand if the current situation continues that then if you'll be able to help us with some number, but that's fine. I mean if you are not able to help with the number currently. That would be all.
The next question is from the line of Sabri Hazarika from Emkay Global.
Congratulations on great set of numbers.
Thank you.
Yes. So sir, I have a couple of questions. Firstly, on the marketing side, I mean, we are almost at INR 8,000 crores kind of run rate versus INR 4,500 crores that you have locked in. So I was just wondering, was there any inventory gain impact also, which was there in Q1?
No inventory gain.
No inventory gain. Okay.
Yes.
And secondly, on the pipeline, I mean, it was previously taken up by another participant also. So you said that gas cost is continuing to decline due to which the pipeline have...
No, I have not said anything. I'm saying -- I said it has now stabilized, almost it will be range bound. I said it declined because of the reasons of the geopolitical situations, all of a sudden reduction of APM gas. And finally, it was totally stopped. So it continued to decline. Now we feel that it will be in this range only.
And then, I mean, in terms of anything specific to the domestic market, like there has been some news of Andhra Pradesh cutting back and other things. Anything that also contributed to the lower OpEx for the pipeline business?
Actually, it helps. Because gas is a commodity, which is suffering from this variations of taxes. Certainly, it is helping. And it particularly helps not only to the gas marketeer like us, but City Gas Distribution companies are benefited most by it. And when they get benefited, we certainly get benefited. Because City Gas Distributor companies were paying higher input cost, higher taxes and, therefore, their competition with the alternative fuel was becoming difficult. So now they have started progressing well because of this VAT cut. And then if they benefit, we also benefit because ultimately, we are the flagship company in gas marketing.
Right, sir. Got it. And sir, secondly, regarding this new petchem project in Madhya Pradesh, so any details you would want to give on that?
I don't have any detail. I only saw, we give clarification to SEBI based on some paper news that as a commercial organization, we continue to look for various opportunities where we should invest our money. And this can be one of the areas, but no decision yet has been taken on putting petrochemical at Madhya Pradesh or any other Pradesh.
The next question is from the line of Kirtan Mehta from BOB Capital Markets.
Coming back to the gas transmission OpEx effect, basically against the volume of growth of 6%, 7% during the quarter, quarter-on-quarter, we are seeing the gross margin increase of 23% . Would you be able to highlight the specific driver, which has helped increase in gross margin?
You're talking of gas transmission?
Gas Transmission business, yes.
7% you yourself said is volume increase. Second, what happens when there is a change in genres that also help because weighted average tariff changes. Third, during quarter 4, we accounted for additional depreciation. Because of that, we took a decision based on the opinion of ICICI that we were keeping 5% of accounts, then we now took a call that we will not keep any value. So that digital was speaking last financial year last quarter, we had accounted for more depreciation. That is now normalized from this quarter onwards. So these, I had one more, the gas price for internal consumption, which is one of the participants asked that it continue to decline, now it has stabilized. So that is also factoring into -- all these factors are helping for increased profit. So if I -- my colleague has put this slide. If we see there is a decrease of depreciation, INR 100 crore; fuel expenses, INR 86 crores; so -- and some provisions were made in last financial year Q4, INR 36 crores. All these factors have helped us.
Sure, sir. The second question was about the 10 to 12 MMSCMD growth that we are guiding for FY '26 and '27 in the transmission level, what is the market share that we are assuming?
70%.
70%?
Pipeline business, you cannot assume any market share. We are -- our existence is for 70% infrastructure and we build because this is a monopoly. Pipeline transmission is a monopoly wherever -- you adjust -- you continue to have those market shares. So we are 70%, almost 70% infrastructure share, so we continue to maintain those shares.
So the country demand would grow by 15, 16 MMSCMD and we will get 70% of that as a transmission level? Is that the assumption?
Yes. Maybe more than that. Pipelines will come. If they come either we put or some other I'm giving this based on current infrastructure, but we have what we are laying.
In terms of the project update, would you also be able to share on Bangalore-Kochi pipeline leg, the last leg that is remaining, what's the target date?
We are on course, and we expect to complete by this financial year.
Sure, sir. One more question. In terms of the APM gas availability, what we hear is that around 69%. So how do we see the availability of the APM gas changing? Do you have any inputs on that?
APM gas for what?
CGD. CGD.
CGD. It continues to decline because the market is growing. CGD is one of the growing sector. It is the only sector which is growing with a double-digit after -- one of the major consumer of gas after fertilizers. So if CGDs, they are growing, certainly, it will continue to decline. 69% may further come down.
From the supply side, we are not seeing issues. So it's only basically because of the demand increase, the proportionate allocation will come down. Is that the way to look at it?
Demand will continue to increase. The APM adaptation may come down. When demand increases, availability is limited. Certainly, it is likely to come down.
The next question is from the line of Ajay Jain from Makrand Investments.
Very good numbers, congratulations on that. Sir, my query is basically on segment gas marketing. You have thrown some light on it, but if we compare quarter-to-quarter, we are not able to foresee what would be a profitability in that. Can you give us some guidance on how to calculate going ahead about your purchases in this gas marketing? Is it long-term basis? Or is it spot, which you import? Or is it linked with the international prices when you purchase it? And how is it done, sir. If you could give us a little idea so that we can calculate. So just what we see...
I have given more than little idea that we will earn more than -- at least INR 4,500 crores.
Yes, that you've already given, sir. Just let me continue on this, sir. There's so much variation. So is the international prices linked to what you import gas from U.S. and other places? Is it on a long-term basis that you have a contract? And how is the price determined? Like the reason behind this is, I'm an investor. I just want to understand the business of how it is done, what is the profitability that comes? Because every time a quarter results come, the figures are so various. I can give you examples, sir. Like quarter 1 and quarter 2 -- I mean, quarter 4, you had INR 1,600 crores profit reflecting in that. And in quarter 1, we were having INR 2,285 crores profit reflecting in this. Now how has this worked out, sir? Because we are not able to see it through. Even if you compare it year-on-year, we are not able to see through how is this calculated? I mean at least some idea if we get how is the company performing, before you give us the results, if we could be able to do that, it would do well, sir. Because company is good. You're doing a very nice job, but we are not able to understand the business exactly how this is done. So if you could throw some color on it, it would really help us.
Let me take you 3 years back. We never used to give guidance on this marketing business because this was one question which you were posing people were not able to understand. So we started giving guidance. Way back in May '22, we gave that for '22-'23 INR 3,000 crores, '23-'24, we said INR 3,500 crores. And now we have said INR 4,500 crores. Today, I have said, minimum INR 4,500 crores. And where from this guidance is coming, and then I will come back to your question. We have almost 14 MMTPA of contract currently operating. Out of those, now you can note it down because some of the answers to your question may be available. Almost 4.8 MMTPA of contracts we have from Middle East, which is back to back, we have certain margins. APM, we have back to back, certain margins. Then almost 3 MMTPA of contracts, we have from [indiscernible], which is crude-linked contract. We have sourced on crude-linked, marketed on crude-linked. So you can assume that almost fixed margin, which we get. That 5.8 MMTPA of contract we have from United States. There, we have marketed some of the gas as back-to-back index. And we have good margin and that is predictable. We work out based on that. Remaining what we do, we continue to remain in the market and we take positions like Henry Hub has gone down to $1.9. In recent past, it was $3. So we continue to watch the market, take positions to take the benefit of arbitrage. That is one thing, which changes. Second, we do destination swaps. When molecule has to travel from United States to India, almost $2 to $2.5 is the tariff, but we continue to optimize through swap. Cargoes going from Middle East to United States. We are bringing from United States and we try to swap and optimize. It's the win-win situation for both the seller or optimizers that we do. We also market the volume in international markets. So when we give you guidance, we work out what we have formed up once we are giving guidance. And we know that this is likely to be achieved. There is no -- we do not have any doubt, but we continue to do optimization and that's how it increases. So this is whole game. If you expect that we will be able to give you guidance. You add that I can give, but that market may or may not support. Market may give different situations. So we give guidance and we continue to come back to you and revise our guidance based on those situations.
Sir, can we understand it that way that in quarter 4, if the international price was $1.9, and in quarter 1, it is $2.4? That means in gas marketing, you would do a good profit in it.
Not for all volume. For some of the volume, not for whole volume.
Okay. Yes, about those...
We have also marketed that volume on same index. We do not have ability to earn both. But where we have not marketed on same index, we can take positions based on future. That will continue to go. It's not a subject, which I can explain in a few minutes. But I have tried to give a fair idea to your question that you are not able to understand why we give minimum guidance.
Fair enough. Can I put it on mail also if there is any further query to this regard?
You can contact any time.
[Operator Instructions] The next question is from the line of S. Ramesh from Nirmal Bang Equities.
So in terms of the conversations with the regulator PNGRB, do you have any sense in terms of when you will get the compensation for the cost of LNG, which you used last year, which you are saying that the regulator is considering? And do you see any risk of the regulator revisiting your integrated tariff in the foreseeable future?
Our integrated tariff. What you said, our integrated tariff?
So I'm just trying to understand if there is any risk of the regulator revisiting your integrated tariff and reducing it?
Revisiting on what basis? There is a defined regulation. Tariff is being worked out based on those regulations. Just because we are able to transport more volume, we are getting more revenues, can it reduce it? Because there is a defined regulatory returns, which are available to us and we cannot earn more than that. We are on the course of earning that. So unless regulator says, every, for everybody, we want to reduce the returns, IRR. That's possibility if exist then certainly, it can happen. Otherwise, no.
And on the compensation for the higher-cost LNG use in compressors last year?
Yes. Actually, we -- immediately after announcement of tariffs, we approached the regulator. And if you calculate based on NPV basis, INR 8 to INR 9 of reduction because there was a reduction of around INR 6. But if you can calculate at NPV base INR 8 to INR 9 is available to us in terms of gas price, we filed an appeal. But unfortunately, lack of member legal of our appeal, I think that's what I understand could not be heard. Meanwhile, we are in the course of filing the revised transmission tariff for integrated pipeline. There, our higher prices can be considered because recently, other transporters tariff was announced where they considered higher price than what we were allowed. We were allowed 3.61. The other companies tariffs when they process that is -- that the regulator has given higher price. Certainly, that is available to us, and we hope that this will be done maybe in 6 months' time. And if not earlier, then either by the end of this financial year or maybe beginning of next financial year, those are available to us on net present value basis.
Sir, if may squeeze in one more question. On the ONGC's KG gas production ramp-up, do you have any sense in terms of what is the kind of volume you can expect? And how much of that will you be targeting to tap?
Sumit [Foreign Language].
I think ONGC has been projecting certain volumes from KG Basin, but we have been hearing from them maybe 1 or 2 MMSCMD in this financial year. We can expect a larger volume in the next financial year. That is '25/'26, maybe in the range of 5 to 6 MMSCMD, but these projections have been coming from them, but they are getting delayed. That's what we have been observing.
[Operator Instructions] The next question is from the line of Mayank Maheshwari from Morgan Stanley.
Just one question from my end. In terms of gas sourcing now. Obviously, you've kind of talked about reasonably well on how you think about demand. How are you seeing the sourcing strategy now going forward as you are in the market? How much could we expect crude-linked contracts, Henry Hub linked contracts now going forward? Is there a mix you want to kind of get to over the next 4 to 5 years?
Actually, our intent will be to have a mixed portfolio. We have experienced that, that helps us not only as a gas marketing company, but also as a country because whenever there is a change in one basin, the other basins had helped us. So we have recently sourced 1.53 MMTPA from 2 suppliers. That's on a crude-linked index and we have R&D market, and we certainly will continue to maintain our mix and -- but the bottom line is that we look for cheapest source, and while we try to have mix, but we -- bottom line the first we look, which will be the cheapest. And certainly, that cheapest should also give us a mixed kind of portfolio. That helps.
The next question is from the line of Vishnu Kumar from Avendus Spark.
Sir, on the Qatar contract, is there any change in the transfer of ownership from, say, Dahej, to directly Qatar to reduce some costs? And if so, is there any cost savings for us and the industry?
We are still negotiating the SPA, detailed contract.
I mean, I'm asking for the existing contract with them sir, because we -- one of our...
I'm not privy to any such discussion.
Got it, sir. And just one question on the volume growth that you are highlighting from 132 to 152, we've been able to achieve whatever you highlighted earlier. But from here, what are the sectors that you are foreseeing when we go from 132 to 152. Any rough idea, if you can help us understand?
Most of this is going to come from the natural CGD growth, which is at least 12% or even higher CAGR. And next comes the refineries along the Eastern pipeline, the Jagdishpur-Haldia pipeline already -- sorry, Paradip pipeline are getting supplies, they will ramp up and Haldia will get connected soon, that the 2 refineries along the Guwahati section of the pipeline. So these refineries will be major contributors as far as transmission is concerned. Then there will be newer customers getting...
Sir, if you can give in volume terms?
presented along these pipelines, which are mainly in the steel sector and the aluminum sector, the metal, which will also be -- these set of customers will also be along this Srikakulam-Angul pipeline, which will be getting commissioned. And also some of them on the Jagdishpur-Haldia pipeline. So these are the major set of customers. Otherwise, there is going to be the natural growth also coming from some of the existing legacy customers.
Sir, on your CGD and refinery alone, what will be the absolute that you are considering, sir, from 132 to 152?
The refinery segment will contribute around 8 to 10 MMSCMD out of that. And the CGD will contribute another maybe 5 to 6 MMSCMD and remaining all will be a new set of customers and natural growth.
The last question is from the line of Sumit Rohra from Smartsun Capital Private Limited.
Congratulations on excellent results. Sir, my question is more to ask you from an investor perspective with clearly emphasis on as gas going ahead in the proportion of the country's growth. So how do you see basically GAIL over a 2- to 3-year perspective in terms of volumes, one? And secondly, sir, more on profitability because that will give us, investors, better perspective on how we are shaping up for the next 3 to 5 years, sir?
I think for gas marketing, I have said we are likely to grow by 5% to 7%, 5% I have given for this year. Gas transmission, we have said for coming 2 to 3 years, we may grow by 10 to 12 MMSCMD. So from the perspective of growth, I have already said, how we are likely to grow.
Yes, sir, I mean you have, but if you can throw some perspective on financial numbers as well, it would be helpful to get a better understanding.
So marketing margin I have already given you guidance for this year, INR 4,500 crores minimum. And next year, you can assume maybe in similar range, INR 4,500 crores to INR 5,000 crores, in same range.
Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.
Thank you very much, and it was pleasure talking with you. Hopefully, we have tried to give answers to your questions the way you expected. In case there was some more clarification or input is required, our team in management and investors relationship is available. They will be able to answer your questions. And I, once again, thanks to you for taking interest and participating. Thank you very much.
On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Read the full transcript via the API
You're viewing the first half of this call. Get the complete GAIL (India) Limited transcript - plus 251,000+ transcripts from 12,000+ companies, speaker segments and full-text search - through the EarningsAPI REST API or hosted MCP server.
Get an API key View API docs →For developers and AI pipelines
Programmatic access to GAIL (India) Limited earnings transcripts and 251,000+ others is available through the
EarningsAPI REST API and the hosted MCP server.
Quarterly plans from $105 - full transcripts, speaker segments, full-text search,
and the /api/v1/transcripts/recent polling endpoint for ETL pipelines.