Indraprastha Gas Ltd
NSE:IGL
Earnings Call Analysis
Q3-2024 Analysis
Indraprastha Gas Ltd
The company is taking significant steps to offset the expected decline in APM gas allocation by boosting volumes from their Compressed Biogas (CBG) plants. With LOIs (Letters of Intent) for 20 CBG plants and 5 already commissioned, they aim to bridge the volume gap. The focus is on CBG as it presents a cost advantage, being 10-15% cheaper than APM gas. The company expects around 2 lakh volumes from their CBG plants, coupled with additional sourcing from third-party providers. This strategic move is crucial as they anticipate lucrative long-term contracts in light of softened spot gas prices. This diversification into CBG production, leveraging technological advancements and partner expertise, is poised to maintain the supply and quality of gas.
Delhi accounts for 63% of the company's current volumes, showing a growth rate of 2-3%. Despite the gradual retirement of DTC buses and a focus on EVs, the company retains its growth trajectory through targeted segments, especially in commercial and industrial domains. The ban on diesel gensets in Delhi has resulted in increased requests for gas conversions, and an aggressive push for adding new connections and improving infrastructure suggests potential volume growth in these categories. With strategic initiatives like converting dumpers and enhancing the customer experience at CNG stations, the company is confident in compensating for DTC volume losses and further expanding their market share.
Looking beyond immediate challenges, the company has its sights set on robust long-term expansion. They plan to add significant customer connections each year, heavily investing in infrastructure. These plans are underpinned by the company's competitive pricing and the growing trend of consumers switching to CNG for its cost benefits. Notable successes include multi-fold sales increases in areas like Hapur, where their own stations have superseded the volumes sold through OMC outlets. The strategy to lay pipelines to GA boundaries, prepare for dumpers' conversions, and establish CBG and LNG stations underlines their commitment to a future where clean energy is more accessible and favored by consumers.
Financial stewardship remains a top priority, with a profit margin target of around 7.5% to 8%. This margin is intended to be maintained through strategic pricing to balance out volume and profit, and any deviation from the target could trigger price adjustments. The allocation for domestic gas, crucial for both CNG and domestic PNG, stands at 78%. For the coming fiscal years, the company projects a capital expenditure of approximately INR 1,400 to INR 1,500 crores, with a focus on investments in CBG and LNG segments, which could constitute about 20% of the total CapEx.
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Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call for Indraprastha Gas Limited, hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ramesh from Nirmal Bang Equities. Thank you, and over to you, sir.
Thank you, and good evening. It gives me great pleasure to welcome you all on behalf of Nirmal Bang Equities for this 3Q FY '24 earnings call with the management of Indraprastha Gas. The company is represented by Shri Kamal Kishore Chatiwal, Managing Director; Shri Pawan Kumar, Director, Commercial; Shri Sanjay Kumar, Chief Financial Officer; and Shri Manjeet Singh Gulati, Chief General Manager of Finance. So may I request the management to give their opening comments, and then we shall throw the floor open for questions. Over to you, sir.
A very good afternoon to all of you. I welcome you all and thank you for joining IGL's quarterly earnings call for Q3 FY '23, '24. I'm Kamal Kishore Chatiwal, Managing Director, Indraprastha Gas Limited. I'm joined by my colleague Shri Pawan Kumar, Director, Commercial; Shri Sanjay Kumar, CFO; Shri Manjeet Singh Gulati, CGM F&A.
IGL has declared its Q3 financial results on 25th of January. The major highlights for the quarter are as follows: PAT has increased from INR 278 crores to INR 392 crores year-on-year with a growth of 41%. Sales volumes stood at 8.48% MMSCMD with growth of 4% year-on-year. EBITDA of INR 564 crores with a growth of 32% year-on-year. PBT of INR 516 crores with a growth of 32% year-on-year. There is a 2% growth in volumes in sequential terms, and there is a decline in EBITDA from EBITDA per SCM from 8.6% in Q2 to 7.23% in the current quarter. The main reason is due to decrease in the APM allocation for the priority sector in the current quarter. The conversion of vehicles continues to be in the range of 15,000 vehicles per month. We are already touching the 9 million MMSCMD sales mark on Sundays and extracting that we will exit the year with the Q4 average sales at around 9 million.
As of approximately 16 new stations are expected to be commissioned during the last quarter of '23, '24. The company is also focusing on LNG and CBG to improve volume and profitability. We have already started working on mitigating the risk of impact of our EV on CNG sales volume by putting our focus in a big way on interstate bus transport and LNG for long haul transportation. We are optimistic that IGL will continue to grow in volume terms in future. Further we are also looking in the area of renewables for diversification in addition to the LNG stations as stated above.
We are also planning to set up a small-scale LNG plant in our GA to utilize the ideal capacity of CNG stations. This will be the first such pilot in the country where CNG will be used to convert to LNG. This will help us in making LNG available for the stations being set up by company and also far from the port cities of Dahej or Ennore or Kochi. So this will be in the Heartland. Now I would like to invite our Director, Commercial, to give you his opening remarks.
Thank you, Mr. Chatiwal. My name is Pawan Kumar, and I welcome you all in this earnings call for Q3 FY '24. And thank you all for making -- taking time out of your busy schedule and attending today's call. Regarding the major highlights for this quarter, the gross profit per SCM has increased from INR 11.34 per SCM in Q3 last year to INR 12.95 per SCM in Q3 this year, which is a growth of 14% on a year-on-year basis. The EBITDA per SCM has shown a robust growth of 26% year-on-year basis and is INR 7.23 per SCM in the last quarter.
For CNG segment, year-on-year growth was recorded at 2% with the average sales being 6.3 million meter cube per day as compared to 6.07 during the previous year. The PNG segment has also witnessed double-digit volume growth in the domestic and commercial segment in Q3. However, industrial segment has led behind due to the price of alternate fuels. We are rationalizing our pricing policy to address this issue. And we expect that in future, the industrial sales will also pick up. We are focusing on more areas for the increase in volume growth and planning to set up 10 LNG stations in the near future as we see the potential in LNG to replace long haul vehicles currently running all diesel. In addition to this, we are working on convergence of dumpers and commercial trucks in our GAs so that they can switch on -- switch over from diesel to CNG to add new segment to increase the CNG sales.
On infrastructure front, we have commissioned 27 CNG stations so far, and we have added around 2.7 lakh domestic connections and around 1,000 industrial and commercial connections in 9 months during the current year. The CapEx incurred during the year till December is INR 824 crores. This was the brief highlight about Q3. Once again, I thank you all for taking part in this and sparing your precious time for joining this call. The floor is now open for question-and-answer session.
We will now begin the question and answer session. [Operator Instructions] We have our first question from the line of Nitin Sharma from MC Pro Research.
Two questions. Can you -- how much was the APM allocation in the Quarter. And can you please provide the breakup of different sourcing of gas, HPHT non-APM, spot, plus term. And then I have a followup.
Total allocation has been around 78% domestic APM and non-APM and 4% was HPHT so that makes it around 82%. And around 17% was term contracts of R-LNG and small volumes spot on IEX also.
Understood. Okay. And secondly, can you please help us understand how do you see APM allocation going -- coming over the medium term?
Yes. Over the medium term, we expect the APM allocation to go down further. Although in the first quarter -- in the fourth quarter from 1st of January, there has been a slight improvement in APM allocation. We've got additional 120,000 more from 1st of January. But over the medium term, we feel that as more and more GAs will get commissioned. So -- and the domestic production is not keeping pace with that. So the allocation is going to go down slightly. And we will have to make up that, I think, either the spot or the HPHT volumes.
Understood. And if I can squeeze another small question, that would be, where do you see vehicle conversion rising from here? So this quarter itself, it was around 15,000. So is there any possibility for some price cut at the retail level that could augment the vehicle conversion, something that could be happen? What's your view on that?
Actually, we are focusing on our new GAs as well as the satellite towns of Delhi because there, we have not -- I mean, some of the GAs we have, in fact, reduced the prices. Say for example, Rewari, we have reduced the prices by INR 3. And in other GAs, say, Kanpur or Muzaffarnagar, Karnal, Kaithal, Banda, Mahoba, or Ajmer GA, we have not increased the prices to make them more competitive. So in spite of decline in APM allocation, we have not increased the prices. So there, we are seeing that the conversions are picking up in those GAs. As also in Rewari, we are seeing that conversions are picking up.
[Operator Instructions] We have our next question from the line of Kirtan Mehta from BOB Capital Markets.
In terms of the -- recently, you talked about sort of adjusting the pricing in some of the GAs which is helping to pick up the sort of the vehicle conversion growth. How do you see that -- how could you sort of accelerate or what are the other steps that's needed to accelerate the growth in the other GAs? And what could be the sort of the potential growth that we can achieve over the next 2-3 years outside Delhi?
See, one of the areas that we have identified is the dumpers that are used for construction for ferrying construction material, sand, marble, et cetera. So there, we feel that -- and especially those areas where the daily transportation is within a limited area, say, 50 to 100 km. So there, we feel that if we can convert them because the numbers are huge. And If I take an example of Banda-Mahoba-Chitrakoot, in that GA, we have around 6,000 dumpers being used daily. So if we can convert a fraction of that, say, 10%, 15%, or 20% in the next 1 year, then the volume growth will be huge because each dumper consumes around 80 to 100 kgs per day. To make that possible, we are now, I mean, converting 2-3 dumpers to demonstrate to the operators there that they will get what is the advantage of conversion to CNG to demonstrate the proof of concept, we are converting some of the dumpers and showing it to them. So that -- we will -- that strategy we will adopt in other GAs also wherever these dumper numbers are there. In addition to that, some LNG -- also LNG maybe in the commercial segment or in the bus segment, so that is another area that we will be looking at in addition to the long haul transportation that in any way we are focusing on LNG.
Right. And in terms of -- would you also be considering giving some of the incentives for the conversion for these dumpers? Would there be a possibility to consider them? We have seen this kind of scheme being launched in Maharashtra with some initial signs of success. So is there a possibility of replicating in the northern area as well?
Yes, that will be a possibility. But before that, we need to have the infrastructure in place because if we have the scheme and we don't have the infrastructure. So that's another area that we are focusing to make -- I mean big CNG stations where all these dumpers -- because they will be needing a lot more space for filling and all. So we are going for some big stations in these areas, and it will be synchronized with the scheme. So scheme would be needed. But before that, the infrastructure would be needed.
Right. You also talked about the sort of adjusting the industrial pricing scheme to incentivize their usage. So what are the thoughts under consideration?
Basically, our pricing policy has been designed for a monopoly because in CNG and domestic market, we are a monopoly. But as far as the industries are concerned, we are not a monopoly because other alternate fuel which are competing with our gas, they are present. So we are making our pricing policy flexibile in line with other companies, where we can offer the customer specific price based on the volumes because the need of the hour is the growth. And hardly any additional charges are incurred on supplying these customers because they are already connected. And they suddenly switch it off, the supply, they stop taking. So we can reduce our S&D charges and we can reduce our margins there, but certainly, we can maximize the volume. So the policy will be customer-specific so that the volume can be brought to the fold.
And is there a possible to sort of give a minimum discount to the alternative fuel sort of a scheme as well?
Yes, we are looking at all the angles because the need of the hour is volume.
But just to supplement the question, I think it will not be a fixed discount kind of a thing. But while pricing our products, that will be one thing that we'll be keeping in mind.
Understood. I will get back in the queue.
We have our next question from the line of Probal Sen from ICICI Securities.
Sorry if I -- if we have to repeat this, I could not catch the first answer completely. You said that APM allocation has fallen to about 78%. About 4% came through HPHT sources. And the balance would have come from essentially spot LNG. I mean, just wanted to get a sense again of what does our overall sourcing mix look like today? What sort of term contracts do we have in place? How much of HPHT do we have in place in terms of contracts? I apologize again if you have to repeat this. I did not hear in the beginning.
Not an issue. I will again repeat that 82% is from APM and HPHT. 17% is from R-LNG from term contracts that we have, long-term and medium-term contracts.
17%?
17%.
Right.
Okay. That is based on Henry Hub-linked as well as Brent-linked and JKM-linked also. And small volumes of around 60,000 or so during the quarter, we sourced from spot through IEX.
So sir, Just to understand, if I can just ask a follow-up. This quarter, if you see the margin, of course, has grown on a Y-o-Y basis, but the margin decline that has happened on a Q-o-Q basis. That is entirely attributable therefore, to the reduction in APM allocation and plus what you mentioned that you did hold the prices and change in some of the non-Delhi areas and the reduction in prices in Diwali. That's how we should look at it? That's the reason for the margin dip on a Q-o-Q basis?
That is the major factor that APM has gone down by around 9% to be precise, 87% to 78%. In addition to that, we had a one-off, I think, dividend income also. In...
That is as far as PAT is concerned, EBITDA [indiscernible]
That's an impact in PAT that around INR 72 crores of dividend income was there.
In this quarter, right?
That is the impact on the PAT not on EBITDA.
And which -- where did -- we did receive this dividend from, sir?
The dividend from our associates, MNGL and CUGL. So that's 72 crores.
Understood. Last question, sir, any volume guidance you would like to hazard? I know it's very difficult, given the uncertainty. But as of now, for FY '25, any percentage volume guidance we are giving in terms of what we expect?
For '25, we will be targeting 10 million.
10 MMSCMD average volumes or exit rating?
Yes.
Average volume throughout the year sir, you're targeting, 10 MMSCMD?
That will be closing FY '25 at 10.
So exit rate of 10 MMSCMD is what you're targeting, right?
Yes.
[Operator Instructions] We have our next question from the line of Maulik Patel from Equirus Capital.
Sir, on the sourcing side, as you -- as one expect that APM allocation will continue to go down in the coming years, what will be the optimal kind of the breakup in sourcing you would like to see from a mix of long-term LNGs and spot and HPHT?
See, in -- our effort would be that whatever volume decline we see in APM allocation, we try to make up with CBG volumes also because we have LOI for 20 CBG plants, out of that only 5 have been commissioned. In addition to that, we are also setting up 10 CBG plants. Now the plants that we will be setting are over slightly -- would be of slightly bigger capacities.
So I mean, if I -- in volume terms, if you say, we will be targeting somewhere around 2 lakh volumes from our CBG plants and maybe another 2 lakh from the outside parties. So 3, 4 lakh volume is going to come. Out of that, only 10,000-odd has come. So whatever decline is there in APM, we would try to first make up with the CBG because that is the cheapest available gas presently, even 10% to 15% cheaper than APM. So that would be our target. And our GAs, our consumptions are such that we will be able to absorb those volumes in our network. So that is one area.
In addition to that, we are -- now that the spot prices have softened a bit. So we expect that lucrative contracts will be available because our long-term contract is expiring in '28, so anything comes up for renewal now that the prices of spot gas have softened. So we expect some good contracts to be available for long term.
Sir, on the CBG side, what we understand that it's extremely difficult and challenging to ramp up the volume in the CBG because of the unavailability of the feedstocks. So basically, we do not have a consistent supplier of the feedstock from the market and the markets are not big enough or probably it carries then, then the logistic costs are very high. So is that the right assessment?
Partially, you are correct in your assessment. But if you have a good technology provider, in a few days, you will hear an announcement from our side on the plants. So now there, we are very selective in choosing the technology partner. And whatever technical hitches are there, I understand that there are quality issues that CO2 percentages in BIS standards and methane percentages. So they are at a very -- the impurity levels are slightly higher as compared to CNG or the PNG requirements, they are being BIS standards. Our effort will be to make it as close to the -- or even better, the present quality of CNG and PNG. So that this will be a preferred, I mean, source for all the CNG companies. So that will -- we will be demonstrating. And in a few days, we will be announcing that those 10 plants. One is already under construction, and 9 more we'll be announcing. And all of them will have -- I mean, the sourcing of the raw material for all these plants will not be constrained because it will be a variety of sources starting from pressed mud or agri waste or MSW waste. So all those will be there. So announcement will be -- I mean, in a few days, there will be an announcement regarding the same.
How much -- how many quarters it will take to ramp up to this 0.4 MMSCMD, 3 to 4 lakh kind of on a volume from the CBG? And what kind of a time line are you expecting?
Normally, it takes around 8 months to 1 year time to build a plant. So our plants, a few of them will come up in June, July. Rest, others would be by FY '25. In the last quarter of FY '25.
Got it. Sir, If you allow me to ask one last question -- I'm sorry, initially I -- I missed the initial remarks. Did you give any breakup between your Delhi volume, the CNG or the non-Delhi volume in your opening remarks?
Delhi volume is around -- 63% volumes are from Delhi. And 37% is non-Delhi.
And sir, what could have been the growth between these 2 segments, Delhi and non-Delhi compared with the previous year?
They have been growing at around 2% to 3%. It is basically absorbing the impact of DTC, the DTC and DIMTS. So we are able to just grow at 2% to 3% after absorbing that impact. The other segment is growing at 7% to 8% outside of Delhi. And the new GAs, the base is very low. If I tell you the number, the growth percentage, it will be very, very high. It's so low that if I tell you that they are growing at 60%, that doesn't make sense because the base is very low. But we are seeing good growth over there.
Sir, what was...
Sir, sorry to interrupt. May we request you to return to the question queue for follow-up questions as there are several participants waiting for their turn. We have our next question from the line of Vipin Goel from Mirabilis Investment.
Sir, just one question again on the conversion front. So you said that about 82% was the APM and then last part was a term contract, 17%. So within this 17%, I mean, what would be the volumes? And then if you could just tell us about the contracts, the total volume that has been contracted? About 2.2 is what I remember from the last conversation. Sir, you can just revise that number.
So now that 2.2 number has increased to around 2.5 because some of volumes, 0.3 to 0.4, rather, we have increased it to 2.75. After taking IC and TL into internal consumption and technical losses, the total sourcing is around 2.75. This includes HPHT volumes also. So 2.35, you can say, is midterm and long term. So midterm is 1.77, 0.58 is long term.
And sir, on the pricing of these 2, the midterm and the long-term, average pricing?
Midterm would be linked to Henry Hub. So that's 115% of Henry Hub plus some constant of, say, 5.5%, 5.6%. Those kind of volumes. So [ landed ] would be somewhere around $13 to $14.
All right. And with this CBG kind of ramping up and APM going down, so do we stand with our earlier margin guidance of 7.5% to 8%? Or is there any change in that?
No, no, that remains, 7.5% to 8% would be our endeavor. And if it goes down below, then we may have to increase the prices. If it goes above, we may have to reduce the prices. But around 8%, we are targeting.
We have the next question from the line of Amit Murarka from Axis Capital.
Just a question on volume. So in the last call, you had mentioned the potential impact of the cab aggregator policy is about 15% to 20%. But you said that you're still evaluating it. So the first question was, would you still stick by that guidance? Or has that changed?
So we stand by the guidance of exiting the year at around 9 MMSCMD and '25 at around 10 MMSCMD. So right now, of the cab aggregator is basically the incremental volumes, the conversions to taxes, that is getting -- that will have an impact on the new additions. But present impact is of DTC that is, I mean, converting to electric. So during the 9 months, we have seen around 950 buses being converted. So you can say around 40% DTC conversions have already taken place. And we have absorbed that impact. And in fact, we have grown slightly in Delhi due to that 2% to 3% growth, whereas the private vehicle growth has been very robust at around 8% to 10% growth is there in the price vehicle segment.
Okay. But I'm still wondering like exit FY '25 versus exit '24 is 11% growth versus like the recent 3, 4 quarters have been only 3%, 4% volume growth. So where will the additional like 7%, 8% growth come by, particularly when we expect slowdown in the cab aggregator volume?
So we -- if you know the CGD sector, most of the -- because for the full year, if we have planned some stations, the last quarter is where the -- all the commissioning of all the stations comes up. So in this quarter, we will be commissioning close to 50 CNG stations. Some of them are in new GAs, some of them in the existing GA of Delhi and NCR area. So once those come into stream -- so we feel that volume growth would be there because there are days in our -- right now, we are seeing every month when we analyze, there are days of the weeks when we are already crossing 9 million. So it's a question of the average because on weekends, our sales go down. So maybe we may have to think about some weekend discount or something like that to ramp up the sales on those 2 days. And -- otherwise, we feel that 9 should be consistent. And once these 60-odd stations, they come online. So then also, we feel that we should exit around 9.
All right. Got it. And just one last question on OpEx, like actually in the last 4, 5 years is OpEx -- your OpEx has been consistently going up, I believe it's because of the new GAs. So -- but -- is there any breakup of EBITDA like how we gave a breakup of volume? Is there any breakup of EBITDA also that you can share between Delhi, non-Delhi or say, for the new GAs?
We do not show the breakup of EBITDA as such. Internally, we evaluate the GA-wise performance. And we -- at this point of time, it will be difficult to compare other GAs which are very nascent -- in nascent stage. And the majority of the profit comes from Delhi NCR region, basically because the volume is lesser in the new GAs and the pricing, which we are -- presently pricing policy, which we are maintaining there that is aimed towards the growth of business and future opportunities rather than profitability. So barring 1 or 2 GAs all our GAs are profitable at this point of time. That's what we can share at this point of time with you. EBITDA level, seeing EBITDA level at -- for each GA will be a little premature at this point of time.
We have our next question from the line of Yogesh Patil from Dolat Capital.
Sir, now almost 4 months are over after implementation of a Delhi EV policy for the cab aggregators, what is your observation on the taxis or cab additions for the last 3, 4 months? And have you noticed any decline in the CNG cabs or taxis additions in the last 3, 4 months?
As of now, we have not noticed any significant decrease in number of cabs and taxis, which are being registered. Rather, the total number of vehicle population is around 15,000. And as the new variants are coming up from the OEMs, we expect that the number of vehicles are going to increase.
Out of that 15,000 vehicles per month addition, what would be the taxis or cabs addition, monthly basis?
Sanjay, you have that data?
See, the number of -- if you talk about breakup of conversion, it's approximately -- 7,000 is approximately private cars. And around 6,000 -- around 5,500 is the commercial vehicle, which includes taxis, goods carriers and 3-wheelers. And around 3,000 is retrofitments. So that's the broad breakup 6,000 plus 6,000 plus 3,000. That's the response. And the specific impact, if you are asking about the aggregator policy on the sales of taxis and 3-wheelers, I think it's only 2 months data which is there. So to meaningfully take out any trend, I think let us wait for one more quarter, and then we'll be able to answer this.
Okay. And the last question from my side, sir, we wanted to understand, are you able to capture the net CNG vehicle addition? I mean, more than 15 years old CNG vehicle getting replaced by the new CNG vehicle, is it just a replacement to the old one? So these type of vehicle addition will not be a CNG volume growth driver. So my question is, do we have any net vehicle addition data which will reflect the real picture of the CNG volume growth in coming days? Are we tracking? Or do we have any that kind of a database track?
So if you ask this, I think there is no scientific way because there is no data which is coming from the...
Actually, the data that we track is from the RTO, the number of vehicles getting registered and the number of CNG vehicles already registered. So in case after 15 years, vehicle is getting de-registered, so that number will go down. The number of CNG vehicles will go down, and there will be no net addition. So we track the data from RTO.
We have our next question from the line of Nitin Tiwari from PhillipCapital.
Sir, my question -- the first question is related to infrastructure spend. So can you help us in terms of what is the mix of spend between the city of Delhi and outside Delhi for this year and as well as like as far as our forecast is concerned. How much percentage are we spending in Delhi? And what percentage are you spending outside?
For the 9 months, we have spent total INR 859 crores during the first 3 quarters of the current year. And Delhi makes up of around INR 400 crores. Our GAs in UP is around INR 300 crores. And Haryana and Rajasthan are around INR 150 crores. So that's the broad breakup.
Understood, sir. And sir, any update in terms of your conversations with Rajasthan and UP government for conversion of interstate transport buses?
Yes, yes. We have a discussion not only Rajasthan and Haryana, UP also, we had a discussion and Uttarakhand also. So UP has agreed to deploy 60 buses, Uttarakhand, around 45; Rajasthan has agreed to start a pilot with 20 buses. So they'll be converting 20 buses from Ajmer depot and then going up to Delhi. And then talks with Haryana is also in progress.
Understood, sir. And sir, lastly, any guidance that you can give us in terms of DTC versus what is the number if you look at DTC and DIMTS combined? And -- how can we look at this number by the end of FY '25? Are we expecting any more retirement of CNG buses and addition of EVs?
DTC, around 3,200 buses are there, so almost 40% of them have converted to EV. And the target is that by FY '25, all of them will be converting. So DIMTS as such, there is no policy there that they will have to convert, but whatever old vehicles are getting retired. So they have already retired 500. So total number is around 3,900 or so. So 500 have retired. Those numbers will go down slightly, but only the DTC numbers would be converting to EV.
We have our next question from the line of Devang Patel from Sameeksha Capital.
There's some disturbance on your side.
We will move on to the next question. We have our next question from the line of Vikash Jain from CLSA. Please go ahead.
I just want to understand, so you said that Delhi is about how much 60, how much percent of this current volumes? With the 3Q volume, how much is Delhi?
63%.
So that's about 8.5 MMSCMD was the volume of that, about 5.3% is what Delhi is. Now from 8.5, you are talking of ending FY '25, that is in 5 quarters -- at about 10 MMSCMD. That's roughly about 18% increase. And this 5.3% with more DTC buses getting retired into EV that you are saying currently is growing at 2%, 3%. That is unlikely to pick up, right? So if you have an extra 1.5% to come from. I mean, we are basically banking on the other 3 MMSCMD also, adding to -- giving a 30%, 35% growth in the next 5 quarters. Is that how we are thinking of things?
Now Delhi also, we are focusing more on industrial and commercial segment. So that is one segment, the industrial segment, where we see a lot of potential. And in commercial segment, recently, there has been a ban on using usage of diesel gensets. So we have got a lot of requests for conversion of diesel gensets to gas. So that is another area.
Second is the domestic CNG segment where every year, we have the connections, but the billing part is taking time because the last mile connectivity is still undergoing. So we are adding 2 lakh connections every year in Delhi. So these are the 3 segments that we'll make up. In addition to that, the CNG infrastructure, we are increasing the dispensing capacity. So to ease the queue situation, once that improves, so we expect that more and more vehicle conversions would be there.
So simply put, sir, you said that currently Delhi on a net basis after adjusting for the loss from DTC is growing by about 3%, right?
Yes.
So this in the next 5 quarters, do you expect that this number, 3%, could be significantly higher because there will be more loss, right? More DTC buses will get converted incrementally. So...
No. What we are seeing that once there is a mandate of [ CNG ] where they have said that the interstate buses entering Delhi, they need to be either CNG or EV or Euro 6-compliant buses. So right now, they don't have Euro 6-compliant, but CNG, they can easily convert to. So that is one segment where whatever loss is there. And those volumes will -- I mean, the depot for filling up the stations would be in Delhi. One of the fueling stations would be in Delhi exclusively for them.
So these are the kind of strategies that we feel would make up. In addition to that, we are also looking at conversion of dumpers in other GAs. So those are the big volume vehicles. I mean where -- if we -- just to give an example, if we just previously also gave the example of Banda-Mahoba-Chitrakoot, we are targeting 6,000 dumpers. So even if we are able to convert 50% of them, so that will make up for a loss of our DTC volumes. So to make that possible, we are demonstrating by converting a few dumpers. We are putting up big CNG stations to make the filling experience more joyful. And plus, the economic advantage will be passed on to them.
Okay. And sir, this 8.5 number in 3Q, is this something which is now looking much better or it's in that vicinity only as we have got into January and all of that?
So 8.5, we expect that the last quarter will be ending at around 9.
Okay. So last quarter average, the average for 4Q could be 9 almost?
9. Almost 9.
Okay. And just one final thing. The allocation that you gave for domestic gas of 78%, 4% HPHT, et cetera, that is for all of your volume or that is for domestic PNG and CNG only?
The allocation is only for CNG and domestic PNG.
So for that volume, 78% is all that you're getting?
Overall, it is around...
Yes. Okay. Understood. That's what I wanted to confirm.
[Operator Instructions] We have our next question from the line of Devang Patel from Sameeksha Capital.
We get some pricing increases in Q3. So are we on track to come back over our EBITDA over 8 per SCM?
We'll be nearing around 8 because we are also focusing on increasing the volumes. So we don't want to increase the prices. I mean, we'll keep the prices to a moderate level so that conversions don't get affected. But at the same time, margin, we are targeting around 7.5% to 8%.
Okay. Sir, just to clarify, how many DTC buses are remaining for conversion now in the absolute number?
Close to around 1,800 also.
And as you are saying, on the 1,800, you expect to convert by end of FY '25?
FY '25 or '26, I think 1.5 to 2 years. So that is the time they have given us.
Okay. Sir, and the CapEx that we are doing now is lower than what we had guided to in earlier quarters. So for next year, what kind of ramp-up in CapEx are we looking at?
So next year also, we'll be doing around INR 1,400 crores to INR 1,500 crores. And there are 2 segments that we will be focusing on is the CBG segment. And another would be the LNG segment. So setting up of LNG stations and putting up CBG plants. But overall, CapEx would remain in these 2 areas. In case of any opportunity where there is an acquisition opportunity, so that amount is separate. It's not included in this.
And CBG, LNG itself would be how much of this INR 1,400 crores, INR 1,500 crores?
So maybe 10%. Overall, total maybe around 20% of that.
Okay. And sir, just to clarify what you said earlier on discounts for C&I customers. So do we not give any incentives or discounts for large volume buyers?
As we have confirmed that -- not for commercial, but for industrial customers, we are making the policy because the volume is large. And we'll be offering the customer-specific prices so that they can switch over from alternate fuel to gas.
And in the near term, do you expect that volume from industrial customers to go up because alternate fuel prices have also gone up?
Yes, we are expecting the volumes of industrial, rather, we are targeting those volumes. So we see that as an opportunity. Industrial and commercial are the 2 segments that we are focusing aggressively because we feel we can increase volumes there.
We have our next question from the line of Mr. Ramesh from Nirmal Bang.
So before I express my vote of thanks and pass it to the management for closing comments, I just wanted your thoughts on 2 aspects. One is in the Industrial segment, how have the margins moved compared to the blended margins in 3Q? Because I would have got some benefit from the higher alternate fuel prices. And do you see the margins being sustained at these levels? Since you are discussing some price adjustments, is there any risk of the margin in industrial declining? And what are the kind of volume growth required to make that up?
Margin may decline a little, but the overall profitability will be maintained by the volume. We might turn a little less per SCM, but the volume will be multifold. Overall profitability will be maintained.
Okay. So if you look beyond FY '25, say, '26, '27, based on all the additional infrastructure setting up, the additional availability of biogas and the initiatives in CBG and LNG and the full-scale operation of all the new CNG station both in Delhi and outside Delhi, can we talk about the volume growth going up from the current 4% to 6% or 7%? Is it possible after '25?
In fact, we are targeting 1 million additions every year, and we have huge plans for that because we have very large GAs where we are putting a lot of money in infrastructure. And our experience is once the infrastructure is there, then the conversions take place and people convert to CNG due to the price advantage. Also, we have seen that all the arterial roads which are going out of Delhi to the neighboring states, most of the roads are covered by our GAs.
As soon as we put our own station there, the sales increases multifold. Like in Hapur, where we were sending around 10,000 to 14,000 kgs per day through OMC outlets. After putting our stations, the sales is around 54,000 kg per day within 2 months. And we have planned huge infrastructure investment. We are already laying pipelines up to the boundary of our GAs so that the people who are going outside our GAs, they can fill their tank from our station because our prices are the most competitive prices.
I once again thank all the participants for joining the call and asking some very interesting questions. Let me hand over the call to the management for closing comments, and then we can close the call. Thank you very much. Over to you.
This is very helpful, sir. So let me thank the management for being kind enough to do this earnings call, and I also I once again thank all the participants for participating in this earnings call. And especially, I also thank Nirmal Bang and Mr. Ramesh. And I hope to see you in the next earnings call. Thank you.
On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.