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Good afternoon, ladies and gentlemen, and welcome to Mahanagar Gas Limited Q1 FY '23 Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Probal Sen from ICICI Securities. Thank you, and over to you, sir.
Thank you, Ryan. Thank you, everyone, for making the time to attend this post Q1 FY '23 results discussion call with MGL Mahanagar Gas Limited management. We are privileged to have with us the senior management from Mahanagar Gas, including Mr. Sanjib Datta, the Managing Director; Mr. Sanjay Shende, the Deputy Managing Director; and Mr. Rajesh Patel, the Chief Financial Officer of the company, to discuss the results. Without further ado, let me hand it over to [ Neha ], who will give us the mandatory disclaimer regarding the results and then the management will give the opening remarks. Over to you, [ Neha ].
Thank you, Probal. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature, and we believe that the expectations contained in the statements are reasonable. However, the nature involves a number of risks and uncertainties that may lead to different results. The risks and the uncertainties related to this statement includes, but are not limited to risks and uncertainties regarding fluctuation in sales volume, fluctuation in foreign exchange, other costs and our ability to manage growth. I urge you to consider that quarterly numbers are not a reflection of long-term trends or an indication of full year results. They should not be attempted to be extrapolated or interpolated into a full year number. Thank you, and over to you, sir.
Thank you, madam. Good afternoon to all, and welcome to the earnings conference call of Mahanagar Gas Limited for the first quarter of the financial year 2022, 2023. I would like to thank all of you who are connected for our earnings call today. Over the past few months, all of us have witnessed India's resilience and recovery in economic activities after COVID. Accelerated pace of vaccination, uptick in consumer and business confidence with better outlook on the general economic situation has resulted in greater degree of optimism. However, adverse residual effects of the pandemic across the globe, coupled with continuing major geopolitical upheavals have resulted in a surge in commodity prices matched by high inflation. First quarter of FY '23 has been a testing time for MGL and the entire CGD industry due to high input gas cost, mainly due to geopolitical factors and supply shortages across the world. Besides, price of APM gas was revised from USD 2.97 per MMBtu to USD 6.14 per MMBtu with effect from 1st of April 2022. To meet the growing demand of the sector and to bridge the gap between APM allocation and demand from the priority sector, Ministry of Petroleum and Natural Gas issued revised guidelines for domestic APM gas allocation on 6th of May 2022. The guidelines were implemented with effect from 16th May 2022. And since then, APM gas is being provided to all CGD entities at uniform base price or UBP for domestic PNG and CNG in transport. This is a very positive step, which provides assurance to CGD industry for 100% gas availability for meeting the demands of the priority sector. This would also go a long way in meeting the commitment of Government of India to share -- to take the share of gas in the primary energy basket from present 6.5% to 15% by 2030. Prior to the issuance of our guidelines, APM gas was allocated for meeting the CNG in transport and domestic PNG requirements of a CGD entity based on half yearly consumption in previous half year, plus 10%. However, under the new guidelines, APM allocation is revised on a quarterly basis by considering consumption of previous quarter, plus 2.5%. This helps the CGD entities to grow their demand by using market determined price gas for a quarter and in subsequent quarter, get APM allocation against such volume. However, UBP is determined and notified every calendar month. UBP of pool gas was declared at USD 8.04 per MMBtu for May 2022 and USD 8.05 per MMBtu for June 2022. MGL continues to create CGD infrastructure across its existing license areas. During the quarter, 62,075 domestic households were connected and that we have established connectivity for nearly 1.93 million households. We have laid 65.21 kilometers of steel and PE pipelines, thereby taking the aggregated pipeline length to over 6,285 kilometers. We have also added 2 new CNG stations and with this, we have 292 CNG stations as on the end of the quarter. We have also added 69 industrial and commercial customers during the quarter. And thus, as on quarter end, we had 4,366 industrial and commercial customers. In respect to our Raigarh GA, we are selected to 56,690 domestic households and 23 CNG stations are currently operational. During the quarter, we laid 12 kilometers of pipeline in Raigarh GA, thereby taking the total length of pipeline to 358 kilometers. This expansion of our pipeline network has created a very good ecosystem for CNG and PNG in Raigarh area and will enable expeditious unlocking of the demand in driver, once our CGS, that is City Gate Station at Savroli is operational. Coming to MGL's operations during the quarter, we achieved overall average gas sales volume of 3.448 mmscmd, an increase of 8.8% over previous quarter volume of 3.170 mmscmd. Compared to the previous quarter, sales volume in case of CNG has increased from 2.277 mmscmd to 2.539 mmscmd, which is an increase of 11.5%. In case of industrial and commercial sales, volume has increased from 0.418 mmscmd to 0.439 mmscmd, an increase of 4.9%. Sales for domestic P&G for the quarter was at 0.470 mmscmd as against previous quarter volume of 0.474 mmscmd. Current quarter EBITDA is INR 286 crore compared to previous quarter EBITDA of INR 215 crores, which is a growth of 32.5%. EBITDA margin is at 19.60% for current quarter as compared to previous quarter EBITDA margin of 19.83%. Net profit after tax has increased by 40.5% to INR 185 crores for the quarter as compared to INR 132 crores in the previous quarter. MGL is a company which has been following higher safety standards with respect to its operations. MGL follows its code of practice for safety requirements, which includes 16 life-saving rules, work trend permit system for 13 critical activities, mandatory safety and technical competency training for all contract staff, monthly safety meeting and third-party engineer mentoring sessions. MGL is an ISO 45,001 certified organization. As a result of implementation of its safety standards, practices and unique initiatives in the area of transport safety management system, the company has won the prestigious FICCI Road Safety Award 2021, amongst all the top names who contested for the award. The award was received from the hands of General V. K. Singh, Honorable Minister of State, Ministry of Road Transport and Highway and Ministry of Civil Aviation of Government of India. Further, MGL continues to work on ESG front, and I would like to share that as of today, we have installed renewable solar facilities at 4 of our offices and 2 of our CNG stations, having the installed capacity of 107 kilowatts. Almost all our vehicles used by senior management and pool vehicles run on CNG. Further, we had been switching to CNG from diesel for LCVs used for transportation of CNG from mother station. And currently, 95 out of 167 LCVs are running on CNG and we plan to be completely shifting to CNG within a short span of time after expiry of the existing LPG hiring contracts. The company has been doing lot of words in the area of CSR and was recently awarded Apex India CSR Excellence Award 2021 by Apex India foundation for dedicating to public the MGL Cardiology Ward at Topiwala National Medical College and B.Y.L. Nair Charitable Hospital. With this, [indiscernible] I conclude, and would now like to open the floor for questions. Thank you very much.
[Operator Instructions] Our first question is from the line of Krati Sankhlecha from Credit Suisse.
Sir, CNG prices today are at only 20% discount to Petrol and only 10% discount to diesel and future cost increases will need even more price hikes. So would it be correct to assume that now for a new customer, there is no advantage to shift to CNG or maybe after the price hikes that are going to come, there will be no advantage?
I think a very good question from your side. Many of the listeners will have this question in mind. Good that you asked for that. Let me clarify that 20% discount is probably the minimum discount with respect to petrol vehicle and our CNG vehicle. If you consider [ NSG ] equivalent, I think you have simply taken the price difference and arrived at the discount. When you compare it in mileage form, it goes anywhere between 30% or 30% plus, okay, depending on the type of vehicle you are using because CNG gives better mileage per kiloliter of gas compared to petrol. Okay. Kilo of gas instead of petrol. Secondly, when we look at prices, as MD said in the opening remarks, this is a unprecedented time where we have seen the increase in the all commodity prices, and so is the case with natural gas, okay. So I don't think that one of such instance will put that kind of fear in the mind of consumers. We believe that in the long run, the prices will -- the gap between liquid fuels and CNG will always remain, okay? Also, as you said, the prices are at a very high level. Today, it is at INR 86 per kg in the city of Mumbai. And across India, if you see at various CGDs, similar or even higher prices are being there. So as a CGD entities, we have been making representation to the government on this front. And government is also cognizant about the fact that having put in so much of money in the sector by the CGD companies in last few years. If you look at a number of CNG stations -- in last 2 years, they must have at least tripled from 1,000 stations to almost 3,000 plus stations. Similar is the case with pipeline infrastructure, which has been put in place. And going forward, that kind of CapEx is also going to go in the sector. So first is, this is a temporary phenomena. We may have to create maybe another 6 months to a year's time. However, I think over a longer period of time, once all the commodity prices tapers down, I think the difference between -- CNG prices also will come down. And further, I think the petrol and diesel prices have been -- I think there is a loss which oil marketing companies and other oil companies are making, and it has been kept on hold, which also customer realizes. So we think that there will be a gap, and we will have -- of course, currently, it's a tough time. And as MD said, it's a challenging time for all the commodities, including CNG. Okay.
I would just like to add to what Rajesh has said, is that some additional production, domestic production from HPHT fields like you to come into the market. And CGD companies have taken up very strongly with the government that since we -- the sector carries a higher priority, so some part of the HPHT gas should be allocated and blend it with the existing pool of lithium gas. And this is under serious consideration at the end of the government of India, Ministry of Petroleum. And we are quite hopeful that some additional quantity of HPHT gas, which will have a much -- though it will be higher compared to the APM gas, but it will be much lower than what the long-term contract of the spot, where the spot prices are. So it's going to have a very beneficial effect on the overall coal price. And we are quite confident that part of this gas, which is going to likely to come into production will find its way into the CGD pool.
For the numbers of vehicle which you have converted, during the quarter, Q1 is similar to what has been the trend. We have got almost 19,000 plus vehicles during the quarter added on to CNG, which include [indiscernible] as well as conversion of diesel and other vehicles. And similar trend even continues now.
Okay. First, such a detailed answer. Just one follow-up. In mileage terms, what is the indifference point for the customers, both for petrol as well as diesel?
So if you say a liter of petrol gives you mileage of, let's say, 18 to 20 kilometers per liter, CNG should be giving at least 4 to 5 kilometers extra or even more when it comes to smaller size like Wagon R or something like that, will give an average of 26 kilometers per kg of gas.
25%.
Okay. So that's -- if you look at the pamphlets published by the OEMs, for CNG variant and petrol variant, you will see that difference. So that is where another 10% to 20% benefit comes out of the CNG use.
Understood, sir. But there is a difference in the maintenance, the [ CapEx ] the size of the tank, et cetera. So at what percent, let's say, right now in mileage terms, you said it's a 30%-plus difference. If the difference falls to about 20%, will the customer be indifferent between the 2 variants?
Probably, your concern is right. In the immediate, this could be a concern. But when we see a long-term this, we don't see that as a concern. And it depends on how much is the utilization by an individual of his own vehicle. So somebody who is using his vehicle for larger number of kilometers, he will still be willing to come on to CNG, okay? And it depends on the type of vehicle also. So what we gave a range of saving is a ballpark number, considering what can be the average.
Our next question comes from the line of Sabri Hazarika from Emkay Global.
So I have few questions. Firstly, with respect to this pool prices and your margin scenario. So you gave us the number for April and -- for May and June, but what would be the number for July and August for this pool gas price?
It has gone up by at least $1, $1.5 since then. Yes.
That is for July or that is for August?
July and August, both I'm saying. Roughly $1 was in the month of July. Later on, it has been further increased another $1, $1.50.
Okay. So if I look into this number. So for example, July, if I consider that my -- and the share of like spot in this mix will be something like 20%, 25%, is that right?
It's very difficult to, I think, come up like that. But I would say overall, if industry is having a requirement of around 21, 22 mmscmd of gas, against that, if there is a supply of around 18 to 19 mmscmd, it could be in the range of around 15% or so, okay. However, the price of gas, what is blended, all that is not available with us. But it is our guess that whatever increase has happened, you can see that it is in line with the spot gas today. So I think as of today or maybe in the month of July and August, GAIL is yet to come up with HPHT or any other term gas looking at the current market scenario. So in the long run or in times to come, we'll may be able to bring in the cheaper gas. But currently, the peers based on the -- whatever is the pooled price, it appears to be spot blending, which is being done at the end of GAIL. Yes, mostly.
Okay. So you are saying 15% to 20% of that pooled gas price will be spot LNG.
Yes. What is the mechanism followed every month, the data is taken from all CGD companies and then the requirement is seen. So based on whatever is the sale which is happening, there can be fluctuations in some part of the city where there is tourism is high or there is a festival. So it can become fluctuating. So we can't be very sure how much is the gap -- and depending on the domestic production, I think every month, they are determining and the source through which we are blending, the UBP is declared. It is rated by PPAC. All the data which are given is rated and the price is rated by PPAC before it is declared by GAIL.
See, we understand that GAIL who has been tasked to do this pooling exercise, it is blending part of the volume from its term portfolio, and part of it is they're procuring spot and also blending. And we have read in the media that Gazprom has defaulted on some of its term supplies with GAIL. So it appears that there is a higher percentage of spot going into it. But GAIL balances this portfolio by its availability and the demand -- that demand number that they collect from the customers. And then that's the balancing, and then rise at the pool side, which is submitted to PPAC for getting, which is -- which they do as per the circular issued by the MoPNG. And eventually, our price is notified at the [ beginning ] of the month.
Our view is currently GAIL is not able to put in term gas or HPHT gas because of the current geopolitical condition. The moment the situations slightly favors the industry, I think there will be a substitution of low price gas supplied to spot, which is currently being pulled. So that will help going forward, maybe -- I think very difficult to predict the time, but it should be very soon, that is what our guess is.
Right, sir. And second question is, you mentioned in the last call that your target is to go to FY '20 kind of an EBITDA per SCM level. So in FY '20, your EBITDA per SCM was around INR 10. Now in Q1 FY '23, you are already at around INR 9.1 per SCM EBITDA. Now if I look into the current quarter, say, we are in July and August, so considering the price hikes that you have taken, I think it is quite commendable that you have been able to pass on, unlike others. Are we like fully passing on this increasing pool gas price? Or is there any -- I mean, are we still at around this 9 to 10 range or at least till now in July and August? Or is there any kind of margin pressure considering the factors like rupee and all are also currently somewhat unfavorable?
Let me correct you. I think I never mentioned that we have a target of going up to '19, '20 margin. What I said in the last call was 2021 was a very favorable year for the CGD industry and the gas prices were all time low. That was a high margin. And I said that slowly, we are almost making margin, which is a margin of '19, '20. I was trying to give you a comparison that -- let's not compare 2021. We don't say that it is our target. We will always keep margins and the pricing, keeping in mind how the new vehicles come on to CNG, and we would like always balancing between a number of people switching on to CNG and the growth. So there can be growth in terms of margin of the bottom line as well as in terms of the volume. So we would always like to balance both. Okay. And I think current numbers, you can always see for the Q1. However, with respect to July and August, I think it's a matter of next quarter. Let's wait and then it will be revealed in times to come. Okay.
Okay. Sir, but you are fully passing on, I guess, the price hike, right? Is it safe to assume that or…
I think it's a very simple calculation, which you can also do, what is the increase per SCM and price goes up by $1 or so. Okay. So at times -- we pass on at times, we see how do we balance out. And as in the first question, the gap between liquid fuels and CNG, we have to maintain and we have to put on the table value for the consumers as well. So we will evaluate both the options of how do we maintain that momentum of vehicles coming on to CNG. So when I said my current number of vehicles getting added in this quarter also, a similar number as Q4, okay? So I'm saying if Q3, Q4, Q1, all these 3 quarters were tough, we don't see that, that is going to be the time for next at least 1, 2, 3, 4 quarters. So let's hope for the best. Okay. Too early to predict.
Yes. Just one small question. In Raigarh, you mentioned that the CNG outlets have remained flat Q1 '23, right?
Yes. There was no addition as far as number of CNG stations are concerned in private GA. You're right.
And industrial volumes is how much, sir? Industrial PNG?
Industrial volume, currently, we are at -- industrial and commercial 0.438.
No, I'm talking about this thing, in -- no, only just a breakup between industrial commercial for Q1 FY '23?
Only industrial is roughly 0.262 and rest is commercial.
Our next question is from the line of Varatharajan Sivasankaran from Antique Limited.
Sir, in the case of [indiscernible] Okay. So the CV conversions is in the momentum, do you see a question problem in terms of queuing on the outlets? Are you seeing signs of it building up? Are you preparing for it?
You are asking whether I'm seeing queuing at the outlet?
That's correct. Especially with the CVs volume picking up. CV, commercial vehicle.
CV. Okay. Okay. Commercial vehicles. You were saying commercial good vehicle?
Yes, that's correct. Because the [indiscernible] a lot of outlets will not be in a position to handle that.
Yes, number of CV continues to be more than 2,500 every quarter. And this quarter also, the number is in the similar range, almost 2,700 commercial goods vehicle, including LCV and HCV has been added in this quarter. See, these are, I think, vehicles are getting added at different pockets or different areas within our GAs. So we don't see really queuing up specifically for HCV and this kind of vehicle. In fact, when an HCV comes in, in one field, they consume more gas and it helps out. And we have added so many stations in the GA2, GA3, et cetera. So there could be queueing felt in some of these outlets, but not at all. And they come at different timings as well. So it depends on the time at which they come up to these stations. But yes, you can see at some of the outlets queuing during the day.
And going forward, what we are doing is we are planning to have big stations, which will cater to predominantly LCV section. And also, you will know that there is a difference in the dispenser for a CV versus for a normal car. So we are designating few of the dispensing points only for the CV so that we are in a position to cater to this kind of a segment, CV segment. And accordingly, also, we are going at strategic points like suppose we are talking about Thane Porbandar road, we have specifically created big outlets for such commercial vehicles because that is the key route for going from Gujarat to Maharashtra and vice versa.
Also, we have added last year, 24 new stations and almost similar number, we have upgraded the capacity. That is helping us out in terms of availability of capacity at these stations.
Yes. When you talk about the upgradation, that is my second question. How many stations have been upgraded during the quarter?
During the quarter…
Upgradation?
Yes. 2 and 3.
Two new stations and 3 upgradation [ happened ]. 5.
And when you have taken the MRU, sir?
MRU?
Yes, MRU.
MRU, we have issued 3 LOIs, and we had opened -- we had sought expression of interest. And after that, 3 LOIs have been -- a letter of intent has been issued. Letters of intent have been issued and the parties are in the process of setting on the facilities.
One party has already identified land, and we are in the process of seeking statutory permissions required. However, I think all this actual setup and getting volume out of this session may see another 5, 6 months max.
Our next question is from the line of Saurabh Handa from Citigroup.
Sir, you mentioned that you have -- the CGDs have made a representation to the government, and you spoke about looking for additional HPHT allocation. Is there anything else that you have also requested? I mean, this is in the context of some press reports saying that the oil ministry, it's considering reducing the APM allocation to the power sector and allocating it to CGDs. Is that a proposal that is being seriously considered? And do you think it can be implemented?
Let me tell you, HPHT gas blending by GAIL is already mentioned in the [indiscernible] which MD referred in his opening remarks. Okay. So that will come out as when HPHT comes up for -- the volume comes up for bidding and GAIL will try and get it.
As far as diversion of APM gas from fertilizer or power, no such -- we are saying that please maximize the quantity of APM gas into the CGD pool. But for where it will come, no such specific request has been made to the ministry.
Okay. Sir, the reason I'm asking is because right now, you have pool gas, as we understand the UBP is around $10, $10.5. APM prices potentially go up by $3, $4 in October. So you are staring at your UBP potentially increasing to $13, $14 before HPHT. If it comes also, maybe it comes only in December, Jan. So you could still be staring at a pretty sharp increase in your gas costs in the next couple of months. So I mean, that's where I was coming from. If none of this happens, then what you will have to take like CNG price potentially go to almost INR 100 in that scenario?
I think ministry is cognizant that in some places, CNG prices have even crossed petrol prices and our diesel prices in a very -- there is a differentials between CNG and petrol got squeezed to a very large extent. And we expect that -- we know that there is something in the ministry that they are working on. And we expect that some favorable dispensation for meeting the demands of CGD in terms of pricing as well as availability are being considered within the ministry. And we hope to see that some positive announcements are made in coming days.
Okay. Sure, sir. Sir, my next question was just on your industrial and commercial. Could you tell us, what was your realization in each of these in the quarter, in commercial and industry?
Linked to the alternate fuels, realization as far as industrial and commercial compared to Q4, it was very good realization. Okay. So on an average realization in case of commercial was in the range of almost INR 43 per SCM. I'm sorry. Commercial was very high, INR 80 plus. Other than that, around INR 65 or so and industry also in the similar range of around INR 65 per SCM.
Okay. And that is a pretty significant increase because I think these numbers used to be around the 40s and 50s.
Yes, especially Q1 compared to Q4 has seen a good realization. And we did remove even premium in the month of June, which we were charging earlier in Q4, actually, we reduced it in April, May and then we completely removed also.
Okay. So industrial almost 65 and commercial…
Roughly I'm saying. Yes, yes. Commercial LPG 19 kg prices are high. So it gave a very good realization during the quarter.
Okay. Fair enough, sir. And we can assume that these will be lower this quarter, right? Because LPG prices commercially have come down, oil prices have come down?
Yes, I think there is generally a lag between the alternate fuel prices and the Brent. Let's see how it pans out, yes.
Okay. And sir, one last question, if I may. Is there any update on the OMC commission issue? It's -- I've not heard about it [ anywhere ].
The commission has, as I said, I think, in the last call also, more or less, we have started giving trade margin as per the guidelines issued by ministry. Okay. However, with respect to class of cities, there is some demand or by the OMC, which is few paisa higher than the ministry guidelines. So we are just sorting out that. Subject to that, I think it is fully settled and we have started billing them. So it's a small gap between their interpretation of the ministry guidelines and probably ours. It's [indiscernible] So value as well as in terms of content, it is very small, not very significant. It's very normal.
Our next question is from the line of Maulik Patel from Equirus Securities.
Couple of questions. First is that you had this last year November or December, you showed some medium-term contract of LNG. I think it was around 0.1 mmscmd. And at that time, you were using that for the shortfall of APM and CNG and household volume. When 16th of May onwards, government has announced a CGD pool. So where has this 0.1 mmscmd of volume? You are good -- you are shifting that to entirely to the industrial? Or have you used this the [ take or pay ] contract you probably had within GAIL and you limit the volume?
We have different term contracts, roughly 3 term contracts. Overall, term quantity has been structured in such a manner that at MG2 level or minimum take or pay level. We are able to cater our full industrial and commercial segment. And if anything above that is taken, then we are able to use it for our priority sector if there is a short one. So technically, once 16 -- post the 16th of May, when 100% allocation has been given was at CGD, there is no take or pay or anything of that sort. Full term contract, minimum quantity is getting consumed for industrial and commercial requirement. Okay.
Is it fair to say this 0.44 mmscmd of industrial and commercial is entirely be met with the term LNG and not any -- is there any spot LNG part of that?
Fully met through term contracts. There could be some minor operational requirement, which can be -- which we'll have to keep it ready through spot. As you said, November, December, we had signed one and then in the late March, we signed one Henry Hub based contract. So all the contracts put together, we are able to cater to [ INC ] fully through these term contracts.
And is there any guidance or number of CNG stations you would look to add in this financial year?
Roughly similar numbers. I think we -- our endeavor is to put more stations but minimum 25 new stations and minimum 25 upgradations, that is what -- and we are working on many more proposals at land and other states. Okay. But very difficult to say a number, but I think this is what -- we have budgeted for quite a high number. We should be able to do around 25 new and 25 upgradations in this year.
Just the last question that given that MGL had not been able to add any GA through the PNGRB auctions in the past last couple of rounds. Are the looking for any M&A opportunity? Or are you able to look for any M&A opportunity that may come through you from the existing? There are so many operators, geo operators, which are in the process to sell out the stake.
We have been always open. And yes, that should be the endeavor. But one has to see which area and how it benefits our existing GAs and all that. So we will be open to all kind of opportunities, which is available at good price and which adds volume and value to the business.
Our next question is from the line of Somaiah V with Spark Capital.
Yes, this is Somaiah V. Sir, first question, at today's price of 86. So the July UBP -- the August UBP price of $10 plus fully passed on? And what is the forex is getting factored into this INR 86 today?
See, we have factored in both exchange increase, which was hovering around INR 70, INR 77 to today at INR 79, INR 80 as well as the increase in the UBP or uniform base price. Okay. But I won't be able to bifurcate how much for this because it's a combined price rise which one does for all elements, of course, including exchange rate as well as gas cost and if there are any other like power and fuel and…
Not a problem, sir. Looking for the bifurcation with rather this $10-plus of UBP in August that's getting passed on at 86, that's what I wanted to understand.
Not completely, I would say.
So that said, [indiscernible].
Part of it be a pass-through. Yes. Because see, it's a month-on-month feature. So UBP will keep on changing month-on-month. We would weigh and see how do we balance out the price and the conversion momentum.
I think got it, sir. My second question from HPHT gas that you referred to. So what is the quantum that is expected to come?
Media reports generally pegged it at around 12 million cubic meters. So but it may come in -- progressively, it will come. So the timing and the quantum corresponding to that is not known to us, but the general sense is that the production is likely to come into on stream very soon. But it will be a gradual ramp up. It won't count -- the whole quantity won't come in 1 day.
Got you. So with respect to your -- the CNG and the domestic portfolio. So last quarter, roughly around 2.8 mmscmd was your consumption. So this time, it's around 3 mmscmd. So going by the 2.5% quarter-on-quarter increase, so it kind of suggests that probably 5%, 6% of spot probably had to fill in the gap. Is it the right understanding?
Yes, you are correct. If I had a growth of, let's say, 8%, then I would have to mix beyond 2.5 any market determined gas. It could be -- if any way, there is excess of the term contract or if there is nothing, then I might have to go for spot RLNG as well. However, please note that once you consume that volume, next quarter, you benefit because next quarter, you'll get the full quantity at UBP price. That's a very, very positive about this new mechanism. So you have to only bear for a quarter, and next quarter, you'll get the full benefit of that. It makes sense putting in even if slightly higher cost, yes, and then build up the volume so that you benefit in the longer basis.
Understood, sir. One last question, if I may. So one, you mentioned in terms of you are seeing the station additions looking at '25. So is this a revised outlook? Earlier, you were looking at adding anywhere between 10 to 15 per annum and now this 25 kind of revised number?
No, no. I think last year also, we have achieved similar number, and we continue to plan for similar number because to have a CNG station, there is a lot of groundwork. So we aim at that number. Actual will depend on a lot of local permissions and things like that. However, our aim is to always at least add these many numbers.
Got it, sir. And also the conversions that you mentioned, the 19,000-plus in this quarter. So you said you're seeing a similar trend between Q4 and Q1. So I mean, you are seeing the same trend being OEM and secondary and secondary too, you are seeing that the trend is kind of maintained Q-o-Q or is there the…
No. I think major is OE because of the new OEs coming on in case of commercial goods and also car, there's a lot of comfort in the mind of the consumer or the vehicle user that his warranty will remain. There's a headache on maintenance, best fuel efficiency. So I think major number is coming through OE, be it LCV or private cars.
[Operator Instructions] Next question comes from the line of Dixit Doshi from Whitestone Financial Advisors Private Limited.
My first question is what kind of number addition we are looking for annualized for household?
We are targeting to connect 3 lakh households this financial year. Last year, we achieved 2,62,000. So this year, we have set our target that 3 lakh.
Okay. And lastly, can you give the breakup of our source of gas in terms of what percentage comes from APM? What percentage comes from with uniform gas and any other gas?
See, whatever is my requirement for domestic PNG and CNG in transport sector, it's currently 100% through APM gas at UBP. In case my growth compared to the previous quarter is higher than 2.5% and balance, I have to blend market determined gas or any other term contract where I have quantity left. So it's depending on the demand.
And industrial and commercial is completely spot, right?
Completely term contracts, where also we have a combination of contracts, which is linked -- some contract linked to Brent and part of it is linked to Henry Hub and Reliance domestically produced [ DHT ] gas. Yes.
Next question comes from the line of Kirtan Mehta from Bank of Baroda Capital Markets.
You mentioned that you are trying to sort of balance 2 objectives while sort of maintaining the growth versus margin. So to maintain that balance right, what do you think is the right differential to have with petrol and diesel, which will not prohibit future growth?
I think rather than this, I would answer it this way. Anybody using a car would look at payback in terms of roughly 18 months or so. So depending on his views, he will come on. So somebody who is using a car daily and running a good amount of kilometers, he will be always incentivized at a price or the gap could be lesser for him. Somebody using less would be different. When it comes to commercial good vehicle, probably people look at a time period of, say, 2 years plus as a payback on the investment he is making. And also, currently, the OEMs and Beat car or Beat LCV are coming OE vehicles, so that price differential is also not much. And there is a good amount of incentive for them even without lesser gap between CNG and other fuels. So it's a very, very subjective question. One needs to look at what is his own use and then one can answer. But always, as a company, we have to put a value proposition in the hand of customers. So since we have a one price for all kind of customers, it's very difficult for me to answer that question. But we will always endeavor that. Let's say for example, I make a very good volume growth in a particular quarter. And for that, I have blend about 102.5% RLNG at a very high price. I will still go ahead and blend it because that will help me in the long term. We view this unprecedented price rises are very, very short lived. Maximum for a year or so. So it's all factors put together, we will take the call. That is what I meant when I say we will balance between the pricing and this. So if it comes to bearing little higher cost in a quarter, but it helps me in the subsequent quarters and getting the better allocation for subsequent months, I would always do that at a lower margin as well.
I'll probably reword this question in terms of -- because the way you said it's your one price, which will impact others. There is a -- if -- unless the government is not able to sort of modify the policy in time, and you are faced with a $3 to $4 price increase. And your view is very clear that this is only for 6 to 12 months. So what is the differential that you would maintain by taking a margin hit on your account to not deter the growth which is coming on? So what is that level that you would maintain in the next 6 months period, 6 to 12-month period?
Yes. I would answer your question slightly differently. I think you have seen the quarter 3 of last year so where we might have taken some hit. So at any cost, we won't have a dry out kind of a situation. We would always love to cater to our customers. If it is temporarily making some negative margins as well for the incremental volumes. So we will add to our customers and making the long run, all of them positive. However, your question very specifically with respect to 6 months, it's quite difficult. If you look at the sixth May guideline where government has given 100% assurance, that itself shows their commitment and the journey towards increasing the natural gas basket from 6.5% to 15% by 2030. So we are hopeful that certainly, there will be some solution either in terms of availability of more gas or in terms of pricing, which will be brought out soon by government. What forms and what this, I think, difficult to answer right now. But I think let's cross the bridge as it comes rather than guessing because it is the way you are estimating something, we are also more or less in the same boat. Difficult question to answer very, very pin-pointedly with numbers.
Understood, sir. Second question was about the -- basically the CapEx acceleration that you plan to do. Last year, you were constrained because of the -- we were emerging out of the COVID restrictions. So what is the sort of the CapEx acceleration that you could do it in this year when the impact of COVID restrictions is much lower?
We have already done our CapEx outflow to around INR 150 crores plus in this 3 months, okay. So we will be doing better than this going forward. I would put it anywhere in the range of INR 700 crores, INR 800 crores. Of course, all this depends on availability of land, availability of pipeline digging permissions and other permissions. But we are ready to do that kind of CapEx and that our outlook on CapEx itself shows that we are very positive about the sector. I'm not worried about the temporary margin pressures and all that.
Mr. Kirtan, we request that you return to the question queue for follow-up questions. Next question comes from the line of Nitin Tiwari from Yes Securities.
I just have a few calculating questions. So in terms of trade discount that has been like decided for the oil marketing companies, so can you give us some indication in terms of how much it has gone up by compared to what it used to be at the previous level?
See the new guideline which is given by ministry has given different trade discounts based on the class of cities, okay? So lowest ranges from around 4.6 and the highest goes up to around 5.4 per kg. That's the range.
Understood. And secondly, sir, in terms of CNG sales, so what was our sales volume in terms of kgs, not SCM but kgs in this quarter?
In this quarter, we have sold around 1.8 million kgs.
The next question comes from the line of [ Vidit Trivedi from ULJK Financial Service ].
Congratulation to great set of numbers. It's just an observation. I'd like to know your sense on that. I've been observing that your competitors, especially IGL, they've been expanding rapidly in the nearby state, be it Rajasthan or any interstate. So what's your sense in that? Is -- are we going to do the same thing? Are we going to expand into the nearby states as well?
I think it's a very question, which IGL will be able to answer. Or as we are concerned, currently, we have -- you know what are the yield we have. So within which we can do expansion. I did not get your question. They are doing -- are they doing expansion in the -- other than their authorized -- yes, it's not so, right?
Yes. I mean they -- I've seen they're expanding in state of Rajasthan, they're getting into many cities of Rajasthan. Do we have any plans so that we can go to Gujarat or maybe nearby states of Maharashtra, this is what my question.
So I think the operations or where we go is dependent on the GAs, which are authorized by the regulator in the sector. Okay. And currently, we are authorized in Mumbai and up to Raigarh.
Got your point, sir. And second question is, can you please give any specific guidance on the top line for the coming years because now we can see that as the commodity prices are cooling down, the guidance which you gave last year, I mean they won't sustain any longer. So you can grow at a good percentage from now onwards. Is there anything you would like to add to this?
Typically, I think top line depends on the -- as you are paying on the commodity prices. So if you look at my top line in terms of value, we'll grow because as you see today also when I have to pass on the input gas cost price, my top line has moved. But I think more relevant should be to look at in terms of the volume of sales which we are doing, right? So top line is a resultant figure.
Next question comes from the line of [ Yogesh Patil ] from Centrum.
So question is related to increase in APM gas prices in October 2022. As per the formula, it would be near to double digits from the current level of $6.1 per MMBtu. So what would be the probability that the government can intervene and cap the rights in APM gas prices? Can you provide any color on this side?
I think when you are saying APM, you mean UBPs, uniform base price, correct?
No, sir. I'm mostly talking about the APM, which is coming from the nominated field.
You are referring to whatever is currently 6.14. You are saying that can go more than $10?
Correct. As per the formula.
And the other part where -- what government will do is I think their decision. However, there is a representation being made by CGD as industry, okay. I think it's too early to even say that INR 6.14 will become double digit because yet all the figures are not available. Some of the indices may be -- so let's wait for the actual numbers to come out. Okay. And probably, it may so happen that the blending which happens currently at spot by the time October comes and there is a pollution, that market determined gas could be at a cheaper cost. Overall UBP could be still in a good range and manageable and not much higher compared to what is current level. Of course, but it's anybody's guess what could be the actual UBP.
I mean do you think that government will intervene and cap something on the rising prices, which is in government hand as of now for the nominated field gas production?
I think we can only do representation. It will be in the hand of government. But looking at the past, the way UBP has come and the 100% gas has been assured to the sector. Let's hope for the best.
Okay. Okay. And then the second question is related to what was the cost of a gas for the priority sector during the quarter?
During the quarter, see, as 1.5 months, it was at $6.14 per MMBtu. Later part as said in the opening remarks by MD, roughly $8.05 per MMBtu. And in the first half, we were blending some spot or LNG or term gas available with us, partially to the extent of 12% to 15%.
Okay. So what would be that on a ballpark [indiscernible]? So was it near to $10 or more than $10?
No, it's -- I think in the month of April, May, spot prices were in the range of $26 to $28. So you can calculate a weighted average of around 12% to 15% of spot and rest has APM available at $6.14.
[Operator Instructions] Next question comes from the line of Sanjay Agarwal from Nirmal Bang Equities Private Limited.
Just one question like I'd -- Sir, at current elevated CNG and PNG prices, do we see any demand slowing down?
I think it is too early to predict. It has, just I think, few days back, it has happened. Of course, but right now, we are not seeing any demand going down. I think that one can only see over a longer period of time, how does it impact the momentum of new vehicles coming on to CNG and see that. Very early to, I think, guess what is the trend. Yes. So far, there was no -- as I said, the quarterly numbers are also in line with the previous quarter, okay? Even current, let's say, July conversion also in the similar range. Okay. So…
The last question is from the line of [ Ankur Agarwal ] from PhillipCapital.
Just wanted to check regarding the pricing for C&I customers. Q1 was particularly exceptionally strong. So has that pricing come off during the second quarter? And we have also seen a movement downwards in the plant. So has the your-term contract pricing also moved in the similar quantum, if you can just quantify maybe in percentage terms, what kind of movements are you seeing for the C&I high price realizations?
See, we have a pricing policy of building or pricing linked to alternate fuels and alternate fuel prices have gone up in the current quarter. If you see per tonne of LSHS was hovering around 53,000 in the last quarter, whereas it was at around 71,000 per ton in this quarter. When you look at 19 kg cylinder, it was around INR 1,950 per cylinder. In the current quarter, the average was around INR 2,150. So in line with this price is going up, in fact, our realizations have improved in both industrial and commercial segment.
Okay. That's helpful. Then secondly, on -- I mean there was a continuation to the previous question as well. I mean the term contract pricing would have probably moved downwards now with rent prices also coming off as…
You're saying compared to Q4?
Q1 FY '23?
Q4 with this year, Q1. No. I think it's most of the indexes have gone up slightly, and it must have gone up by around $1.5 to $2.0, Henry Hub beat Brent in contract.
Okay. Sure, sir. Then second question was…
[indiscernible] the term contract was lower compared to the realization on the sales price side. That has added to the good margins in case of industrial and commercial.
This was for the first quarter?
Yes, for this quarter compared to Q4 last year.
Okay. Okay. That's helpful, sir. Then second question was that you mentioned you have -- as a industry, you have made representation to the ministry regarding the pricing of gas. As a industry, is there an agreement where you see pricing -- I mean, whether industry would be comfortable with that particular cost of gas. Right now, we are already seeing UBP is at more than $10 per MMBtu. So is there -- as an industry, I mean, do you see $15 as a limit or let's say, $13, $14 as a limit where you see the growth prospects of the CGD industry would not be hurt. What is the industry thinking behind when you are making representation to the ministry?
I think comparatively, a CGD like NGL or IGL, who are old in the business or GGCL for that matter, we have made a substantial amount of investment. But you look at the new players who have come in the sector, they have made in recent years, good amount of investment, and they have to yet meet the MWP target and make much more investment. So for them, it is a bigger concern. So the industry as a whole is, one, is putting so much of CapEx and the kind of investment this industry requires. Certainly, high prices is a matter of concern. So that has been represented to the industry to make this sector more viable and -- but based on the conditions on which the new entrants and the CGD bidding rounds have been concluded, there should be support from government. Otherwise, how will people achieve their minimum work program and putting so much of money.
As there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to Global Sen for closing comments.
Yes, sorry. I just wanted to say thank you to everyone. Thank you to the management, especially for taking the time to answer the questions in this many details, sir, really appreciate it. Thank you to all the participants as well for making the time to attend this call. Thank you all. You can all dial off now. Thank you very much. Have a good evening.
Thank you so much, Probal. Thank you.
Thank you. Thank you.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.