GAIL (India) Limited

morning ladies and gentlemen on behalf of antique stockbroking i welcome everyone to gale india limited's annual investor and analyst meet i hope everyone is healthy and doing well today we have the pleasure of having with us the senior management team from gain to discuss the business development and earnings of the year gone by we shall start the session with management commentary which shall be followed by q a The presentation with respect to today's event shall be uploaded on GAIL's website. I will now hand over the call to Mr. Ashish Maheshwari, Head of Equity Anti-Spot Broking, to make opening comments and introduce the matter.

Over to you, sir. Good morning, ladies and gentlemen. It's a pleasure to have all of you here with us this morning. It was the worst of times and also it was the best of times. The current environment only makes me remember this quote by Dickens. However, it always prods the pioneer in us towards what is increasingly called as the new normal. Gale, as a matter of fact, has been a pioneer in developing the natural gas infrastructure, the natural gas market in India, and also the new normal of holding annual investor meet. Today, we have the pleasure and the honor of having with us the very people who are at the helm of this dynamic organization. Let me, please allow me to introduce. Manoj Jain, CMD of Gale. A mechanical engineer and a thorough business leader with over 34 years of experience with Gale India Limited. In the areas of marketing, business development, projects and operations management. P.P.K. Gupta, Director of Human Resources. A mechanical engineer again, with 46 years of which and diverse experience across the oil and gas sector. Particularly in project execution along with operations, maintenance of natural gas and pipelines, gas processing units, city gas distributions, besides of course human resources. Sri A. K. Tiwari, Director of Finance, a cost accountant by profession, who has a rich experience over 37 years in the areas of proper finance, taxation, treasury and capital budgeting. He has also played a defining role in implementation of the under construction Urja Ganga pipeline. Mr. Tiwari is also actively involved in drafting and implementations of AL Strategy 2030, a route to diversification. Needless to say, Mr. Tiwari also has a major role in various digitization initiatives being taken by the company. Ladies and gentlemen, we are also joined by Mr. E.S. Ranganathan, who will be taking over as marketing, who will be heading the marketing initiatives going ahead for GAIL. With this, I hand over the floor to the management for their opening remarks.

Good morning, everyone. As introduced by the team of antique Mr. Ashish and Nitin, I would just like to share again with you that now we are joined by Mr. Ranganathan. He is an instrumentation engineer and he has been in the gale since beginning and he will be joining upon superannuation of Mr. Gajen Singh on 1st of July and he will be with us as director of marketing. And as already introduced Mr. Gupta and Mr. Tiwari, are also there in our company. So, with this first I will request that our director of finance will give a brief of financial highlights and major events and then I will touch upon the some of the areas and then we can open for questions and answers.

Thank you sir, thank you very much. Respected chairman, director Achhar, designated director of marketing ES Ranganathanji, OIC HODs from various sites and my dear friends from investor and analyst community connected through Webex. A very good morning to everybody and welcome to Gains Earning Card to Share FY19-20 results. I hope you and your families are keeping safe amid this pandemic. I would like to thank you all for taking your precious time and showing keen interest in the result and performance outlook of K. Traditionally, we have ensured to meet you personally at Mumbai for the analyst and investors meet immediately after the annual and quarterly result. However, due to COVID-19 pandemics and subsequent safeguards being taken by the government and the company, we have chosen to conduct the meeting virtually instead of traditional meeting at Mumbai. We have already declared the annual and Q4 FY20 research study and the same is also available on Gale website. I am sure you would have gone through the same. We have also hosted the investors presentation on our website and we hope that it would be helpful to you to get some insight into industry outlook and performance of the company. The physical performance of the company was steady during FY20. Gas marketing stood at 96.26 MMSMD. The gas transmission stood at 108.37 MMSMD with capacity utilization of 53%. Polymer production stood at 788 TMT with capacity utilization of 97%. The domestic market share of oil in polymer is around 18% including the marketing of PCPL. The LHC production is stood at 1266 TMT with a capacity utilization of 89%. The LPG transmission is stood at 3909 TMT with capacity utilization of around more than 100% is around 102%. I am happy to inform you that during FY20 total 120 cargos, including 90 cargos from US, have been procured, out of which 46 cargos were sold overseas, and the remaining cargos were brought to India, which is 74 cargos. I am happy to inform that during this pandemic, Yale has taken various digital initiatives, including e-measurement, which helps to meet the payment commitments towards its suppliers and contractors, including MSMEs, during the lockdown. Now I would like to give you major financial highlights. Gale achieved roster number of 71,730 crores against UP 74,808 crores in FY19. There is a decrease of 4% mainly due to lower price of petrochemicals, LSC, natural gas. The petrochemical price reduced by Rs. 16,000 per metric ton, LSC by Rs. 4,000 per metric ton and NG by around Rs. 0.25 per mm2g. PVT stood at Rs. 7,943 crores in FY20. As against Rs. 9,085 crores in FY19, there is a decrease of 30% mainly due to lower prices of petrochemicals, LSC and gas marketing spread. Gale-resistant PET of Rs. 6,621 crores in FY20, increase of 10% from previous year of Rs. 6,026 crores due to adoption of lower corporate income tax in the current year. We have opted Vivaas Seviswas scheme under which 44 income tax cases of 21 financial years starting from 1996-97 to 2006-07 has been settled. I would like to inform you that during the last 15 days the Department has settled around 5 year cases of around 25 crores and we have got the refund of that. We have made the provision of 918 crores under the scheme resulting into reduction in the contingent liability of Rs. 1,900 crores. The net worth of the company stood at Rs. 41,854 crores and capital implied rupees 2,431 crores. The debt equity ratio of the company is standard 0.09 times, which indicates that the company's ability to leverage its balance sheet to meet its future capital. On consolidated basis, Gail's turnover is due at rupees 72,414 crores, as against 75,912 crores in FY19. The PVT increased to Rs. 10,429 crores in FY20 as against Rs. 9,831 crores in FY20. PAG increased to Rs. 9,422 crores in FY20 in comparison to Rs. 6,546 crores in FY90. The Gales JV subsidiary have performed reasonably well The group companies mainly IGL, MGL, GLGAS, PLL, BCPL added to the group companies consolidated profits. This is to further inform that the government has approved the transfer of administrative control of Crumb Food Crackers and Polymers Limited from Department of Chemicals and Petrochemicals to the Ministry of Petroleum and Natural Gas and also approved a feedstock subsidy of 4,600 crores for 15 years. The accounting of subsidy of Rs. 2,350 crores resulted in increased consolidated PACT. I am happy to inform you that DCQL plant is operating at its full capacity. Against the authorized capital of Rs. 5,000 crores, the paired-up capital of GAIC is Rs. 4,510 crores, of which the Government of India holds 51.76% and the Foreign Portfolio Investor holds 16.2% share in the company besides other shareholders. Yale declared the total dividend of Rs 6.4 per share amounting to Rs 2,886 crore for the financial year 2019-20 which has already been paid in the month of February 20. Yale has been receiving capital grant for its Chakdishpur-Haldia-Bukharo-Dhamra pipeline project regularly from the government Until then, the capital grant of Rs. 3,609 crores has been received out of the total approved grant of Rs. 5,176 crores. I am happy to inform you that the GIL received nil comment for the year 18-19 from CAGE for the 10th consecutive year in a row. Six cities awarded directly to GAIL i.e. Jamshedpur, Ranchi, Ganeshwar, Qatar, Varanasi and Patna have all become operational and 41 CNG stations have been completed so far. During the year, GAIL has taken a loan of Rs. 4,350 crores mainly to meet its pipeline tapas and the loan outstanding as on debt is Rs. 5,257 crores. I am happy to inform announced that the Gail has retained domestic rating of AAA and international rating of BAA3 negative outlook by Modi's and BBB minus negative outlook by Fitch is equivalent to India's sovereign rating. Management is taking all possible efforts to maintain improved profitability while continuing to maintain its operations safe and sustainable. We have launched the company-wide initiative Cost Efficiency to Boost the Margin, targeting to optimize cost and to improve the operational efficiency. I would like to touch upon the KL Gas performance. The turnover and profitability of KL Gas Limited has improved significantly and during the year FY20 achieved a turnover of Rs. 5,144 crores. and PVT of Rs. 203 crores. The patch almost doubled to Rs. 156 crores from Rs. 81 crores in comparison to FY19. KLS along with JV added 81 new CNG stations and more than 1,60,000 new TPNG connections have been connected. This year deal did capex of Rs. 6,100 crores of which major share has been spent on various pipelines. In the next two years, we estimate to have a capex of around Rs. 5,000 crores and Rs. 9,000 crores respectively, mainly on pipeline and also investment in equity, PADCAM and CTD. Now I would like to give you the brief outlook In addition, I would like to give you a brief outlook of the industry. Share of natural gas as you know in India, energy mix is 6.2% as against the world average of 24%. The government of India has increased the shares of natural gas to 15% by 2030 and has taken various initiatives. The initiatives which have been taken by the government of India are completion of the national gas grid north-east gas grid, building of LNG input facilities, marketing and pricing freedom, development of CGT network, promoting bio-CNG, gas trading exchange, etc. Further in the union, budget 2020, the finance minister had announced for laying off national gas grid by expanding the pipeline length to 27,000 km. The total pipeline infrastructure in the country is around 17,500 km i.e. 12,005 km by GAIL and around 5,000 km by other entities. Aligning with the government objective, GAIL and its JVs is building pipeline for around 8,400 kilometers and around 8,600 kilometers further is being undertaken by other entities. The capex of Urza Ganga project achieved till date is 9,600 crores and the commitment we have made to around 13,500 crores. Major new pipeline project undertaken by KL and KLJBs are Sirkakulam Angul pipeline 700 km with investment of 3000 crores with a completion period of 36 months. Mumbai Jasugura pipeline 1705 km investment of 7800 crores completion period 36 months. Dhamra Haldea revision in Paradeep spur line 240 km investment of 1,200 crores, completion period 2 years, gas pipeline infrastructure in North East for over 1,650 km at project cost of around 9,300 crores. Further, in order to develop the CGD network, during the year, Gale along with subsidiary JV has added over 300 new CNG stations and over 9.5 lakhs domestic team connections. As you know that the GAIL has suggested to P&GRB for determination of the unified tariff for all the pipeline under the mechanism a single tariff would be applicable for all the customers and could provide level playing field and enable the reach of the gas to far-flung areas of the country. P&GRB is actively considering the case proposal. As you are aware that The DOT has raised demand of Rs. 1.83 lakh crore. The Supreme Court has given the direction to DOT for withdrawal of the claim. They took various initiatives on sustainability and environment developments and this was the brief from my side on the financial results as well as the other points. I once again thank all the participants for their seniority and time. Now I request our chairman to share his views and provide you an insight into the future outlook of the company. Thank you, thank you very much.

Thank you, Alisa. Good morning again everyone. You heard that finance broadly has covered all the financial highlights and the activities Gary's undertaking. I would like to supplement on two accounts. One is about the impact of COVID on the company's performance and how we see it looking forward. Primarily in the April there was some impact and our gas sales reduced up to 30% but after the opening started from 20th of April in a graded manner our demand is also improving and almost we have reached to the near normal demand except for CNG. The CNG is related to the vehicles movement and as we all know that there are restrictions on vehicles movement still at many of the places and people are preferring to remain indoors. So, the demand of CNG sector is the range of 50 percent. However, the total demand has reached more than 90 percent now and We expect that in next one to two months time, the CNG demand will also be very close to normal. So from the gas business perspective, we expect that our business in around two months time will lead towards normality. On the pep chem side, we had to shut down our plant for around three weeks in the month of April due to the logistic movement and the demand reduction. But since then the demand has picked up and now the plant is running at 30% growth. The LPG plants and liquid hydrocarbon plants and other operations, they were more or less normal even during that April month also because they have come under the same category of essential services and we have been able to maintain all our services regularly and the operations were normal in the respect of liquid hydrocarbon plants. including LPG production. So on operations aspect now we see a brighter days ahead that yes our normalcy will soon return maybe in two months time will be almost completely normal including CNG also that is our expectation. If we look from the demand for the new customers definitely there is some impact on this but we feel that some of our consumers who are ready to take gas are in ready state even by the time this COVID started. So, once our pipelines especially in south and eastern India start connecting those consumers, we see some of the demand to be readily available for the pipeline business. So, from that aspect also As of now, we don't have significant worries, but yes, for small industries, there has been some setback and then they are coming back again. So, maybe some delay might be there, but we expect them to come back once the pipeline reaches and the benefit of low price gas is available to them. On account of project's progress, yes, there was some significant impact during the month of April and then later we started our and now work on all the running projects has started though it is not in full swing but we have restored to a large extent the progress which was before the COVID but there are some restrictions of working because of social distancing and the local containment area related issues. So that progress has not come up to the full extent. But slowly slowly it is picking up and we feel that with this picking up taking place maybe in few months again the project also will reach to its normal speed and we will try to pick up for the last time also so that our projects remain in time. Specifically on the Kochi-Mangalore pipeline section, That section work has fully started and we are almost in the last stage of completing that section and we expect that by July the gas will reach to Mangalore and where the industries are already waiting for this gas to reach and the gas supply will start in July. On the Urdhya, Pradhan Mantri Urdhya Ganga, construction work has started on all fronts. And barring the some areas of West Bengal and some forest issues, we are expecting that the work is progressing as per our schedule and we will be able to commission a large portion by December 20 and remaining some portion may be by March 21. For the Barani Guwahati section also our progress has started and as of now we feel that we will be able to maintain the progress and make up for the lost time and our original figure of December 21 we will be able to maintain. Apart from this on the city gas aspects also from Gale CGD as well as Gale gas geographical area the work has been started. almost all the areas, but definitely because of this impact and also monsoon which is coming, the progress in next 2-3 months will not be that significant or that fast speed. But after the monsoon is over, we feel that all the works and progress on all the CND and PND works will be in full swing. And as you all know that Gale and its subsidiary have been the major player in domestic connections as well as CNG stations. Last year, more than 90% of total connections were made by Gale and its devies. And on the CNG station also, more than 60 to 65% CNG stations were made by Gale and its devies. So, we continue to remain a large player in this area and we plan to expand our footprints into CDD areas on a on a fast basis also. Apart from this we are happy to share that the Konkan LNG Limited at Dabhol which was earlier after de-merger facing some restructuring issues now has been largely we have taken the equity from lenders and Konkan LNG has repaid the loan of lenders and we have supported them in repaying their loan and now Konkan LNG has become a subsidiary of GAIL with 69% share of gale and they have also awarded the breakwater job. This was a long time thing to massage L and D and we expect that in around two years time from now by August 22 we should be able to complete the breakwater works and with that the terminal will be working at its full capacity of 5 million tons and before that also we expect that in the during the summer of 2022 Some cargo he may be able to unload depending on the progress even with the partial completion of freight body. These are all the about the operations and projects. Regarding this sustainability development we have been included FTSE 4 good index series for third year in a row which is showing the commitment of GAL on the sustainability front. And also on CSR front, we have been doing a bit on health, sanitation, education and skill development. And last year also, we have fulfilled all our commitments. And total spent on the CSR project was 125 crores, which was more than 2% of our profits of the last three years. This year on 2nd of April, we have contributed to this 50 crore for PMJS fund. towards this COVID-19 and we expect to remain engaged with the government as well as the various agencies relating to COVID and other aspects with respect to health and nutrition in line with the government's objective of teaching to the poor and marginalized people on the CSR front. Apart from this, from the project front, As you heard from our director of finance, we have received an authorization from Mumbai, Nagpur, Jharsuguda pipeline from PNDRB. And we have already last year got Sirka, Kunu, Angul and Gamra, Aldia sections. These three pipeline works, this year we expect to take a start those works on ground. And we are also working towards procurement of time pack, major ground lead items this year. So that our commitment towards this completion of National Gallaudet remains intact. So these are my initial thoughts and with this we are open to your questions and answers and as we come across your questions we will present through highlights on our various information which you would like to learn. Thank you very much.

Thank you. Thank you.

Can we begin with the question and answer session?

Yeah, please.

Before we start the question and answer session, I would want to remind all the participants that participants are in mute. You have to use your raise hand option that you have indicated over there. Once you have raised your hand, I will unmute you and you can then ask your question. You will have to announce your name and your name of your company before you ask the question. So, sir I am beginning the question and answer session. First question is from the line of Nafisa Gupta. I'm unmuting you, Nafisa. Please go ahead.

Thank you. Good morning, sir. Sir, my question is mostly on empty trading. So we've seen good margins in this quarter. I just wanted to understand how many of the cargoes did we buy and how many of those did we sell abroad? And if you could give some idea on the pricing of these cargoes also.

If I understood your question correctly, you are talking about this quarter?

Yes, from this quarter.

In this quarter, primarily we have been taking the allocated cargoes and one or two cargoes we have issued due depending on the demand and as such we have been able to ... ... ... ... ... ... ... ... ...

my question is that because all prices are so low and given that domestic demand was also not very high I just wanted to understand like the margins seem pretty high so my question is is more on the pricing uh uh that on what is there is uh would be able to tell you if you could give some idea on that uh And so my second question is on the speculations around the company plate. Actually we don't expect this to be a split.

It is a 100% substituting model. We are expecting it to be. Understand there is a proposal in the government which is being considered but if the proposal is agreed it will be only speculative to give timelines.

Also, sir, just a related question. So we recently had the first gas exchange in India which was launched and Gale tied up with the IGX. Just wanted to understand the impact that will have on Gale's business in terms of trading particularly. Would you see more spots coming into India after that?

What we feel that normally any exchange when it comes to any country, it leads to a more demand creation from the gas perspective because more consumers get attracted for short-term requirements where they can switch over from alternate fuel to gas and gas to alternate fuel depending on the pricing issues. And it also increases and enhances the transparency and also a fair price mechanism So all those advantages over a period of time definitely will come but it is too early because it is just started and what we feel that primarily regulator will have to make you guidelines to operate the exchange in the country and once those guidelines are in place then probably it will get a push towards this exchange working. As far as Gail is concerned, we have both long term as well as spot IRFs. So, we feel being a large player, we should get advantage of it.

Sure sir, thanks. That is all from me.

The next question is from the line of Mr. Ashwari Agarwal. Please go ahead.

Thank you. My question is how to see this 5.8 million ton US LNG volume, which will be coming to India in this year and the next year as per our long-term contract. So my working say is that the procurement cost should be $6 per MMBTU+. So how we will be disposing of such a huge volume, given the spot prices are so low, And even if we go with say 10, 11% of the fruit price right now, just say 4.2, $4.4, uh, I see a potential, a big potential loss. So here you can share your view. That will be very helpful.

Yeah. You said about the word market, definitely the spot prices are low. Definitely crude has taken a dip and now is coming back again. Uh, But out of our cargoes, maybe US cargo around 90, which we expect this year, we have almost tied up around 90% or 88 or 90% cargoes which are already tied up through some either consumers or maybe on international market with the you can think about that, okay, with a hedging also we have done for some of the prices. So, some of these challenges which we are talking already taken care by us, but definitely it is not a cakewalk, we agree, and there are challenges, but we are here only to convert those challenges into opportunities and also to minimize the or mitigate the impact of those challenges. We feel that things are little

in terms of volume and the pricing. So I understand 90% of the volume is already tied up. If you can share some insights on pricing that will be really helpful.

As I touched upon in the first question also that most of our volumes are on long term basis and those are tied up based on some indices. So based on that indices we may have margin of plus or minus margins. And some of the values, yes, which are open, we also keep deliberately open for occasional demands which come. So on those, call can be taken at that point of time when the schedules come.

Last question, how do you see FY22? So FY21, let us assume that we are doing very well in terms of volume and pricing.

I never said we are doing very well, but we expect to do well.

In the interest of time I would request all participants to restrict their questions to two per participant. Next question is from the line of Amit Rustagi.

Please go ahead. Sir, good morning. Sir, could you help us to understand that there were news flows on cancellation of few US cargos. So, is there any penalty on us for not picking up or what are the contractual terms over there? That is my first question.

We have not paid any penalty on any of the cargo. Largely, we have rescheduled the cargos only and as such we are not facing any breach of contracts or anything

Okay. And so, my second question is on the capex plan for FY21 and 22. If you can give us the spend and what is the status of our petrochemical expansion project in Maharashtra?

21, we expect the total capex in the range of 4000 crore as director of finance has told. 22, we have got this around another 4000 to 5000 crore pipelines and CTD. And maybe on the Maharashtra plant, depending on, because in Mumbai still the situation is not that normal. So we are just waiting for the situation to ease out because we have to work with the court authorities for this Maharashtra plant. So as of now our plan is for major capex on this Maharashtra plant next year. But we will have to see how the things take shape in Mumbai and Maharashtra.

Thank you sir.

Thank you Amit. Next question is from the line of Amit Shah. Please go ahead.

Amit. Hi sir. Thank you for the opportunity. Just real quickly I wanted to check with you on the gas trading again and sorry to come back to the same same question. But I just wanted to see the consistency in Should we assume that on a quarterly basis now the volatility will be much lower considering your hedge or contracted large part of the off day and how are you seeing is should we expect Q1 to be similar to what Q4 FY20 was? Thank you.

We are happy that you raised this question. There is no question of meaning any awkward thing because this is a market and it keeps on changing and definitely we are here to take care of it. In Q1, there is going to be definitely something different from Q4 because of the overall situation. It cannot be exactly similar to what before COVID was. Apart from this, we were expecting in Q1 at least 2-3 major plants were to be connected to our pipelines as well as one of the major fertilizer plants was to get commissioned during this Q1. All this unfortunately could not be done in Q1 and because of this COVID everywhere our pipelines also for two months could not progress as we thought of and also one of the plant which are the pipeline was linked but the plant's commissioning got delayed because of COVID. These three were major consumers which we were expecting on Q1 so on that account yes this quarter will be slightly lower than Q1.

This is from the gas trading perspective, right? Yeah. And also going forward, if you see that spot LNG is so much cheaper, right? Do you see an instance where you might be saddled with the expensive LNG and that way you are forced to divert that expensive LNG to your company? business or it will always be that these contracts are very iron clad and whoever has guaranteed uptake will take uptake. There is no going back on that. That's my last question. Thank you.

It is that contracts are for honoring them and we are honoring, we expect others also to honor and so far we have not paid any.

Okay, thank you.

Thank you, Amit. Next question is from the line of Nathin Parekh. Nathin, please go ahead.

Thank you, Nitin. Sir, just two questions. The first is on the pet chem business. The EBITDA increased sharply on a two-on-two basis. This is this quarter. Costs came down. What drew this lower cost? Was it just very cheap gas? And is this sustainable into FY21?

There are three factors. One you rightly said the price of gas is reduced. Second is the volume because we are running at better capacity utilization. And third is that we have been able to run consistently and on a cost optimized operations have been undertaken. During the last year you might have seen after the month of last April did not have any major shutdown or any unscheduled trip or which I mean disrupts the operations and also increases the wastages. So we have been able to maintain all those things and operationally the efficiency also last year was the best ever efficiency we have seen in PATCAM since its beginning.

Thank you, sir. So my second question is going back to the gas sales. Has any of the contracts in terms of the cargoes that you have booked from overseas, has any of your either hedge trust counterparties or customers declared force majeure in the first quarter? And if they do declare a force majeure in FY21, what would happen to any liability that would arise? And connected to this, given that the gas exchange has come up Will GAIL now in FY21 be selling the imported cargos on the exchange or will it still be undertaking bilateral sales with the customers?

Your last question first is we will do all these ways in which business is done both exchange as well as bilateral because we have such a large pair that exchange will not cater to such large volumes in any case hence It is in the initial stage only. And bilateral deals definitely for supplier volumes are required. We have been doing. We will keep on doing. And we have also been putting out our own weights also. So, this matter also will be continuously taken. Regarding force pressure, no major supplier has issued any force pressure to us.

In terms of your customer, sir, the domestic markets that we have.

And none of your customers as well.

Yes, some of the customers have done, but we have been also able to pass on to our domestic suppliers. And primarily it is ONGC whose wells were reduced because of C&G demand because for a longer period of time subdued. Otherwise, other than that, there is no significant difference.

So, just to confirm, sir, on the imported cargos, there has been no force majeure that you have faced from any of the customers and you don't expect this to happen in F21?

We have not any significant force majeure we have faced from the consumers in India and going forward, we feel that situation should improve, but if suppose somebody raises, we see it as it comes.

Thank you very much, sir.

Next question is from the line of Aditya Mundra.

Yeah, thank you for the opportunity. Sir, if you can throw some light on the, you know, exact pros and cons of the falling LNG prices on both transmission and marketing business for us. How does it affect our business? Transmission? From your point of view. Yeah.

Transmission is going to grow on two accounts. One is because we are increasing our infrastructure presence. So that will definitely lead to more and more consumers getting connected and opting for gas. Secondly, if the gas prices are low, definitely it helps in creation or improving the demand. There is no question about that. On the marketing front also, um, By and large, low prices are good for the country and also for the large demand and creation for the guests. So, from that aspect, it is a I am going to be a good senator.

However, as you all know, we have got some tie-ups which are leading into some kind of formula. We do not Yes sir. Yes sir.

Thank you.

Thank you. Before we take the next question or request to participants if their questions are answered please deactivate your raise hand symbol. Next question is from the line of Bhavin Gandhi. Bhavin please go ahead. Hey Yogi. I suppose there is some line. We will take the next question from the line of please go ahead.

Thank you for the opportunity. Good morning, sir. I had two questions. One was, you know, there was quite a bit of strength seen in the LPG business for this quarter. And as you mentioned, even operations on the production side did not really get hampered because of the essential services tag. Now, I just wanted to understand, sir, both in terms of volumes and what kind of trends you are seeing in pricing. in first quarter and what kind of guidance can you give at least for volumes for the full year? That's my first question.

Pricing wise I think June it has again picked up. There was low price in the month of April and May and now June again it has picked up and going forward we feel that the prices are going to be little firm only and on the volume part it should be similar to last year because all capacities are restricted because of which this is more or less near to the quality of gas which is available and near to that whatever is extractable we extract as an NPD. So, volumes are going to be near to last year's. Okay.

And secondly, sir, you mentioned about the small disruptions as far as transmission and PETCHEM is concerned. So barring the first, the third, where obviously there are a whole lot of issues that you have to deal with, can one assume that at least nine months it will be near normal operations and therefore for both PETCHEM utilization of 100% and for transmission, the growth of, you know, three to four MMSCMD? Can we assume for the nine-month period I'm saying, barring Q1?

on pad cam yes we are near to 100 percent uh for the remaining nine months it will remain 100 percent uh for the transmission part as i said the cng business is not yet picked up in the range of 50 percent only so maybe another two months more it will take we expect that to come to near numbers and an increase of 3 to 5 on SMD may be little higher under the present situation but more clarity may come by the month of 3. End of Q2 only we will be able to see how it pans out and how pandemic pans out in next 2-3 months.

Right. Sir, just one last bit on a follow-up. So current transmission volumes are what, around 90 mm SMD right now? Is that a level? You said 20% lower or thereabouts or?

It is around 10% lower as of now. So, maybe it is a rate of 95 to 100.

95 to 100. Alright, sir. I will come back if I have more questions. Thank you so much.

Thank you, Prabhu. As a reminder to participants, once again, please deactivate your raise hand symbol if your questions are asked. Next question is from the line of Mr. Vinod Bansal. Vinod, please go ahead.

Hi, am I audible? Yes, you are. Hi, sir, I have questions on the gas marketing business as well. You said, could you just repeat for CY20 or FY21 out of the 5.8 million tons, how much has been placed globally to begin with? How much has been? Placed outside India.

I think it is roughly, if you look from this aspect, it is roughly

No, he is asking for current year.

I think it should be in the same range out of the 90, it should be around 40 or so maybe outside India. 37, okay. I said number is 37 US cargo that's for outside India.

Okay. This is for CY20.

This is FY21.

FY21. And if I may, out of these 37 cargoes, you do hedge a bit as well. How many have been hedged to ensure that they do not have any losses at all?

It won't be proper to give the exact numbers, but a large portion of it has been hedged.

I understand, sir. A broad range would do for us. A range in numbers would do for us. 70 to 80 percent, 50 to 60 percent, that kind of range will do for us.

May be around 70% in the range may be that is hedged.

70% of this 37 cargoes are hedged. Alright, that is great.

Total, I am talking of total cargoes which are there in the US whether it is coming to India or this around 70% have been hedged either through hedging mechanism or through a consumer director.

Okay. So out of total cargoes 37 have been placed outside for fiscal 21 and out of total cargoes 70% have been hedged or directly sold with no pricing open either India or outside. Is that the right understanding?

Pricing open, yes.

It is not there. It's not there. Would you have placed something for fiscal 22 also or that's too far in the future?

So, we have also some of the tied up as well as some of the hedging also done. But those numbers are not as large as 21 because we keep on doing as and when we find suitable approaches.

Absolutely, I understand that. Can you share numbers on that also no matter how small and how they will evolve?

I don't have readymade available. Maybe later we can share.

For 22, I don't have readymade. Okay. But it will be less than half of FY21 directionally speaking?

It will be difficult to give any guess because I don't know the number.

We can give you a letter, we can share. You can ask separately, we will give you.

I will come back separately, sir. If I may just stretch this question further on domestic, whatever you plan to bring to India, I think there were plans to sell to these upcoming fertilizer plants. The one that started or was supposed to start in 1Q21 got delayed. So, what is the status of these plants now in terms of your expectation of the new timelines for them to commission?

As I told you, South India, we will reach Bangalore by July 8th. So there the plants will be expected from August onward they should start taking the gas. And in the eastern India one of the plant is ready so maybe another 3 to 4 months time we should be able to start supply there. And the three of the main Urja Ganga they were anyway tied up for the end of the funding.

So they were not scheduled this year. So they were tied up for end of FY22, but now with this disruption due to COVID, the complete stoppage for two months and now the slowness in work, I try to presume they will not come in at the last timeline. Are you working with FY23 and FY24?

We feel that it is a long time and maybe... Situation may get cleared in 3-4 months more time depending on how pandemic pans out. Otherwise, we feel that making up for 2-3 months may not be difficult for those funds because they were running on time as of now before the pandemic. Right.

Just to tie this all together, so you had big plans to bring energy to India and these plants were the key customers. Whenever these come, what is your target sales volume placement overseas and India for this 5.8 million tons when these plants are ready out of this 5.8 million?

Ultimately, when we tied up our target was to bring entire volume to India, barring one or two small volumes here and there. But because of the plants originals including also got either deferred or delayed, some of the volumes we were selling as a part of mitigation plant to the international market. But largely we were playing out for selling into India.

Yeah, but these plants will only consume what 2.5, 2.6 million tons all put together per annum.

Yeah, that much is the only volume which we are selling in international market as of now.

But I presume some of the existing domestic contracts might also expire in a year or two. There might be some medium-term contracts that you'll have to replace again.

But then we are here to actually do our marketing also.

okay fair enough also uh so if i may slip one more question in general your opex this year has been lower both employee cost and as well as the other opex items last three quarters in the row any any uh comment on that and what's going on employee cost we have got some provisions for this performance related pay which provision has got reduced because of gravity governments guidelines and all those things

Otherwise it is similar number is there and so provisions were reduced and on account of other OPEX largely because the raw material cost is reduced. So, those OPEX has also reduced. And this will be in Pata we have some operational efficiencies also.

Right. Should we assume this number of 1500 crores employee cost of FI 20 and 4600 crores other OPEX that is a sustainable number FI 21?

We feel and we are working on further cost optimization because we feel in these times it is good to be better and efficient.

Just to add, as I have told in my opening remarks that we are having the cost optimization measures at different levels to boost the margin. That is also one of the initiatives we are taking. So that has given the result and will give further results.

Thank you. And just one last small one. You said 70% of the total volumes have been hedged or placed. Are they uniformly 70% hedged across four quarters of FY21 or more in the first two quarters, less in the last two quarters of FY21? I don't have the exact quarter-wise details. But broad understanding. Is it like 100% of the first half and 50% of second half? More like that?

Correct. At this moment probably I do not have data, so it will be difficult, but I we can share later. You can approve by the letters.

Fine. Thanks a lot sir. Thank you. Thank you Vinod. Yeah. In the interest of time, as a reminder, please restrict your questions to two per participant. There are other participants also waiting in the queue. And another reminder, please deactivate your raise hand symbol if your question has been answered. Next question is from the line of Mr. Raj Gandhi. Raj, please go ahead.

Hi, thanks a lot for the opportunity. Hello, am I audible? Yes, Raj, you are audible. Thanks a lot for the opportunity. Did I hear you correct? You mentioned 2.21 trading profit will only be slightly lower than 2.24. Sir, while mentioning about, you know, on the marketing, you mentioned Q1 2021, which is the June quarter trading margin or EBITDA, which would only be like 600 crores this quarter. You mentioned Q1 2021 trading margin would be slightly lower than Q4 2020.

Q1 is not as good as Q4, definitely. Right, right. That's slightly wrong because it's slightly given as you all know the margins which were available in the month of January and February are normally not available in summer months. So, in any case, Q1 can never be equal to Q4.

Sure, sure, sure, sure. But, for sure, let's say, you know, you can expect an explicit number right now, but for sure, as in, you know, you will not any predict losses per se so that overall segment should not report losses. Is that a That will be part of Q1 number, so probably it will not be good to expect. Okay. Okay. So, I am just, you know, this understanding correct that you have placed 90% of the volumes and out of that, you know, 70% has been hedged as well on the pricing. So, it's only, you know, when 90% of the volumes is placed, there can be loss or gain, but out of that 70% is hedged. So, only the 30% This is where we can have pricing gains and loss depending on how the market behaves.

Okay. I just by eating marketing to elaborate on this.

Yeah.

Which we get from U.S. percent. Out of the 89, 90 cargoes that we get from US every year, only 9 cargoes are remaining unsold. That is roughly 10%. Out of these 90%, either these are sold to international parties or banks or they have been brought into India.

Okay. Okay, now total, if you look at the volume, it is roughly 190 cargo in a year, including R&D, which we buy from TRL.

Okay. So, out of these 100, it is a lot of disturbance. I will mute my line. 30% is the open portion. Your understanding is correct from the extent that around 30% are the ones which have got the price fluctuations. Correct.

That we are hedging or some measures we are hedging.

Okay. Okay. Sure. Thank you. And just last question from my side. So, on the transmission side, we hear from the regulator as well that they are working on giving relief to the industry. We have seen some consultation paper coming through. So, possibly to elaborate on what's happening on the transmission side.

As you all know, we have already given a proposal name that was also put on the website of the regulator and public consultations were also done. So, now we have to further see how the final it takes final shape and what regulator takes final view on that. So, we have to wait only as so far we are do not have any other information.

Thanks a lot.

Thank you Raj. Next question is from the line of Vikash Jain. Vikash please go ahead.

Thanks for taking my question. So I just wanted to understand on your gas transmission bit, other than city gas, everything else has reached close to 100% utilization. Is that by now, I mean, not the full quarter, but by now, is that a good understanding? Yes. Okay. And sir, on LPG production, you would have seen some impact because of ONGC's production falling in the early part of the April-June quarter. But after that, now, even in that business, we are near 100% utilization. Is that correct?

Yes.

So of all of these businesses, you've already explained petrochemical is 100% utilization. It's only the city gas part which is impacting gas transmission. For all the other businesses, Gail is operating almost like normal.

As of now, yes.

Okay, and so gas trading, just kind of coming back to that, I know it's taken a large part of the call. So, you know, gas trading profits... In FY19, EBITDA was about 2800 crores, then went down to 21 and a half, you know, 21, a little over 2100 crores in FY20. Do you think that for the full year, I know quarter to quarter can be more difficult, which quarter you're hedged, etc. This 2000 crores or so, Is a reasonable number to work with even for FY21 and it's not going to be significantly off from this number?

Come again, last sentence I could not get.

What I'm saying is that gas trading EBITDA for FY20 was a little over 2100 crores. is it fair to work with close to that 2000 crore kind of a number for FY21 as well? Because, you know, why I'm asking that is, since possibly the worst of the impact would be felt in the April to June quarter, you would have some sense of how things played out here. And that should give you some confidence on the full year number. So somewhere in the ballpark of 2000, is a reasonable number to work with for FY21. Is that a broadly correct statement to make?

Actually, the trading EBITDA has two factors to depend. One is about the COVID you said that one quarter is almost over. But we do not know what second quarter will bring. That is one. Other than that, you have seen that since February onwards, there is large volatility in the international markets also. Trading EBITDA is also largely impacted by that volatility which though OPEC has now brought some stability into it but we do not know what will happen in December again because it all depends on the announcements and speculations worldwide. So as such the giving a number or range at this stage may be very very difficult or very speculative but we feel that we are going to be more challenging than the last year.

Okay, so let me rephrase that question. What I mean to ask is, I know global markets can be pretty volatile, particularly in the current times. If going by the trends that you've seen in first quarter, there is not enough reason for me to doubt that there will be a big drop. Because I'll tell you why. Because your last year was very you know, volatile in terms, it was much more volatile than other years, where 2Q had a very low trading profit, then you will prove from their own. So from that perspective, what I mean to ask is, is 1Q from that perspective, whatever you are seeing, There isn't going to be a material, when I say material, I mean say 30-40% decline on a full year basis. You have no reason to believe so far. Unless things worsen from here, it should not be materially different from FY20.

For the remaining months, we can say that yes, it is going to be a little challenging, but it's not going to be a very bad year or so does it. That's what probably at this stage we can say. However, as earlier I put that caveat that we do not know how situation will pan out in the future.

Okay. Just one last thing, Mr. Tiwari. Sorry, I missed this. So, what is the capex guidance that Mr. Tiwari did give for FY21 and FY22? I missed it.

Sorry. FY21 is 4,000 crores, in the range of between 4,000 to 4,500 crores. And 22 as of now our guidance is of around 8 to 9000 crores. But that all depends on the plants how we get early clearances and all.

Thank you so much. Thank you Vikas. This question is from the line of Vishnu Kumar. Vishnu please go ahead.

Thanks for your time, sir. Sir, this is again coming back on the gas marketing. Is there any one-off in this or any take or pay that we have accounted for this quarter? Because I remember in 2Q in your volumes, your profitability was low. We had mentioned that some take or pay would get accounted by 4Q.

No, in this, we don't have any such issue. Last year, there was some gain because of some past consumers of 130 crores or something, but this year, it is not.

So, there is no one-off amounts that have been included in the 4Q gas marketing profits. Really?

2.4. 2.4? Yeah, yeah. There is no one-off.

There is no one-off. Got it, sir. Sir, and also you had mentioned about the unified tariffs that the discussion that you are having with PNJRB. Could you elaborate a little and net effect of whatever adjustments that we are, whatever we are going to do, how will it impact the transmission profitability going forward? If you could elaborate a little on that.

I think that because it is almost more than a year that we submitted our proposal and the consultation was also done around a year back. And then NGRD is working on that as of now no latest information we are adding that but yes we understand that they are working on it in the interest of demand increase. So, one thing is sure that the consumers will get benefit and once consumer get benefit and more gas demand is created we also get benefit.

So, given that your commissioning of pipelines both of them are likely the baby by March or June of the next year. Should we expect some kind of a tariff announcement by that time with the unified tariff policy? Because if the rates, if we accumulate HEJ plus that rate, it almost goes to north of one and a half, two dollars, which may not be a price for a lot of other consumers excluding fertilizers to come and take offtake volumes.

I cannot, I mean, have a take on timeline because regulator only who will be able to

uh throw more light on the timelines it will be only that's guesswork so that's okay got it sir thank you thank you uh in interest of time we'll take one last question uh last question from the line yeah thank you can you hear me yeah thanks a lot so

Just on the tariff side, what I wanted to ask you is that all of us were quite disappointed when the HVJ tariffs came in last year, in June. So, do you think that unified tariff plus some other gas transmission, do you think they have the potential of making up that disappointment? In which terms? Unified tariff.

Unified tariff. In which terms? Because BGF tariff in any case has been fixed. No, no, no.

All of us were expecting a 36 to 40% kind of increase in tariff because the volume divisor went from 100 to 75% and then the tariff was only 4%. So do you think that the reforms which may happen, from what we hear, there are other reforms also in the works, some of the grievances which the pipeline companies are those are also likely to be addressed, plus the unified tariff. So both put together, do you think that the HVJ and other the unified tariff may be more in sync with what all of us were expecting and so that disappointment may be made up? What's your thought?

My thought is that probably from now onwards, if anything comes, either unification or any reforms, these are going to be positive for us only.

Okay. One last thing on the gas marketing now. Two issues here. One, could your first quarter, the June quarter be as bad as Q2? Because your worst quarter since the US LNG started was Q2 of last year. So could it be as bad one? And secondly, see the way we are looking at it, our concern is that if you Look at the delivered price of US LNG today and compare it with spot LNG. It could be like a $3.50, $4.00 kind of a trading loss. And if you apply that to say 30% of your volumes, then it's a very big number. And that is where the concern of people is coming from. So if you could give some thought on if somebody is thinking that you could have a $3.50, $4.00 per MBT loss on 30% of your US LNG volumes. So where is this thought process wrong? If you could tell us. So from what you are suggesting, it looks like this kind of a scenario is very unlikely.

Only thing, I can say if we do nothing, that is the worst thing you are talking about, that 30% volume and $4 loss and everything, if we do nothing. But definitely we have been doing and we continue to do many of the things. And as you know, in reality, everything cannot be like the worst situation. So definitely things cannot be as bad as you are thinking in those terms. But you are right that these are not also looking up very positively that yes there can be profits on those volumes immediately. So definitely those challenges are there but those are the very very worst numbers we are talking about.

Yes sir your questions are answered.

No, just one. I didn't get the last part. So, you are basically... So, lastly, just last thing. Thanks for giving me this opportunity that... So, if let's say gas prices remain here 3 or don't go more than 3.5, do you think that then... So, when you... If spot energy does not drastically improve from even in winter beyond 3, 3.5, then do you think that things could be bad or... So, lastly, that's what I'm trying to ask you.

What I am, I think I have covered also, as compared to last year, this year cannot be a better year because of the large volatility and as you have already explained in your question itself. However, what you are looking, those bad numbers, those still are unrealistic bad numbers.

Okay. So, could you have that kind of loss on some volume but not on 30? Is that the way to put it?

Yes. Still, I'm not sure about those large numbers on each because there are strategies that at least we can go for reducing the volumes if those are the large losses.

So, those are the realistic losses. So, when you say reduce volumes, you can postpone to later years, is it? There are many things which we can do. Okay. So, what is the flexibility there? In a sense, to what extent can you cut your volumes?

As such there is no flexibility available but then many things pan out when you talk depending on the situation. Also we could reschedule some of the cargo ship because the demand was not there but the original plan for it.

Okay. Thank you. My first question was basically could the June quarter be as bad as Q2 FY8

I know the numbers for Q2 of last year so it will be difficult and June quarter I feel that we should not speculate because then Q1 numbers will be coming shortly.

Thanks a lot. Thank you for the patience and all the Thank you.

Thank you. Thank you. In the interest of time that was the last question. I wholeheartedly thank India's management for giving us this opportunity to post annual investor and analyst meet on their behalf. I now hand over the floor to the management for any closing comments.

I think that was a very excellent arrangement you made and you so very well spent out and we thank you and thank all the analysts who have joined us and who have been supporting and who have been working with GATE for all these years. So we expect good support and your wishes going forward. Thank you very much.

And also if you have any further query or any information you want to have, please approach us. We will provide the details whatever the queries are there. So please be free in asking further questions. Some of the participants have not been able to ask the questions. Please be free. We are here to give you all the replies for that.

Thank you very much.

Thank you. Thank you.

Thank you everyone for joining. On behalf of Gale and Anti-Stock Protein, this concludes the Investoring Analysis in our discussion.