GAIL (India) Limited

On behalf of higher security, I welcome you all to the webinar of GAIL to discuss the first quarter FY21 earnings. Today to discuss the results in detail and share the performance outlook, we have Mr. A.K. Tiwari, Director of Finance of GAIL, along with the other senior officials. I will first request there is a finance deal to give an opening statement subsequent to which we can have the floor open for Q&A. Without much of a delay, I hand over the line to you, sir. Thank you. I have with me Mr. Raju Mathur, ED Corporate Affairs and VAT. And I have with me Mr. Raju Singhal, ED Marketing, ED Finance Mr. Ashim Rai, ED Marketing Mr. Sandeep Kumar, ED Finance Mr. RK Jain, and all other colleagues. So whole team is there to respond to you. and discuss with you. A very good afternoon and welcome to the Army call to discuss the Q1 FY 2020 performance of kids. I hope you and your families are safe during this pandemic. We have declared the result of the first quarter of the current fiscal year today, and you must have already received the same. I would like to give you a brief insight of the company's performance to bring more clarity. Here I would like to say that I will touch the details so that many queries could be responded to you, and totality I will give the overview. So, little bit time it will take. First of all, I would like to inform you that the provisional demand notice of Rs. 1,00,000 have been withdrawn by DOT. So as on today, there is nothing payable and dues are settled. So far as the physical performance are concerned, as you know that the country is still resisting against Coronavirus and has badly impacted the business during first quarter of June 2020. Gale has maintained its best to survive in this terrible time. but some situations doesn't remain under the control of the company. Due to lockdown of related industries, the physical performance of the company witnessed a decline across the segment. I would like to repeat once again, due to lockdown of related industries, the physical performance of the company witnessed a decline across the segments. The gas marketing segment, the gas marketing is at the 1.16 in Q1 FY20 as against 97.76 in Q4 FY20 declined by 17%. The gas transmission is at 90.22 as against 108.99 . in Q4 FY20 decline of again 17%. And the capacity utilization reduced to 45% as against 53% in Q4 FY20. The polymer production is to that 134 DMT in Q1 FY21 as against 208 DMT Q4 FY20 decline of 36%. and the capacity utilization reduced to 66% of our petrochemical plant as against 103% in Q4 FY20. The polymer cell increased to 183 DMT in Q1 FY21 as against 174 DMT in Q4 FY20, increase of 5%. The LSC cell is 265 DMT as against 302 DMT in Q4 of last fiscal year, decline of 12% and the capacity utilization was also reduced to 76% as against 85% in Q4 FY20. The LPG transmission is to that 963 TMT in the quarter as against 1040 TMT in Q4 FY20 decrease of 7%. The capacity utilization was 99% as against 109% in Q4 FY20. So you have seen that there is a decline in the physical performance in all the segments as well as the capacity utilization of the various plants as well as various services. I would like to give the trading and transmission segment outlook first. There was sharp reduction in the domestic gas production from OMGC reduced from 46 mmHg to 41 mmHg and consumption in the country. Gale faced a reduction of around 30% in gas sales and transmission volume during this quarter or maybe during the peak season of the pandemic. There have been significant impact in CGD sector. The consumption was reduced to 50% in April 2020 and around 40% in the month of May. Low demand in steel and other manufacturing sectors as most industries operated at reduced capacity. However, fertilizer and power becomes stable during that terrible time. I would like to give you the consumption pattern of gas. During Q1 FY21, domestic gas sales have reduced by over 4.4 MMSMD as compared to Q4 FY20. Oil and gas sales have declined by 7 MMSMD and transmission volume reduced by 7.4 MMHCMD due to reduction in supply to refineries and fertilizer plants. Overkill sales of US LNG was also impacted by more than 5 MMHCMD. Further, it is pertinent to mention that commencement of RLNG supply to various fertilizer units, that is native fertilizer, where the plant already commissioned and pending connectivity from KKMDPL pipeline. Ramakundam fertilizer plants under pre-commissioning and Mangalore chemical and fertilizer pending connectivity from KKMDPL project is also delayed owing to various reasons. It is expected that situation may improve from Q3 FY21 onwards. There have been a steady improvement in the consumption due to graded relaxation in the lockdown and increasing economic activities across all segments. Though the initial impact on natural gas demand was around 30%, the average decline during current quarter is approximately 70% due to consistent improvement in the optics. Currently GAIL is operating at more than 95% of FY20 trading and transmission volume, and we expect that in the next one to two months time we will surpass the FY20 level. I would like to give you just position, studies position, where we have our volume touched to 87, 1.29 mm CMD for gas trading and we have transmission around 111 mm CMD. So we have almost a pandemic level of the volume trading as well as the transmission. I would like to give you the outlook of the petrochemicals due to non-availability of the transportation for our polymers. after the announcement of lag lockdown there was an inventory buildup due to which we have to texture down of our plant both at part one and part two with effect from first april 2020 after the start of vacuums movement the plant restarted with effect from 18th april 2020 at partial capacity The permaplant regained its full capacity in the middle of May 20, and the total production loss due to lockdown shutdown was approximately 65,000 metric tons. The demand picked up after the relaxation in lockdown and gave top sale to 183 TMT in the quarter, recording an increase of around 5% over the last quarter. So far as the LPG and LSC segments are concerned, though the LPG demand was intact and its movement was not impacted, being covered under essential services, the demand for other LSC products like propane, pentane, and NAFTA were impacted due to lockdown. Now, I would like to give you the financial highlights in comparison to Q4 and this quarter. The active gross turnover of is 12,060 crores and 17,709 crores in Q4 FY20. There is decrease of about 32% mainly due to lower physical numbers as explained due to COVID-19, lower petrochemicals, LSC and natural gas prices, prices of petrochemicals reduced uh two thousand uh per metric ton and lsc reduced by 12 000 per metric ton so these these has impacted the profitability of our petrochemical and lsc segments the profit before Tax stood at 356 crore in Q1, as against 2,556 crore in Q4 FY20, decreased by 86%, mainly due to lower physical numbers, number one. Number two, lower prices of petrochemicals by around 2,000, as explained, and LSD by 12,000 per metric ton. And lower gas marketing is fake. Gale-rested PAT of Rs. 256 crore in Q1 FY20 as against 2018 gross. Here I would like to inform that the Q4 PAT of 2018 had an impact of adoption of lower tax to tax by the profit was not comparable that is not comparable in that way because it has impact of around 1800 to 2000 crores on the fact let us now give you insight into the segment wise analysis from drop in the profitability I know that our investors our people connected are more concerned about the gas marketing. So I would like to share our gas marketing segments in detail. Gas marketing segment PVT reduced from a profit of 6,000 crores in Q4 FY20 to a loss of 547 crores in Q1 FY21. The primary reason for such decline is reduction in the gas market due to reduction of gas demand in the country during Q1. This is the main reason. Yale has taken various measures to accommodate falling RLNG sales because of outbreak of COVID-19, and Yale canceled some of the cargos to reduce the nomination and reduce the nomination under PLR volume. CBD sector, which consumes around 14 mmCMD of domestic gas, was reduced to 6 mmCMD. Further, due to subdued prices in spot market, some customers are inclined for current RNG market. Hence, in order to retain the customers, the company has also taken steps to keep the prices aligned to the current market prices. There is a decline in the spread in current quarter due to lower growth and spot prices leading to lower sales realization without commensurate decline in the purchase cost of the imported gas. Here, I would like to once again mention that our volume, which was the pre-COVID situation, was at its core has reduced to 72. So, all this has impacted the volumes. And we have as already I have explained earlier. LNG cargos in the quarter as against 23 cargos in Q4 FY20. The situation for the gas marketing was exceptional and in spite of all the measures taken by Gale to minimize the impact, Gale suffered loss in the segment which was primarily driven by sudden crash in the demand and prices However, as already stated earlier, the demand has picked up, and we are already supplying more than 95% of FY20 levels. In energy transmission segment, the PVT was down from Rs. 870 crores in Q4 FY20 to 702 crores, a decline of 19%, which is largely in line with the decline in the physical volumes. In petrochemical segment, the PVD decreased from Rs. 71 crores in Q4 FY20 to loss of 164 crores, primarily on account of the loss of production due to shutdown and marginal decline in the average price realization by Rs. 2000 per metric ton. The demand has picked up and we are able to sell around 183 TMT in the quarter as against production of 134 TMT. The petrochemical plant is now operating at the full capacity. The PVT and LHC segment has reduced from 528 crores to 266 crores primarily on account of the lower price realization. The price, as already explained to you, reduced by Rs. 12,000 per metric ton. I would like to share the gale gas performance. The turnover and profitability of gale gas has dampened significantly in Q1 as demand in CGG sector was severely affected due to the impact of lockdown. The CNG volume for the quarter declined by 68% and bulk of industry's volume declined by 25% in the quarter as compared to Q4 FY20. This quarter GAIL achieved capex of Rs. 401 crores, which primarily includes equity contribution, operational capex and pipeline, In spite of the low capex during Q1, we estimate to achieve the capex of around 5,000 crores to 6,000 crores for the full year. We have a plan to expand around 9,000 crores in the next fiscal year, mainly on pipeline equity and petrochemicals. I would like to share the project performance. on account of the uh projects progress there was significant there was some significant impact during the quarter work has started in all our ongoing projects however there are some restrictions because of the social distancing and the local containment area related issues Cochin-Manglo pipeline section work has fully started and we are almost in the last stage of completing the section. SDT work in only small segment of Chandigiri River is going on. Rest is complete. We expect to complete it shortly. The supply of energy will commence in Manglo section, Manglo area. On the Pradhan Mantri, the total commitment as on date is over rupees 13,600 crores and the actual capex till date is 9,800 crores. We have been receiving the capital grant from the government regularly and till date the total capital grant received is 3,609 crores as against the total grant of 5,676 crores. I would like to touch upon the construction. progress. The Dhobik-Durgapur line up to matrix is expected to be completed shortly within coming two to three months. Dhamra Angul mainly by June 21 and Paradeep spur line by December 21. Bokaro Angul main line we expect to commission by December 20 and the spur line by June 21. Durgapur-Haldia pipeline we expect to commission by December 21. is expected to be commissioned by March 21. Also our progress has started as of now we feel that we will be able to maintain the progress and make up the lost time and we will be able to maintain our original schedule of December 21. Apart from this the city gas As well as the GAIL gas geographic area, the work has started in almost all areas. Presently, GAIL is supplying gas to all CCVDs with infrastructure of 41 CNG stations and approximately 56,000 CNG connections. I would like to touch upon the outlook. The total pipeline infrastructure in the country, as you know, is around 17,500 kilometers. Around 12,500 kilometers of CAIL and around 5,000 kilometers of other entities. Aligning with the government objective, CAIL and JLJV is building pipeline for around 8,400 kilometers and around 8,000 kilometers being undertaken by other entities. Neither new pipeline project undertaken by Gail are pipeline 700 kilometer investment of 3,000 crores, committing to the 36 months by July 22. Mumbai pipeline 1,705 kilometer investment of 7,800 crores, completion by May 23. pipeline 240 kilometer investment of 1200 completion by 22 pipeline infrastructure state for over 1,650 kilometer at project cost of 9,300 . So far as the unified tariff are concerned, suggested to PNGRE for determination of the unified tariff for all the pipelines. Under the mechanism, a single tariff would be applicable to all the consumers and would provide level playing field and enable the reach of the desk at far-flung area. PNVRB has web-hosted a public consultation document on a new methodology for fixing unified tariff. Entities have submitted their comments on the consultation document, and we expect that this will be completed soon. I have given the brief introduction of the financial results, outlook, and the reasons. I once again thank you for the time and patience. I request now if you have any questions, clarifications, that can be asked. Thank you very much. Over to Harsh.

Thank you, Tom. Harsh, you are on mute.

Well, as we assemble the queue for the Q&A, I would request all the participants to ask two questions in each so that, you know, we can cover as many participants and more diverse subjects along with, you know, along with management of GAIL. So, the moderator will now announce how to, you know, ask the question, and you will assemble in a queue so that the Q&A can be taken ahead. Go to you, moderator.