GAIL (India) Limited

Welcome to the Q3 FY21 Earnings Conference Call of Gale India hosted by B.O.B. Capital Markets Limited. As a reminder, all participant lines will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a Dutch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rohit Ahuja, Head of Research and Oil and Gas Analyst at BOV Capital Markets. Thank you and over to you, sir.

Good evening, everyone. Welcome to Gail's Q3 conference call on behalf of Bob Capital Markets. It's a pleasure to host the management. From the management, we have Mr. A.K. Tiwari, Director of Finance and other senior management. I hand over the floor to Mr. Tiwari to take this forward.

Thank you. Thank you very much, Mr. Rohit and my dear friends from Investors Opportunity. A good afternoon to all and welcome to GAIL's Q3 FY21 earning calls. We have declared the results of the third quarter of the current fiscal year today and I am sure you must have be happy with the overall performance of the company. Before I get into the financials, I am pleased to inform you that the Gale has emerged as a winner in the Investors Relations Award 2020 under the category of ESG Disclosures. The award has been given by IR Society in collaboration with BSC and KPMG India based on the various parameters including feedback from buy-side and sell-side. I thank all the investors in dispensing their faith and confidence in the transparency and disclosures of GAIL. This award is the testimony of the GAIL's effort in maintaining and improving its investors' relation. We will continue with our endeavor to make our IR program one of the best in the industry. I once again thank all the investors on behalf of GAIL. I would like to inform that GAIL has also received the prestigious Golden Precinct Award of Excellence in Corporate Governance for the year 2020. This reward we are going to receive today at 5 p.m. I am also happy to share with you that the much awaited Kochi-Mangalore section of KKMDPL was commissioned in November and was dedicated to the nation by Honorable Prime Minister in January 21. With this, we have started supply of 0.8 mmHg of gas to Mangalore Chemicals and Fertilizers. Further, the 348 km Dovi-Durgapur section of GHBDPL up to Matix Fertilizer has also been completed and dedicated to the nation on 7th February 2021. The pipeline will have revival of HURL Sindhari Fertilizer Plant and will supply gas to Matrix Fertilizer Plant in Durgapur. This also supports PNG and PNG supply to 10 districts at Satra, Palamu, Kodharma, Giridi, Dhanbad, Bokaro, Hazaribagh, and Deogar in Jharkhand, and Paschim Vardhaman, Purva Vardhaman in West Bengal. The gas supply to Metix plant for commissioning is likely to start in March, and plant is likely to be on full load by April 21, leading to a gas supply of 2.47 mm CMD. The gas in HURL Gorakhpur plant has started and their pre-commissioning activities are in progress. The gas supply will go up to 0.5 mmHg by March 21 and likely to double by September 21. The other plant, namely Baroni and Sindhri, the pre-commissioning activities are likely to start in February-March 21 and commissioning by November 21. In one of the previous phone calls, few investors had suggested that the GAIL should go for buyback of shares. You are already aware that the GAIL has announced buyback at the rate of 2.5 per share with a total buyback size of 1,046 crores. In addition, GAIL has also declared interim dividends of Rs. 2.5 per share in January. Now let me give a brief insight of the company's performance for the quarter. The physical performance of the company during the quarter has improved in all segments. The COVID impact which was seen in Q1 had started to recover in Q2 and now in Q3. The impact on physical performance has been fully neutralized. All plants have attained normalcy and operating at optimal capacity utilization. There was no major shutdown of any plants and pipelines during the quarter. In fact, the petrochemical plant and LPG transmission pipeline is operating at more than 100% capacity. The gas marketing stood at 95.62 mmHg in Q3 FY21 as against 88.6 MMSCMD in Q2 FY21, increase of 8%. The gas transmission is stood at 110.35 MMSCMD in Q3 FY21, as against 106.44 MMSCMD in Q2 FY21, increase of 4%. The capacity utilization increased to 54%, as against 52%. in Q2 FY21. The polymer production stood at 233 TMT in Q3 FY21 as against 221 TMT in Q2 FY21. Increase of 6%. The capacity utilization increased to 114% as against 108% in Q2 FY21. So we can say that the FATA petrochemical plant is fully stabilized and running more than 100% capacity. Similarly, the polymer cell increased to 231 TMT in Q3 FY21 as against 224 TMT in Q2 FY21 increase of 3%. The LHC cell stood at 319 TMT in Q3 FY21 as against 297 TMT in Q2 FY21 up by 8% and the capacity utilization in the current quarter is 88% as against 81% in Q2 FY21. Similarly, the LPG transmission stood at 1,088 TMT in Q2 Q3 as against 1,058 TMT in Q2 FY21, increase of 3%. The capacity utilization was 114% as against 111% in Q2 FY21. Now I would like to give the financial highlights. There achieved gross turnover of Rs 15,386 crore in the current quarter as against Rs 13,611 crore in Q2 FY21. There is an increase of 13% mainly due to improvements in physical performance across all segments, increase in price of RLNG and increase in practicum PECM price, which is across 8,000 per metric ton. PVT stood at 1,868 crore in Q2 as against 1,551 crore in Q2 FY21, increase of 20%, mainly due to better physical performance, higher price realization of petrochemicals. Yale registered PAT of 1,487 crore in Q through FY21 as against 1,239 crore in previous quarter clocking an increase of 20%. On a nine-month basis for the period from April to December 20, the turnover declined by 24% to 41,057 crore PBT declined by 30%, 3,774 crores, and PAD declined by 70%, 2,983 crores, mainly due to having the impact of lockdown pandemic in Q1. Now let me give you some details of the segment-wise profitability. In energy transmission segment, volume and revenue has improved, The PVT is 977 crore in Q2 FY21 as against 1009 crore. As I have already told in petrochemical segment, the PVT increased to 423 crore in Q2 FY21 as against 170 crore in previous quarter. In LSE segment, the PVT has marginally improved to 283 crore in the current quarter. as against 280 crore. In natural gas trading segment, the loss narrowed to 74 crore in Q2 as against the loss of 365 crore in Q2. So on account of the better price realization in domestic market and increase in the crude and spot market, we have been able to have the better margin in gas trading segment. During the quarter, Yale received 23 LNG cargoes from U.S., 15 from Seven Pass, and 8 from DCP, as against 20 cargoes in Q2 FY21. Total 64 cargoes received up to Q2 FY21. Out of these, during the quarter, 11 cargoes were sold in the overseas market, and the rest 12 were brought to India either directly or through the estimation shop. The total 26 cargoes were sold outside India up to Q3 FY21. If you see the jail gas performance during the quarter, the revenue from operation of jail gas was 1,058 crores, as against 951 crores, increase of 11%. Similarly, the PVT increased to 87 crores, as against 61 crores. The CGD sector has shown a very sharp recovery from Q2 onwards after suffering a major setback in Q1. The total gas sales by Gale Gas increased to 4.91 mmCMD in Q3, which dies against 4.7 mmCMD in Q2. As regards the capex, this quarter Gale achieved capex of Rs.1,739 crores in current quarter as against 1,530 crores in Q2. Total capex up to Q3 is 3,670 as against the plan of 6,600 crores. And we are going to achieve this total capex of around 6,600 in this year. So far as the project performance are concerned, The GAP of Ramgandam Fertilizer and Chemicals have started and commissioning activities are in progress. Presently, RHCL is drawing GAP to the level of 1 MMXMD and which is likely to go up to 2 MMXMD by March 21. On the Pradhan Mantri Urjagang commitment, as on date is over 14,500 crores. and the actual capital till date is around 10,700 crores. We have been receiving capital grants from the government regularly and till date the total capital grant received is 4,084 crores as against the total grant of 5,176 crores. The status of the various pipeline projects are Vijaypur-Auraiya pipeline is expected to be commissioned by March 21 Sultanpur-Jajjar-Insar pipeline and Haridwar-Rishikesh-Dehradun pipeline is expected to again commission by April-May 21. Dhamra-Angul section of JSBDPL by December 21. Bokaro-Angul by December 21. Durgapur-Haldia by December 21. Baroni-Gohati by December 2021. So we are on track to complete all the pipeline projects as per schedule. Sirkakulam-Angol pipeline which is having 700 km investment of 2700 crores, we are expecting to complete by July 2022. Thamra-Aldia section 2, 40-kilometer investment of 1,200 crores, we are expecting to complete by November 22. Mumbai-Jasugura pipeline, 1,755-kilometer investment of 7,800 crores, we are expecting to complete by May 23. That pipeline infrastructure in North East States, which is 1650 kilometer at a project cost of 9300 crores are actively means every material and all procurement are being done so that is also on track after commissioning of hurl plant rhcl and completion of connectivity to matrix which has sale in the domestic market will increase by across 11 MMCNT. On the CGD front, GATE is supplying gas to all 6 CGDs with infrastructure of 49 CNG stations and across 1 lakh DPNG connections. The present flow is increasing day by day with the commissioning and with the CNG stations. We have operation of its plant has been done, has been our priority. So we have achieved zero major reportable accident during last four consecutive years. And there is no such any major reportable accident which are there. So we have given the brief introduction on the financial results and the major highlights of the company. We would be happy to clarify on any point that you may have. Over to Rohit, please. Thank you very much.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sabal Singh from Centrum Broking. Please go ahead.

Hello.

Hello. Yeah, please.

Am I audible, Tiwari ji?

Yes, sir. Yes, sir. Yes, sir.

Sir, thank you for the opportunity. This was on broader guidance. You obviously gave us a flavor of how demand across sectors is picking up. But for transmission volume, sir, assuming that there is another couple of MMSTMD increase, in Q4, if we exit at around 112 odd MMSTMD, what sort of volume guidance can we look forward to, sir, for FI22?

Uh... As I have given the projections, if the volume of cell will increase, transmission will also increase. So that way, it will be up. See, we cannot give any fixed number at this moment because so many infrastructures which have been created are trying to have their consumption base, and transmission will increase. CNGs are coming, PNGs are coming, our base of the pipeline are increasing. So growth will be there. It will be not less than 5% to 7%, my perception is there, over the transmission volume which are at present.

Got it. So that range is good enough, sir. And the second question was with regard to the petrochemical segment. Obviously, the segment has done very well in this quarter, well ahead of, I think, what most of us were looking.

Is it possible, sir, to break up the EBIT improvement or the EBITDA improvement that's happened in the segment in terms of how much is due to pricing and how much is due to volumes?

See, both are contributing, but as the production is going to be more than 100% and we expect that it will be not less than 110%, so That way our fixed cost adoption will be there. And yes, prices, we don't have much control, but we expect that, as I came to know from the team, that prices are going to be stable and increase further also. So we expect that in the petrochemical segment, we are going to have better margins. And if some details are required, we'll give you separately.

Sure, sir. One last question, if I may, on the US or rather on the natural gas trading segment. You know, in January, of course, spot LNG prices in Asia have reached record levels.

Is it fair to assume that Q4, one would, you know, one has already seen the losses narrow for gas marketing from the previous quarter.

Can we expect numbers to return to, let's say, profitability given the Asia price trends that you've seen so far? Yeah, yeah. We are also quite hopeful.

Okay, sir. Thank you so much for your time. I'll come back if I have more questions. All the best.

Thank you. The next question is from the line of Nafisa Gupta from Bank of America. Please go ahead.

Sir, my question is on the cost in the LPG and other liquid hydrocarbon segments. Any reason why it's shot up substantially in this quarter?

Yeah, I'm not getting that up. Please come again. Please tell. I could not get what you are asking.

About the cost in the LPG and other liquid hydrocarbon segment, they have been significantly up in this quarter. Any particular reason why?

Prices are there and the production is good. We had a good utilization. All these factors have contributed. Dices are around 3,000.

Sir, and sir, if we could just repeat the number of LNG cargoes that we've imported in this quarter.

I have already given the number.

For FY21, how many have you achieved in the first nine months?

The number of cargoes from US, if we see, out of this quarter, out of 23 cargoes, 11 cargoes were only sold internationally. I'm doing well work for them in Sweden.

All right, sir. Thank you.

Okay, thank you. Thank you. The next question is from the line of Avdut Sabnis from Ingrid Capital.

Please go ahead. Yes, sir. I want to repeat the question relating to... I have a specific question that if you look at the NTG and hydrocarbon segment, I'm comparing numbers in the third quarter versus the second quarter. Okay, if you look at revenues, you know, there's an increase in revenues in the third quarter related to second quarter. Revenues will capture volumes as well as pricing. Whereas if you look at profitability at EBIT, okay, it's actually flat at 280 to 280 crores, flat on the quarter-on-quarter basis. Despite the fact that this segment will consume APM gas, the prices have dropped substantially on a quarter-to-quarter basis.

So, can you explain as to why the profitability is flat despite increasing revenue and likely decreasing cost?

You are talking about the LPG segment, LSP segment. Yeah, LSP, yeah. LSP segment. See, detail analysis I can't give you because… there are the mix of the transactions which are there, but two factors have contributed. One is the three factors rather, price, and second is our good production level, and third is our sales also has contributed these things, and price of the cost of gas also. So all these mix are there. If you want to have a particular details, all these things and we can provide separately. These are the mix of the transactions which are there. Okay. My next question is... What do you want to know? Very simple, sir. As you said, revenue is production, whatever volume and price is captured in the revenue number. On a very rough calculation, we can say that 83 crores are on account of this price. And approximately, our cost of input has also reduced. That has contributed negative on 38 crores. And there was certain quantity also which was in the reduction is there. Yeah, it is increased. Reduced, yeah. In Q2, reduced. At 3 metric, then, yes, reduced. So, that has also contributed around 33 crores. Detail, we can provide if you want, separately also. There's not any question. Okay. Next question relates to reliance gaps in KGD6. Okay, they have put out two tenders, one for 5 and one for 7.5 MMCMD. That's all in the public domain. And we now know who the customers are for the entire 12.5 MMCMD. Now, given that customers are known, could you give us some clarity on how much of that 12.5 could come on your network? It's not a pointed question.

See, what we have bought is about two MMCMD type. Okay. So, it's between 1 and 2 mm CMD that we have bought. Now, how much of this will flow into Gale network? That will depend on the buyers of those volumes, you know. Some of them, some of that volume is bought by some Gujarat-based plants. So they will have the option to take this gas directly from east-west to JSPC network. So all of it may not really flow into pipeline network.

I get that, sir. I'm asking how much is certain. You know, where the customer doesn't have a choice and he's beyond network.

So including your volumes, how much is certain to come only on network? I have told you our volume is about less than 2 and more than 1 mmCMD out of this 12.5, which will definitely flow into our network.

Thank you, sir. And just a last question on PET-CAM. For the fourth quarter, is there any land shutdown or can we expect the same level of, broadly same level of productivity in the first quarter? There was no plant shutdown. Same level of production was there in Q2, Q3. No, I'm asking for fourth quarter. Is there any shutdown plants? There is no plant shutdown. Thank you so much. Thank you.

Thank you. The next question is from the line of Amit from UBS. Please go ahead.

Okay, thank you for giving me an opportunity and for a wonderful set of numbers. Sir, my first question relates to the utilization of the pipeline. So, you have mentioned about 11 mm CMD volume. Could you give us a broad break up that what set of consumers like each fertilizer plant is going to consume over the next six months? Because I think you mentioned from September we would reach around 11 mm CMD on that network. So, on rough side we can say that Ramagundam will take around 2 mm CMD. HURL Gorakhpur, HURL Baroni and Sindhi each will take around 1.9 mm of CND. Matrix fertilizer again 1.5 from RLNG will be there and then CGM gas will be there. Put together it will be 2.47 and these are the numbers and then some CGDs will come put together are coming to around 11. Yeah, but sir, my understanding that some of these fertilizer plants like Boroni, Sindhri and Gorakhpur, they may not be fully ramped up by September 21. So do you expect that these fertilizer plants will be fully ramped up by September 21? Our estimate is by December it will be fully ramped up. That indication we have given. But chronologically they will start, say for Gorakhpur, by March 21.5 MMSMD and then ramp up to 1.89 also. So, similarly, Sindhri also will come up. Baroni, we are also expecting their plant. So, Gorakhpur is already on the pre-commissioning stage. So, that we can expect. Matics have already told that plant is ready. The commissioning activities started because the plant was shut down. for a long period. But we have reached. Our gas is reached there. As soon as they want, they will take it. So I think in the coming one year or so, this 11 or 12 MMCMP is a very optimistic number and it will come. And what is the broader tariff for Ujjaganga project? They have given a tariff of around 64 or so. 64 rupees per MMTU up to phase one. They have not declared further tariffs, so it will be declared and then very informed. Okay. And then my second question relates to how many NMG cargoes, like this year if we see, you're bringing almost 50% of the cargoes from US in India and 50% cargoes are disposed of internationally. Now, how do we see this ratio getting changed over next two years? What is the outlook for FY22 and what is the outlook for FY23? As the consumption in the country will increase, the sale in the international market will be less day by day. So these RLNG will be consumed by these fertilizer plants and other areas also, other industries also. So slowly this will come out, but this will come down.

Maybe that, you know, by the end of December 22, we start getting entire volume in India, very likely. If these plants come up in time, as proposed, then in 23, there will not be any volume which will be trade selling in international market. Unless there are the opportunities. Unless there are the, you know, arbitrage opportunities, we will not.

And so, just last question from my side. What is the expectation on in-weight So which pipelines do you think we would be transferring for the INVID because Finance Minister also announced in the budget that GAIL's some of the pipelines would be monetized over next one or two years? Yeah, the announcement is from the last, only 10 days have been passed away. And INVID is a very complex use transaction. So we can't specifically tell which pipeline will go. Whatever you are seeing in the market, we are also seeing in the market. This pipeline has gone and it will generate these things. But on commercial point of view, we are evaluating and then we will inform suitably because there is a mechanism of informing by tail. We will inform to say we will inform so many others. So we will inform at appropriate time. We are also... assessing what would be the best way of doing the transaction. Okay. Thank you, sir, and best of luck. Thank you. Thank you very much. Thank you, sir.

Thank you. The next question is from the line of Manish Jain from Gourmal 1. Please go ahead.

Yeah, hi. We wanted to know the payback period for the CapEx that Gail is making over the next five years. Basically, what is the IRR that you expect on this capex? And the second related one is, from your current pipeline in kilometers, this capex of five years will take you to what level of pipeline in kilometers?

So, for your first question is there, 12% IRR is the theoretical figure which is given by PNGRV. So, our expectation is 12% IRR. but actually we cannot give you any number because every pipeline has different scenario, volume, tariff and prices. So we cannot give any exact number of the pipeline which we are laying but we expect that as soon as our volumes are increasing our bottom line will also increase and We can't give any number at present that we don't know the tariff scenario of JSB2PL pipeline. You know the KTM pipeline, volume utilization. So these things will ramp up and the industry, when they start consuming, I think, but we are very sure that the bottom line is, for that number can't be given at present.

About the length of the pipeline, we currently have 12,800 kilometers. Another 5,000 kilometers is expected in another 4,500. So we will have 18,000 to 19,000 kilometers of line in the next few years.

Thank you. I'll join back with you.

Thank you. The next question is from the line of Mayanki from Morgan Stanley. Please go ahead.

Thanks for the call, sir. I had just one question. This was regarding the point you mentioned earlier in your opening remarks on six to seven pipelines that will be getting completed by end of 2021. How much do you think will be the volume that can potentially expect in 2022 from these pipelines?

I have already given the number. about the pipeline which is in process of commissioning, so that 11 mm CMT. But other pipelines which are there, Tirka Kulam, Damra Angul, Mumbai Jasuboda, these pipelines, and Baroni Guwahati. So we have estimated the number, but that number, again, depends upon the industries which will consume. you can expect growth as i have already told five to seven percent that can be expected uh whatever the current level is there that we are also assuming that the volume upside will be there and we are quite hopeful with the with the coming cities which are coming up cngs which are coming up and the lmcs which are there connected with our main pipeline which are there that the industries will consume so There will be upside on the volume, that much I can say.

Got it. Thank you, sir.

Thank you. Thank you. The next question is from the line of Vidyadhar Ginde from ICICI Securities. Please go ahead.

Thank you.

My question is on the gas trading marketing part. So how much of your US LNG cargos are fully tied up for FY22 and I presume that given the current conditions, all of them are tied up profitably without either breakeven or profitability?

For this FY22, we are almost fully tied up. Either we have sold those volumes or whatever is left, we intend to bring entire volume to India. So for FY22, entire volume is tied up. Maybe one or two percent is loose, that's all. Okay? And profitability? That I cannot say because every transaction is executed at different prices. So I can't tell you often profitability or at loss. But it should be likely to be marginally profitable only. Okay.

So marginally profitable or are you confident that from if not Q4 this year but at least next year you should given the conditions and if oil prices remain where they are or go up only then?

See whatever is brought to India that is anyway profitable because that international volume is transferred to domestic growth. And especially that crude running above 60 it is always profitable. So now what remains is international sales. So I'm saying even international sales will be likely to be marginally profitable overall.

Okay. And what proportion of your volumes next year will be international and how much domestic?

So about last year also we have sold about between 40 to 45 cargoes, 2 to 2.5 mm TPA. So this year also it will be about 2 or maybe slightly less.

To outside India?

So, yes. Either can't be given. It depends upon the consumption in the country as the fertilizer plants will ramp up. So, we will be consuming more and more. So, it will slow down slowly and gradually.

It will be less than previous year, definitely.

Yeah.

See, what I was trying to understand is the impression one has is that last year there are some volumes given the very low spot energy prices and then the oil price collapsed. some volumes were tied up at a loss and you were hoping for opportunities at later stage if spot LNG goes up you can hedge or something and should not probably hedge it was uncovered volumes on that front are things substantially better next year and so next year most of the quarters as things stand you are likely to be in the black no no next year we are quite hopeful that will be not black it will be good yeah yeah it will be very good similar to earlier year FI-20, FI-19-20, similar, that kind of.

Yeah, we expect that way, but it depends again with the prices which are there.

But our understanding was that you use hedging to sort of lock yourself in. So it's not foolproof?

Hedging is also one of the instruments. We have to predict the prices and many times the hedging may not be profitable also. So There are many, many scenarios which are there. Hedging is one of the mitigation measures which we have taken. If in the domestic market consumers we have tied up, then there is a plus. We can't tell you margin.

I'm assuming that none of the volumes which you plan to sell in India, there is a delay or something. I'm assuming that everybody takes volumes as expected. In that case, you should be.

Yes. We expect that.

One last question. You have this number of EBIT which were disclosed which in standalone on the gas trading front is 73, 74 crores and then there is this 157 crores in console. So how does that I think even in earlier quarter the console number was higher.

I am not getting.

Your gas trading EBIT is disclosed both in standalone earnings and consolidated earnings. Consolidated earnings gas trading, EBIT loss is larger. It's about 157-158 crores. Compared to 73 crores EBIT loss in standalone. Can you just tell us what is that?

Is it your Singapore entity or somebody, the loss incurred by that? No, no. Here, please have a look. I will come back to the number. Question? I will come back separately and give you answer. Let me find out the calculation.

And Q4, are you reasonably confident of being in the black because we are in the middle of the quarter? Yes. And not just being in the black do quite well? Yes, we will do. Okay. Thank you. Thanks a lot.

Thank you. The next question is from the line of Sabri Hazarika from MK Global. Please go ahead.

Good afternoon, sir.

First, I've got clarification. So you mentioned that 11 MMSTMD you are expecting in the next one year. So this 11 includes Sindhri and Baroni pipelines as well, right? Yes. Okay. And second clarification is the Baroni-Gohati pipeline will also be ready by December 2021.

Baroni Guwahati we are expecting in December to be ready, but not in December 2021. Baroni Guwahati will take time. It will be next year only. Baroni Guwahati you are talking, right?

Yes, Baroni Guwahati.

Baroni Guwahati will take time.

Okay, and...

Yeah, yeah, it is December 21st. Yeah, yeah, it is December 21st. Right after that. Yeah, a lot of work is going on. Yeah, yeah, please, sorry.

Okay, and the first clarification is that this LPG EBIT, the EBIT that we reported, has remained 280 crores in both Q2 as well as Q3, despite the fact that APM gas prices have corrected and Arab Gulf and international LPG prices have gone up. So, was there any one-off, anything on that, sir, during Q3?

No? LPG may throw a one-off. Just one minute. Yes?

Hello?

There is no one-off. It is a slight increase in the quantity also in Q2 to Q3. And price is also, price has given, price is now. Your process should have gone up significantly, QOQ, between Q2 and Q3.

Yeah, it has remained flat. Any reason behind that?

The price is there and some adjustment on the, means adjustment what we say in the average cost of input, which has given negative. That's all.

Some prior period adjustment on cost of... No, nothing.

No such one-off is there. Okay, sir.

Okay, fair enough. Now, I have just one question. This is relating to that transport system operator which the finance minister announced. Now, there has been, like, it is going on in the news flows, but there is, like, lack of clarity in terms of what would be the nature of this agency. So, would it handle the entire natural grid in the country, including GSPL and Reliance Pipelines? and whether it will be taking commercial interest in this pipeline or it will just be an operator with just operational power. So anything on that, any clarity on that?

Yeah, this is a new concept of government which has been announced in the budget. And so far our understanding goes that some operator will be there who will oversee. See, our pipeline which are there at present, are operating around 13,000 kilometers of the pipeline. And this is to take interest of the customers, and it is clearly written in the budget that indiscriminate way. So just to inform you that we have already one quarter where the third party can book their capacity and you know that the capacity utilization of the pipeline at present is around 50% and most of the pipeline are empty. And through that portal, one can put their volume from where they want and tariff is already declared by the PNGRB. So what the basic concept goes that for As an operator, as some third party oversees, they will regulate, they will oversee that it is booked, pipeline hydraulics are there and so many other factors which are required. I think some transport service operator will be there and they will charge some money, we understand. But total details will come up from the ministry and then we can share. It is just a formation which they will visualize and then it will be done. But we expect that the total pipeline should come in there, not only the DEL pipeline, other pipelines, DSPC and other pipelines which are there, that will be part of this TSO and one can book their capacity based on the availability of the pipeline from one corner to another corner. We cannot give much detail at this moment because it is a very recent announcement. As soon as something comes up, we will share in our speech also.

Thank you so much and all the best for the future.

Thank you. Thank you. The next question is from the line of S. Ramesh from Nirmal Bank. Please go ahead.

Good evening and thank you very much. First on the petrochemical business, given the increase in the LNG prices, do you see any impact on the EBITDA margins in the fourth quarter?

Yeah, it will be almost same. We expect that the prices will remain the same and quantity or production level, sale level will be up. So we we expect that a better margin.

OK, and secondly, on the unified Paris mechanism, once that is notified, the regulator is talking about revenue neutrality for the pipeline operator. So in accounting terms, when you report quarterly and annual results, do you see any, you know, reconciliation issues which will lead to some movement in your P&L and who will actually reconcile the, you know, the balancing part uh how do you expect that because the regulator just says the pipeline operator and the customers have to work out the arrangement so how do you think the unified mechanism will actually you know ensure that there is revenue neutrality and your transportation returns are protected on an annual basis see this is a new concept or guideline which has come up

We have also taken up the matter. There are many regulatory parties there, accounting parties there. That is not very clear. So we are taking up. As soon as this clarity will come, we will inform you.

So on one last question. Now, again, going back to this question of the sport LNG prices increasing, do you see any negative impact on the consumption of the sport LNG in the Indian markets And how do you see the growth in the natural gas volume in the fourth quarter and then the coming quarter overall for the market?

No, there will not be any negative impact on volume. Sales volume will be maintained and keep growing. Besides, these spot prices were up only for a month or two, January and February. They have already come down substantially and likely to remain soft. or the level where they are presenting a little softer only. So therefore, it is very unlikely to affect any demand.

Okay. One last thought. In terms of the potential, you know, movement of natural gas to GST, do you see that, you know, kind of benefiting rail and the transportation companies? And the consumers, because you have the benefit of input tax credit, and how much do you think that can lead to overall savings on the cost of gas to the consumer? Any working you may have done on that?

On GST you are asking? Yeah. No, we have not done anything because things are, you know, very dynamic. It's changing. Even VAT profiles keep changing from state to state. So we don't have any level. So how can we calculate as of now? We don't even know what will be the GST level.

Okay, fair enough. Thank you very much. I'll come join the queue. Thank you a lot and all the best.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Rohit Ahuja for closing comments.

I thank you all for attending this call, and it was a pleasure to host Gale Management, and I congratulate them again for a good set of results. And wish you all the best for the future, sir. Thank you.

Thank you. Thank you, Rohit. And I also thank you for this call. And if any questions or if any queries are there, My team is there, myself is there, because in the phone call some questions might not have been answered or there may be some clarifications which are required. Please be free to contact us and we will inform you whatever the details are required. Thank you. Thank you very much.

On behalf of VOB Capital Market Seminar, that concludes this conference. Thank you for joining us and you may now disconnect your lines.