Analyst Concall
Indraprastha Gas to up natural gas prices to maintain EBITDA
This story was originally published at 20:21 IST on 29 October 2024
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--Indraprastha Gas: Provide gas to 2.8 mln households
--CONTEXT:Comments by Indraprastha Gas mgmt in post-earnings analyst concall
--Indraprastha Gas: Have 5,000 industrial, 6,300 commercial customers
--Indraprastha Gas: Have 884 CNG stations, serving 2 mln vehicles per day
--Indraprastha Gas: Jul-Sept average compressed biogas sales 5.29 mln kg/day
--Indraprastha Gas: Hope to achieve volumes of 9.5 mscmd on average FY25
--Indraprastha Gas: Sales outside Delhi growing at 17-18%
--Indraprastha Gas:Target INR 17-bln capex in FY25, spent INR 5 bln Apr-Sept
--Indraprastha Gas: Hope to achieve 8-10% on-year growth in volumes
--Indraprastha Gas: To commission 3 LNG stations by FY25-end, 50 in 3-5 yrs
--Indraprastha Gas:Don't see growth slowing on INR 2-3/kg hike in CNG tariff
--Indraprastha Gas: Need INR 5/kg CNG hike to maintain current EBITDA level
--Indraprastha Gas: In discussions to raise natural gas prices for customers
--Indraprastha Gas: In talks with govt to rationalise tax on natural gas
--Indraprastha Gas: No existential threat from electric vehicles
By Sunil Raghu and Akshay V. Johnson
MUMBAI – Indraprastha Gas Ltd. is in discussion with the government to raise natural gas prices, the company said during a post-earnings analyst call Tuesday. The company said it needs natural gas prices to increase by INR 5 per kilogram to maintain its current level of earnings, before interest, tax, depreciation, and amortisation.
With the government recently cutting allocation of natural gas sold under the administered pricing mechanism by 20%, Indraprastha Gas' management said it was now looking for alternative sources to meet demand. Analysts in the call largely focused on the cut in administered gas price allocation, and how it would affect the profitability of the company. Indraprastha Gas is focusing on liquefied natural gas and compressed biogas to improve its volumes as well as profitability, the company said.
The company said the industrial segment is fully dependent on regasified LNG, and there is no administered price mechanism allocation in the segment. The management said it is confident about finding alternative sources to counter the cut in allocation. The company said it is in talks with the government to rationalise tax on natural gas. The impact of any reduction of gas allocation under the administered price mechanism will be offset by rationalisation of taxes, it said.
The company said it provides natural gas to more than 2.8 million households, 5,000 industrial customers, and 6,300 commercial customers. It operates more than 884 compressed natural gas stations and serves 2 million vehicles per day.
In Jul-Sept, the company achieved the highest sales per day during the September quarter at 5.29 million kilograms per day. The company said it does not see a reduction in the growth volumes even if the CNG tariffs increase by INR 2 per kg.
The company said it is looking for long-term contracts in case it is able to source gas at a cheaper price or at a price closer to the administered pricing mechanism gas prices, in order to protect its margins. The company said there is no existential threat from electric vehicles as demand for CNG is growing at a much faster pace compared to all other fuels. The company sees de-growth in the petrol and diesel segment.
The company has a target of 9.5 million standard cubic meters per day. For the September quarter, the company achieved an average volume of 9.03 mscmd. The company aims to achieve an 8-10% on-year growth in volumes. Indraprastha Gas is set to commission 3 LNG stations by the end of this financial year, and plans to open 50 LNG stations in the next three to five years.
Indraprastha Gas has planned a capital expenditure of INR 17 billion for the current financial year. The company said it has already made a capital expenditure of around INR 5 billion in Apr-Sept. About 45-55% of the capital expenditure will be made in the Delhi-National Capital Region and the rest will be spent in other geographical areas. The company said its sales outside Delhi are growing 17-18%. End
Edited by Tanima Banerjee
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