IGL has a programme to provide 4 lakh domestic connections & set 120 new CNG stations in FY22: AK Jana, MD

AK Jana, Managing Director, Indraprastha Gas Limited (IGL), talks about September quarter results, demand situation for CNG, plans related to electric vehicle charging stations and expansion plans during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: How has been the quarter for the company? Also, provide a sense of segmental performance in terms of CNG and PNG?

A: I am very happy to say that this year in spite of the pandemic situation though we had a target that we will have to be at the level that we used to achieve before the COVID. But in spite of that, we could not achieve that target. It is down by 18%, if you see the bifurcations the domestic PNG has gone up by 22% then the last year. The industry also went up by 5%. While in the commercial sector it has reached the level of 45-50%. And, the CNG because certain sectors were not operating, like schools, hotels and restaurants and restrictions due to the farmers strike at the centre at Delhi border, we were not able to achieve the CNG level and is down by 22%. So, all put together it is 18% down. But in the second wave, if I see that just after weeks we could achieve the levels at which we were operating in March.

Q: What is the reason for the decline in the margin? Going forward, what is your outlook on margins?

A: If we compare the margins with the last year then it has increased. Last year, the margins stood at Rs 6.4 EBITDA per SCM and today it is Rs 7.60 for the whole year. If I compare, the margins of the fourth quarter with the third quarter then there is a slight decrease in that and this is because of two things (i) the gas prices in March has gone very high and (ii) at the year-end the adjustment of provisions that is made has led to an increase in our cost due to which the margins contracted. But we had a target to attain a margin in a range of 7.50% to 8% EBITDA per SCM so that an additional burden doesn’t fall on the customers. Secondly, we want to continue the conversion that is happening in the CNG vehicle. So this was a strategy for us. Going forward, looking at the business growth and investments and balancing things, we may increase the margins.  

Q: Recent lockdowns had an impact on volumes in Delhi. How it is shaping now as things are unlocking now and how much the demand has gone up? The difference in CNG and petrol/diesel prices is increasing continuously due to the continuous increase in diesel/petrol prices. Is any price hike in CNG is expected sooner?

A: Our pricing formula is based mainly on three things, like: 

1) The input cost of gas that is fixed for the domestic gas price is fixed around $2.18 MMBTU and it will continue till the next October.

2) The investment I am incurring for setting up a new CNG station and creating infrastructure.

3) The operating expenses. Additionally, we are adopting some new technologies like digitalization and these are the things where additional costs will be there, which as a part of supply and distribution cost.  

The fourth one is that normally we see what is the price of the alternate fuel, which is increasing but today we are not very keen to increase but still we will do some balancing, if required it will be increased because of this high investment because of reducing cues in the CNG stations and the investment In the new GS. So, we will be doing a balancing but today I won’t be able to tell you how much it will be there but will take a call so that the growth of CNG is impacted by increasing the price.

Q: How many new CNG stations have the company set up in Q4FY21 and what is the plan for FY22? How much the CapEx the company will do and what is the overall growth plan for FY22?

A: Last year, due to the pandemic situation, we gave connections at 3 lakh and 10,000 houses, which is the highest number that any entity has achieved in any sector. We added 60 CNG stations. This year, we have a programme to provide around 4 lakh domestic connections and resource planning has been done for the purpose. We invested around Rs 1,000 crore last year and have a plan to spend around Rs 2,000 crore this year in which the expenditure proportion will be around 40% in the new GMA and 60% in the old GMA. In this, we have plans to set up around 120 CNG stations and connections at 4 lakh homes. And the way we have converted 100% industry into PNG, which we're using polluting fuels, we will try to do it in the NCR region, we have a high network in the area. In the NCR region also, we have a target to convert all the industries, which are using the polluting fuel, into PNG.

Q: BPCL has a 22.5% stake in your company. What will happen with the stake after BPCL is privatized? 

A: It is very difficult to say and it is driven by the ministry and BPCL. A bundle sale is being done, so, if the BPCL is out then whosoever buys it will have the stakes. We will discuss it based on the terms and conditions it will have with the BPCL. So, it will not be the right thing to talk about the issue at present but it will not have any impact on IGL, i.e. we will continue with the growth and investment plans because we have resources - be it be about the funding or human resources - is sufficient to carry on the business further.

Q: Even during the last interview in March, you said that the electric vehicle is also an interesting area where a lot of development is visible, especially in the battery swapping business. You also talked about setting up a gas meter manufacturing unit in India for which you have also floated an expression of interest (EOI). What is the update in both areas? 

A: As far as the new business area is concerned, I had discussions about the EVs and we are at a very final stage in it. We are thinking of battery swapping in July itself and we will do it immediately. Discussions are going on on the MOU part and as it happens we will discuss it with you. But, in the context of EVs, we have plans to install a battery swapping facility at 50 to 100 stations. The second is the long-haul transport and we have started it with the Dehradun Transport sector in which after refilling the buses can run more than 1000 kilometres. In fact, the Uttrakhand government has liked it and they are also pushing us both of us will jointly work on it. Parallelly, now, we are discussing the same with the nearby states, like Uttar Pradesh, Haryana and Punjab. If we can convert the long-haul busses into CNG then it will emerge as a big revenue source for us. The third point is that we were having discussions with DTC and have signed an agreement for the next 10 years and they will continue to take CNG from us. We have fixed a target to take 7 million MMSC gas to 10 million in the next 3-4 years.