GAIL (India) Limited (GAIL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Gale India Limited Q2 FY27 Earnings Conference Call, hosted by Philip Capital. As a reminder, all five small lines will be the listen 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, send zero on attached on phone. Please note that this conference is being recorded. I would now have the confidence over to Mr. Nitin Tiwari from Phillip Capital. Thank you, and over to you, sir.

Thank you, Muskan. Good day, ladies and gentlemen. Best wishes in advance for upcoming festive season. On behalf of Phillip Capital India Limited, I welcome everyone to Gale India Limited's second quarter 5.27 earnings call. Today, we have the pleasure of having with us, the senior management of Gale, led by Director of Finance, Shri S. K. Sinha. I will now hand over the floor to the management for their opening remarks. This shall be followed by a question and answer session. Over to you, sir.

Thank you, Nitin. Good evening, everyone. It is always a pleasure to talk to the investors and analysts. And we are deeply thankful for your continued trust and engagement with Gail. The company has declared its result for the Q2 F5 26-27 today, which you must have seen by now. I will talk about highlights, business overview, status of capital expenditure, then we will take your questions. Key business highlights for the quarter. Number one, Gale won Precision Award PNGRB Excellence in the category of Gas Transporter of the Year and Health and Safety. Gale recorded is the highest ever natural gas transmission of around 148 mmCMD on 21st September 26th. Q2 of April 26-27 was another quarter of robust and richness performance. Even as a challenging time continued, the base Asia crisis has now gone on for over eight months, and the company volume from the Middle East partly offset through portfolio flexibility and spot sourcing. Gale's Diversify portfolio again proved to be a key strength in navigating the quarter effectively. Continue to be volatilized dollars per MMPTU. The time demanded challenging. As a company, our prime focus has been to meet our customers' requirements so that they are not left in Singapore. GJSBL supported girls in the sourcing spot volume from time to time, prioritized supply to our customers. The company continued to focus on operational efficiency and valuable value for our stakeholders. PBT and FAT during the quarter stood at Rs. 5,838 crores and Rs. 4,650 crores, respectively, almost in line with the previous quarter. For half year, this financial year, PBT and FAT stood at 11,611 crores and 8,943 crores, respectively, which is a growth of more than 160% as compared to the H1 of the previous financial year. Moving to the segment-wise, starting from the natural gas transmission, natural gas transmission volume for Q2FI27 stood at 130.10 mmCMD as engaged 122.36 mmCMD in the previous quarter, an increase of about 6.3%, in line with the recovery in the gas consumption in the country. During the quarter, we also recorded our highest river transmission volume of 147.55 mmMSTMD on 21st September 26th. Overall natural gas transmission volume for 8 months F by 27, 6.25 mmMSTMD. Transmission volume at 48 crores at PVT level, 53 crores, 51 TMT in Q1 F by 27. And due to the scale of operation, the transmission in the LPG transmission segment, volume improved by 5% and stood at 1130 TMT as engaged 1077 TMT in Q1FY27 per metric ton.

Again, the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-down text. If you wish to remove yourself from question Q, you may press. Please sit to use hands while asking a question. Please and gentlemen will wait for a moment while the question Q assembles. The first question is from the line of ProBell scene from ICIC Security. Please go ahead.

Thank you. Very good afternoon, sir, and many congratulations for a very strong set of numbers. I just wanted to understand your thoughts on where this strong gas demand is coming from, in the sense that despite the kind of strength we have seen in energy prices, you know, in your opinion, I mean, if you can just give us some sense of which segments, consuming segments are actually seeing traction, and is it more a function of organic demand or also a continued switchover from other alternate liquid fuels?

Thank you, Prabhulji. As you know, we have major five segments where gas consumption is happening. Number one, fertilizer. Second, power. Third, TGD. Fourth, industry. So, during the consume more gas as compared to the previous quarter. So, power sector consumed, consumption of power sector has increased from 10 to 12, 27, from 32 to 33 percent.

Okay. And this, sir, this percentage increases versus Q1 or on a Y1, sir?

Q2 versus Q1.

Okay. So, on a Q1 cube, sequentially, that is the kind of increase we have seen?

Yes.

Got it. The second question was, of course, around the trading business. You know, obviously, I think this is a question you would have been asked at Q1 itself that the guidance remains fairly conservative. Now, if I look at the run rate that is there for the first couple of quarters, we are already sitting on somewhere around 6,500 crore or so for EBITDA. So, one should again sort of assume that this is sort of the 9,000 crore number that you just mentioned. This is again sort of the minimum level that you hope to achieve. And if the current situation were to persist, there is a reasonable chance of upside risk to be estimated. Is that a fair way to look at it, sir?

Basically, based on the internal calculation, under 500 crores, based on what happened during the Q3 and Q4. So, though, $32 and our HH price is around $10. So, we are mixing the gas with the spot as well as HH and other portfolios and we are supplying to that to the customer. So, during the Q3, I think our nine months versus three months, gaining more margins, this will not available during the Q3 and Q4.

So, going to the estimation of our marketing committee, we are estimated. So, the 9,000 to 9,500 crores is the reasonable ban based on current situation which we could estimate. So, we are not saying that it is whether optimistic or pessimistic, but it is a reasonable estimation of our marketing committee.

Got it, ma'am. One last question, if I may. In terms of the transmission segment, sir, was, you know, I did mention that you reached an all-time high of, I think, somewhere around 147 MMS CMD, if I'm not mistaken. But just your thoughts on 148 MMS CMD. 148, sir, 148. So, what has been the October run rate, sir, if one can ask?

It's 127 MMSCMD on yearly average basis, 34-135 MMSCMD. Particular date, this was 148, but not regular basis. So on average basis, it is around 126-127.

So that is what we should be working with for the second half of the year. Got it, sir. If I have more questions, I'll come back in the queue. Thank you so much. Thank you.

A reminder to all the participants, you may press star and want to ask questions. The next question is from the line of Malik Patel from Equiria Security, Private Limited. Please go ahead.

Yeah, thanks for the opportunity. Just two questions. One on this PetCAM expansion of PDH plant, where are we in terms of timeline And in terms of commissioning, there's been slight delay in overall project progress. So that's the first question. Second question is related to overall LPG business. Obviously, the volume has been flat. But are you getting more domestic gas, APM gas to manufacture, to produce the LPG? Because there has been a shortage in the past, which is currently not there. But has there been any discussion related to that with ministry?

Commission during the next year, I think, as the scheduled completion, it is 38 June 27. And this may take more six months plus minus commission during the year 27-28. And second question regarding the LPG.

NWG gas for that? Or the LPG? Or it's only APM?

For APM gas that we are getting. And based on the gas profile, which we are getting domestic gas profile, this is the maximum we can produce. So we have, we started our Gandhar plant as well to meet the country's requirement. And this is the maximum production level based on the domestic gas profile that we are getting from ONUC.

Got it. We are extracting C3, C4 plus.

Yes.

So right now, whatever molecule So, based on the molecule available, we are consuming gas around 1.9 mm CMD.

Got it. Now that 1.1 or 1.2 is APM and remaining is NWG. Got it, sir. Thank you. Thank you very much.

Thank you. The next question is from the line of Amit Muraka from Access Tuttle. Please go ahead.

Yeah, thanks for the opportunity. And just on the trading segment, while this year you are raising the guidance now to 9,000, 9,500 crores, as you said, will you raise it also for next year or like how is the guidance for that?

Next year, I think that situation will be normal. So our normal guidance is around 4,500 to 5,000 crores.

So, as of now, you maintain that then. Sure. And also, on the Petkin business, so you have reported a small positive EBITDA here. Just wanted to know what is the source of gas and the cost of gas in the quarter for Petkin.

Basically, we have gas from the different sources. We have HH gas, we have JCP gas, we have spot gas. So, we are providing around 40-50% HH gas and 40-50% spot gas. So, based on this mix, we are able to manage EBITDA positive during the Q2 FY27.

And this mix will continue, right?

Yes.

Got it. But what was the average cost that came in Q2 for the gas?

Around 13.6.

13.60. Even though you said that 40-50 was portal NG, but the average was 30.6. I mean, HH was $10, right? And as you mentioned, the delivery cost was $10 for HH and NG.

8.8. Around 9. 9. And it's 40-30, $32.

We are investing gas to petrochemicals from our existing portfolio, which includes JCC, some mid-term gas, and HH as well. So, it is based on the availability of gas in our portfolio. We are allocating it to our pet chem segment.

Understood. And also, like, the transmission OPEX has risen a bit in the quarter. So, any kind of one-off over there, or is it like a normal increase due to cost inflation that you're seeing?

Talking about the Q2.

Yeah, the second quarter.

It is basically the fuel cost because the transmission volume has increased. So, we need to run our compressors to push the gas. So, it is basically the fuel cost.

Sure. Sure. Okay. That's it for me. Thank you.

Thank you. The next question is from the line of Nitin Tiwari from Philip Capital. Please go ahead.

Yeah, hi, sir. Good evening. There were a few questions from my end. So, sir, we are seeing a lot of reports about increase in logistics costs as far as food sourcing is concerned. So, are we facing similar challenges in increase in trade costs for LNG tankers as well? And is there any shortage that we are seeing for LNG tanker availability while we are scheduling our cargoes?

Can you come again, Nithin, please?

Yeah, ma'am, I was asking that are we seeing any challenges with respect to increase in freight cost or availability of LNG tankers when we schedule our cargos?

There is no shortage. No shortage. We have six cargos on our long-term portfolio which are transporting our LNG from U.S.

We are optimizing our shipping portfolio through days, 4 days, 4 days.

Sorting is on a delivered basis, Nathan, if that is what you are referring to.

All right, ma'am. And that's helpful. And secondly, I also wanted to understand that what's the prognosis for petrochemical plant at Pata? I mean, we have had been facing challenges with its profitability, and I understand that these are, like, you know, somewhat challenging environments, but when things normalize, like, you know, what kind of a normalized profitability you can expect from this unit, and when can we foresee that happening, if we can throw some light on that?

...37,000 per metric ton. We are supplying gas around $14. So, based on $14,000 and one last $40,000 price, drastically come down to around $95,000 per metric ton. Then suddenly gas price will also reduce from the existing level to $9,000. So, I think $50,000 price and $9,000 input cost...

Thank you.

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

Good afternoon, and congratulations on good set of numbers. So, my question is pertaining to this 190 MMSEM PLL volumes. So, was there a financial benefit from that during the quarter, which was part of the marketing earnings?

Repeat your question, Mr. Sabri.

In this North Street account, you have mentioned 190 MMSCM of supply you received from Petronet, LNG, I think which is some of the Qatar volumes which may have come during that period. So was there a financial impact of the same on the marketing earnings?

We got, though Qatar energy continues to be under force measure, They supplied some cargos. One such cargo was received in September, and we have received three cargos in October, right? And these cargos are pertaining to long-term portfolio, which are supplied back-to-back to federalists. We are getting normal margins on this, which we used to get earlier.

Okay, so there is no one-offs or anything of that sort in the marketing numbers. It is basically the JCC versus current brand spread and HH versus oil link plus spot that is what is driving the second quarter numbers also, right?

That's right. And in addition to what you have mentioned, we have got some margins on our spot sourcing as well. We continued sourcing spot. The spot was rising. We were buying spot. So we got some leverage on that account as well.

Got it. And just a granular detail on this marketing guidance for next year. So you were at 40-45 billion earlier. So now we are at 45-50 billion. Is that right?

The things will be normalized. So, our guidance was 4,500 to 5,000. So, in the next year, it will be around 4,500 to 5,400.

And this is on what level of volumes?

At current level, 105 MMSMD, around 100 plus MMSMD for the gas marketing.

100 plus MMSMD, 4,500 to 5,000. Thank you so much, and all the best. Thank you.

The next question is from the line of Ashton. So, I can start with this.

Please go ahead.

Is my audible?

Yes, sir.

So, as PLG's IPO is coming, so how do you see its volumes evolve over the next three to five years, and how many CNG stations are you planning to set up over this period?

Basically, right now, we are having six CGD, six geographical area, and I am going to transfer to the gale gas because IPO of the gale gas will come during the next year, 27-28. So, whatever increase in the CNG station or the CNG connection will be done by gale gas. For the next two years, Gale Gas target to add around 275 new CNG stations with CNG connections.

Got it. And sir, can you give me the FY26 volume, overall volumes and volume breakup in MMS-CMD for CNG, domestic PNG and industrial PNG for Gale Gas?

For gale gas, just 2.39 CNG for the gale gas for half year. 67 CNG, 0.58 industrial, 0.05 commercial, and 0.09 domestic. The total gas, 0.39 MMS GMT.

Sir, this is for which period?

And for the TTZ around 1.24 and bulk sales, 3.16. The total, 6.79.

Sir, this is for FF26, correct?

The next question is from the line of Vikas Jain from CLSA. Please go ahead.

Yeah, thanks for taking my question, Sinaji and Anjanaji. So, my question is about this gas volume increase that we have seen, QOQ basis. Of course, great numbers are over there also and overall as well. So that increase from 122 to 130 mmCMD roughly. Is there an element of some seasonality over there? Is there a big element of power or is there anything like that which maybe will kind of dry out soon or something like that?

Major consumption happened in the power sector, as well as in CGT and fertilizers.

So the extra 8, how much roughly came from power?

At the country level, power has consumed around 2 mm STMD more, and fertilizer consumption increased by around 4.5 mm STMD during the quarter as compared to previous quarter. In addition to that, PetCem plants, which were not operational in quarter one, they were also started like C2, C3, Opal, and our own PetCem plant. So there is an increase in consumption in PetCem as well by around 3, 3.5. For the country level, the consumption has increased by around 8.5 of MSCMD as compared to previous quarter. And if we compare it to previous year, we are more or less flat.

Fertilizer was simply because they are returning from shutdowns and all. And again, similar could be said about PetKem that they are getting back the volumes. So, the power element is only about 2mm SCMD for the country overall, right? Yes, that's right. So, it's not… So, even currently, it will be fair to say that you will be not too far away from these kinds of numbers. I mean, about 128, 129, close to that kind of volume numbers.

I already said that for current financial year, we will be around 126-127.

Okay. No, okay, fine. So, even right now, you are working around the ballpark. That's why that gives you the confidence. And so, we are building on that 126-127 and saying that it will go to 134. That extra 6-7, you suspect, how would that break up come from? I mean, how much is coming from Citigas and how much from others?

Mostly Citigas.

So, an extra 7 MMSTMD you are expecting from city gas, is it?

Refinery volumes we are expecting to come back because refinery currently they are consuming around 5 million less from what they used to consume historically. So, this refinery volume 5 MMSTMD will come back. So, CGD is growing at a very good pace. Last year, the average Consumption of CGD was around 45, which has grown to 55, 54, 55. So, the CGD is growing plus refinery volume will also come back.

Okay. And so, even at these high LNG prices, this kind of volume of 128, 129, 130 of MSCMD, you see is sustaining around these kinds of volume.

We are supplying based on the mix.

We could answer to your query, Vikas, or...

Yeah, yeah, yeah. No, no. Thanks a lot. Thanks a lot. I got my answers. Thank you.

Thank you. The next question is from the line of Sanjay Mukhin from J.P. Morgan. Please go ahead.

Satish J. Andranaji, good evening. A couple of questions from me. On the balance sheet, sir, there is a sharp increase in trade receivables in the first half. Is this just a pricing issue, or is there anything else on the receivable side, sir?

Basically, gas price has increased as compared to the previous quarter. So, within credit collectible has increased drastically around 5,000 crores.

Correct. So, there's no delays in payments from any customer as such.

This is a normal…

Second question, sir, could you update us on the new pipelines that have been commissioned? Are we seeing any incremental gas volumes on, let's say, the Mumbai-Nagpur-Jasrugura pipeline sections?

Now, we are supplying to the CGD sector in Mumbai-Nagpur-Jasrugura, and similarly in the Chirka-Kulam-Hangul pipeline. But certainly, there is a customer in the Jasrugura, so we are connecting these customers, and they will consume gas in the coming year.

Do you have a sense of how much of customer conversion you can see along the new pipelines? And lastly, on the Kochi pipeline, sir, it's been delayed continuously for so many years. I mean, you said it will get completed in this fiscal. What is the confidence around that?

Basically, only 3 to 4 kilometers is left. So, if we are hopeful that 3 to 4 kilometers will be late by March pipeline, including Jagdishpur-Albiya, Kochi-Kanjaport-Mangalore-Mangalore, SAPL, Mumbayne, Rudhasko-Jammu pipelines, all the pipelines will be commissioned during the current year by March maximum.

All right. Thank you, Sadeeshji.

A reminder to all the participants, you may press star and want to ask questions. As there are no further questions from the participants, I would hand the confidence over to the management for closing comments. Over to you, sir.

Thank you. Thank you, Nitin, and thank you all the analysts and investor fraternity for continuing their trust in Gail, and for any further query, you may reach out our IR team, led by Anjana Ranjivamayam. And I would like to wish everyone a very happy, prosperous, and joyful Diwali. Thank you. Thank you so much.

Thank you. On behalf of Philip Capitan, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.