Indraprastha Gas Limited (IGL) Q3 FY23 Earnings Concall Transcript

Indraprastha Gas Limited (NSE:IGL) Q3 FY23 Earnings Concall dated Jan. 27, 2023.

Corporate Participants:

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Pawan Kumar — Director, Commercial

Manjeet Singh Gulati — General Manager-Finance

Analysts:

Yash Goenka — — Analyst

Ronak Chheda — — Analyst

Devansh Nigotia — — Analyst

Ketan Mehta — — Analyst

Rajesh Aynor — — Analyst

Maulik Patel — — Analyst

Nitin Tiwari — — Analyst

Devansh Nigotia — — Analyst

Siddharth Chauhan — — Analyst

Vishnu Kumar — — Analyst

Varatharajan — — Analyst

Presentation:

Operator

Greetings, everyone. On behalf of IIFL Securities, I welcome you all to the Third Quarter FY23 Earnings Call of IGL. Firstly, we sincerely appreciate management’s initiative to interact with the investors through this forum. Thank you very much, sir. Today, we’ll discuss the results in detail. We have the entire senior management of IGL. I’ll make a brief introduction. Firstly, we have MD, Mr. Sanjay Kumar; Director Commercial, Mr. Pawan Kumar; CFO, again Mr. Sanjay Kumar; and Mr. Manjeet Singh Gulati.

I first request MD, Shri Sanjay Kumar.

Unidentified Speaker —

We also have Rajeev Kumar, he is Chief Marketing Officer.

Operator

Welcome, sir. I first request the MD to make an opening remark, subsequent to which I’d request CFO to say a few words, and then we can open the floor for the Q&A. Over to you, sir. The recording has stopped.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Okay. I welcome investors to this earning call.

Operator

Sir, just a second. Sir, we are not able to hear you.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Are you able he hear us now?

Operator

Yeah, now it is very clear, sir. Thank you.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

No, but why we are disconnecting every minute? My IT team says that there is no problem at our end.

Operator

Now lets continue. Now it’s clear.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So IGL has declared the Q3 results day before yesterday and declared a PAT also to INR278 crores, which is 10% lower on a year-on-year basis, and for the first time IGL has crossed the five-figure mark in terms of turnover in an FY within nine months, which stood at INR11,500 crores during the nine months. IGL Board has also approved payment of interim dividend of INR3 per share to the shareholders. This sales has grown by 6% over the corresponding quarter in the last fiscal and with the average daily sales going up from 7.66 million cubic meter per day to 8.12 million cubic meter per day. Product wise, CNG recorded sales growth of 8%, while PNG recorded sales volume growth of 1% in the quarter as compared to corresponding quarter last year. Q-on-Q, the sales volume was almost flat 0.4% growth. However, for the first nine-month period of this FY, significant growth of 19% was witnessed.

On EBITDA front, the Company has earned EBIDTA of INR428 crores as compared to INR470 crore in the corresponding quarter of last year. The per SCM EBIDTA stood at INR5.74 during this quarter against the corresponding previous year number of INR6.67 per SCM. The decrease is mainly on account of increase in the input cost of gas, which could not been fully passed on to the customers to maintain the balance between growth potential and profitability.

We expect the same to be increased to the range of INR7 to INR8 per SCM in next financial year after implementation of recommendation of Kirit Parikh committee — Kirit Parikh committee report. In the future outlook, we’ll maintain our stand that company expects healthy volume growth and is likely to achieve 9 million cubic meters of sales during our FY2024 and further 10 billion cubic meter per day sales in FY2025. These are my opening remarks.

Pawan Kumar — Director, Commercial

Good evening. I’m Pawan Kumar, Director, Commercial. I welcome the Investors in this question-and-answer forum. Post-COVID, we are meeting first time in this format, which we’ll like to continue. As regards to the future outlook, we maintain our stand that the Company expects healthy volume growth and is likely to achieve 9 MMSCMD next year and 10 in the subsequent years. And the Company will try to maintain the EBITDA in the range of INR7 to INR8 per SCM.

The results have already been available with you and we have started working recently in the new GA which was allotted to us, that is Banda, Mahoba and Chitrakoot in Uttar Pradesh. We have started laying the pipeline. As far as the other GAs are concerned other than Delhi and the older GAs, we are expanding our network in a very faster manner in Ajmer, Pali and Rajsamand, then Muzaffarnagar, Meerut and Shamli, and then Karnal and Kaithal. And we are also expanding quite fast to cover the entire up Hapur and the outers part of Meerut. The jobs have already the tendered out, and this area being quite Populous and paying capacity also quite high, we expect that the sales volume from this area will be phenomenal in [Technical Issues]

And now I welcome investors and we’re can straight away go to the question-and-answer session.

Questions and Answers:

Operator

Sure. Thank you. Really appreciate the opening remarks and brief overview. I would request the participants who wish to ask questions, kindly either type in the chat box so that we can read them and recite them for the management, or you can rise hand, we’ll call out your name and unmute your line and you can go ahead with that. [Operator Instructions] So the first question is from Yash Goenka. Vedashree, can you unmute on Yash’s line.

Yash Goenka — — Analyst

Hi, can you hear me?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yeah.

Pawan Kumar — Director, Commercial

Yes.

Yash Goenka — — Analyst

Hi, sir. Thank you for taking my question. I wanted to know what is the OMC commission and ETC discount for CNGs in NCT region? And second question will be, can you give us the breakup of CNG volumes in PV/LCV [Indecipherable] stage carrier for nine months FY23?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So, what is — OMC commission and what is other part of question?

Yash Goenka — — Analyst

DTC discount.

Pawan Kumar — Director, Commercial

As far as commission is concerned, it is INR5.94 per kg and it is under discussion, still under discussion by the industries. But the provision have been made in the [Technical Issues]

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So INR594 before we are already paying to the OMCs. And DTC discount is 6% of the retail price that we — whatever is the retail price, 6% of that is the the DTC discount because they have given us all the facilities within their [Speech Overlap] for setting up CNG station.

Yash Goenka — — Analyst

Okay. And sir, breakup of CNG volumes in PV/LCV Three-wheeler buses, stage carrier for nine months.

Pawan Kumar — Director, Commercial

Stage carrier and bus is approximately 20% to 22% of the total sales. Out of that around 8% to 10% is ETC and dues. That’s the breakup of total sales in terms of buses and transit vehicles.

Yash Goenka — — Analyst

Okay.

Pawan Kumar — Director, Commercial

Total CNG sale is 4.5 million kg per day, of that 20% is DTC and stage carrier. And what is the breakup?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

8% to 10% is DTC. That is the total volume. [Speech Overlap] I hope you got it, Yash.

Yash Goenka — — Analyst

I’ve got around 30%. I got stage carrier and DTC, that is 30%, 35%.

Pawan Kumar — Director, Commercial

Total bus sale is 22%. Out of that 8% to 10% is DTC and remaining 10% to 12% is stage carriers.

Yash Goenka — — Analyst

Okay, fair. And what has been the volume growth for CUGL and MNGL for nine months and what is the outlook for them on margins and volumes for the next two years?

Pawan Kumar — Director, Commercial

As CUGL is concerned, CUGL has the I think they have not grown in terms of volume and the profits are also been down. As far as MNGL is concerned, we have grown by 9% and they are maintaining the profit during the quarter as compared to last year.

Yash Goenka — — Analyst

Okay. And outlook on margins [Speech Overlap]

Pawan Kumar — Director, Commercial

1.1 million cubic meters per day. And CUGL is selling around 0.33 million cubic meter.

Yash Goenka — — Analyst

Okay.

Operator

Yash, can I request you to come back in the queue? There are a lot of participants. Ladies and gentlemen, I request you to restrict one question per participant. There are at least 50 people in the queue. And we’d like to take as much questions as we get. So the next question is from Ronak Chheda. Ronak, please go ahead.

Ronak Chheda — — Analyst

Hello. Thanks for this opportunity. Sir, really appreciate the initiatives. I had a couple of questions, but I’ll restrict to one. Sir, given the litigation delays in Gurgaon, what is the realistic opportunity for us there and what other current volumes, if you could throw some light?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

The current volume in Gurgaon is about 0.18 million that we are selling. We are also selling to the other party in Gurgaon about 0.25 million cubic meters per day. So this is the volume that is going on. So directly we are selling about R0.18 million cubic meter per day. And through that — the other party which is you know Haryana City gas, which is operating in some part of Gurgaon, we are selling 0.25 million cubic meter per day.

Ronak Chheda — — Analyst

And sir, what could be our opportunity here in terms of volume, say next two to three years? How far we can grow?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

This — you may be aware, Gurgaon is actually under review or evaluation, whatever you call, it has been referred to PNGRB by Supreme Court.

Ronak Chheda — — Analyst

Yes, sir.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So we expect a decision within a few months I think when we will get the clarity about — we are a central government-authorized entity. The other entity claims that they are a state government-nominated entity NOC entity. So this is a highly technical and legal — these words have got different meanings and they depend on the interpretation. So Supreme Court has referred this matter to PNGRB.

Assuming that there are no such obstacles or there is free work front available to IGL for the whole of Gurgaon, in one or two years the sale can actually escalate — can improve 0.5 million to 0.8 million also. That’s the kind of sale that we can achieve in the next two years if there are no legal issues, that is my input view.

Ronak Chheda — — Analyst

Thank you so much, sir. I’ll come back in the question queue.

Pawan Kumar — Director, Commercial

I think this will be the final decision. The case as been lingering around in the Supreme Court for years and years and now it is in the final stages. And Supreme Court so the has also given direction that the gas arrangement which is presently with IGL and these private companies is valid up to September ’23 only. Now it will be final whatever is done.

Ronak Chheda — — Analyst

Got it, sir. Thank you so much for your time.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

All right.

Operator

We’ll take a couple of questions from the chat box. The first one is from Aishwarya Agarwal. And the question is, what is your expectation for APM gas price and the gas volumes? And why do you expect the APM prices the way you expect it to be? That’s part of the question.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

And as of now about 20 million cubic meters per day of gas is being allocated two CGD sectors. We do not foresee any increase in this volume. If from some other sector government allocates us some gas, it will be good for the CGD sector. And about the pricing, you may be aware about Kirit Parikh committee report, which has already recommended that for the first year the price would be $6.5 per MMBTU, which presently is at $8.57 per MMBTU. So we can easily see that there is likely to be margin enhancement was of about INR6 per SCM if this goes through — if this gets approved. We hope this gets approved very soon within the next one month. Maybe by 15th of March this should definitely get approved, because that is — it is in the — government is already working on that.

Operator

Thank you. And the second part of the question with CNG prices close to liquid fuel, do you see volume growth adversely getting affected?

Pawan Kumar — Director, Commercial

We were just talking about Kirit Parikh committee report. We have allocation from APM, non-APM is around 76% currently. So once the report implemented, there will be cost reduction on the 76% — almost 76% part of the gas. So, I think that’s should lead to increase in the margins. And secondly, we are also seeing that the crude prices are coming down and the gas prices wherever they’re linked to Brent they will also come down.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Just to add to what your were saying. The76% is from the point-of-view of the total sales. We talk about only priority sector, 87%. [Speech Overlap] So for CNG and DPNG it’s 86%, 87%. For total IGL sales it is76%, we wanted to clarify that. Regarding the other point that you made that the prices are very close as the Director Commercial said, that Kirit Parikh committee report has already recommended $6.5 per MMBTU. So we hope that we get approved and that gives us a lot of headway, a lot of possibility of even maintaining the convergent rate off CNG vehicles. So more-and-more vehicles will be bought because we will moderate the prices if that committee report gets through. We will moderate it slightly.

Operator

Understood, sir. Thank you very much. We’ll take one more question from the chat box and then we can turn to the live Q&A. The next question is from Pinakin Parekh. And he asks, what is the outlook for gas costs in the second half and would gas costs move up higher in the second half?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Which second half?

Operator

I think he means by the calendar year.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So calendar year, we are well placed to have lower cost of gas. Most analysts are telling — you to see European winter was so mild this year that some places where the temperatures was normally minus 5, minus 6 degrees centigrade, there the temperature recorded on 1st of January was 19-degree, or 12-degree or 16-degree, which shows that the heating requirement has gone down in Europe in recent weeks and that is why the storages are even today full up to 76% in Europe. So we hope that LNG prices would soften and the domestic gas prices which are available on different trading platforms, they are actually always mirroring the LNG prices. So they will be lower than the LNG prices if the LNG prices go down to $15 in next are few weeks or $12, and domestic gas will be available at even lower prices. So this 76% that he was referring to a few moments ago, so remaining 24%, most of our gas, we will have some compensating factor in the form of better margin if we are able to source those gas. I’ll be happy in doing it in the last few weeks. And that is why we have maintained this margin, we have been able to get the profit of INR278 crores.

Operator

Understood, sir. Really appreciate. He further asks, how does the Company view the recent ordering of EV buses by DTC.

Pawan Kumar — Director, Commercial

EVs are being ordered, but major convergence so far is — registration is in two-wheelers only and as the buses are being ordered, so we are also expanding into other segments. Like, we are expanding very fast into other GS, where our work is progressing very fast. Secondly, we are looking at the long-haul buses. Like, you know, we have converted a few buses in Dehradun and which are plying on Dehradun, Delhi route. Similarly, we are working with [Indecipherable] Road Transport Corporation where we want that Jaipur- Delhi buses should be converted to CNG. And we also want that the Haryana roadways and UP roadways which operates from Delhi and passes through our GA, they also start converting their fleet into CNG. So we expect any loss if it is there to E-vehicles will get offset by these segments.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So in summary, what he has told that we acknowledge the threat of EV. First think is that we know, because they are now I think issuing tender of 5,000 buses. We understand that buses would come — EV buses would come. And by acknowledging, we are making strategies which will compensate for that business and give us alternate diversification for growth of our volume as well as new business in the form of EV Sector also.

Pawan Kumar — Director, Commercial

Also there are a lot of dumpers, heavy vehicles carrying sand and other things, building materials on the periphery of Delhi. We have been able to convert then to CNG and we are also working with the OEMs for tractor manufacturers, because a large part of this NCR, including Muzaffarnagar, Meerut, Hapur, and Rewari, this forms a part of NCR where diesel vehicles more than 10 years old cannot be used. So our AIM is that once we are able to convert the tractors, tractors can be used for 15 years and being a vast agricultural land, a large volume can be compensated from this segment.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Additionally, it’s not that they’re buying only EV buses, they are also buying CNG buses. Both the fuels be steadily maybe 10 years at least. It will not be a sector that didn’t drop I think. Next, four, five years we do not see any degrowth in our bus sales.

Operator

Really appreciate it. Thank you. So the next question is from Rajesh Aynor. Vedashri, can you unmute his line?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, Rajesh. Hello. Yes, Rajesh, go ahead.

Operator

Rajesh there is some issue with your line. What I’ll do is perhaps come back in the queue again after a minute or so. Vedashri, can we take the next question from Amit Rastogi.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, Amit. It it Amit or Ameer.

Operator

Okay, some issue with his line as well. Vedhasri, can we go with Devansh Nigotia, please.

Devansh Nigotia — — Analyst

Yeah, Sir can you hear me now?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, we can.

Devansh Nigotia — — Analyst

Yeah, okay. Sir, first of all, I’d like to congratulate for taking this initiative of hosting the call with the investors and I hope this practice will continue in the coming quarters as well. Sir. I have two questions. One is when we look at the LNG mix, like you mentioned 24% LNG we have, around 14% for the priority sector and 10% for the non-priority sector. So what is the benchmark, broadly can you tell us? And what percentage we are still procuring from spot?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

The average price that we are paying is about $13, $14 — $13, $14 per MMBTU for the remaining gas that you’re talking about. Unfortunately, because of the APM, non-APM price being our INR8.57, that price is also — the gas price without pipeline tariff is around $10 per MMBTU. So what happens is that, that gas comes at $10 per MMBTU approximately. And this one, the remaining 24% or 25% of gas that we are using, that is coming at around$13, $14. It is here that, that $10 will go down to about $7.25 with taxes I’m talking about or $7.5, and that is where the actual margins would come in.

Devansh Nigotia — — Analyst

Okay, okay. Sir, what are the benchmarks we have broadly, like how much is linked to Henry Hub, how much is linked to oil, and how much is linked to the spot? If you can give me a broad percentage.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

About 60% is linked to — 50% to 60% is linked to Henry Hub. This is about the remaining supplies that we are talking about. And about 30% to 35% is linked to crude oil, which could be Brent as well as JCC. And the last bit of about 5% to 10% depends on the week and fortnight and all that, is actually bought by us from the current market. That is the strategy we have knowingly kept, because sometimes we get gas which is cheaper even than the LNG price from the domestic sources. Those who have got volume for mitigation, those who have got volume for operational reason, etc. That is the best approach that an operator can have and we are the biggest EV operator and we would like to continue in that fashion, that is the strategy that we are following.

Pawan Kumar — Director, Commercial

I’d also like to add that this quarter we got strong domestic gas at ceiling price, approximately 2% of the…

Devansh Nigotia — — Analyst

Okay, okay. Got it, got it.

Pawan Kumar — Director, Commercial

$10.46

Devansh Nigotia — — Analyst

Okay. And sir, my second question is relating to the volume growth. So we have already seen that this quarter volume growth was flattish over the last quarter, second quarter I’m referring to. So what are the reasons you think that has led to a flat volume growth? And is the exit volume in the month of December or end of December was encouraging? Can you give us some guidance on that?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Look, so the volume growth actually depends on the general feeling about CNG, other than IGL, not IGL. But other than IGL, most players have increased the prices by INR5, INR10 etc. There are people who are selling CNG at INR89, INR90, INR95 and all that. We would like to follow the strategy of keeping our market intact. And that has somewhat affected the sentiments of buyers, but there are new models which are coming. We have been talking to Maruti. We have been talking to Tata Motors and some — in Auto Expo we were also talking to iShare, et. So there are some new CV models, there are some new car models which are coming, and we hope to combat with with higher conversion rates later. Presently, the conversion rate is about that. In 13,000, 14,000 per month, which we had informed you last time we would be meeting.

Devansh Nigotia — — Analyst

Okay, got it. Sir, thank you for taking my questions. And once again, thanks for hosting this.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Thank you.

Operator

Vedashri, we’ll take the next question from Ketan Mehta. Ketan go ahead.

Ketan Mehta — — Analyst

Hello. Thank you sir for this opportunity. Are you able to hear me? Am I audible, sir?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, yes, go ahead.

Ketan Mehta — — Analyst

Thank you, sir. In terms of — my question is about the volume growth that we are looking at. So over the next couple of years we are looking at adding 2 million cubic meters of growth. Could you give us a breakup in terms of GAs? Like, which are there GAs where this would get added — incremental growth will come from and how much of this would be from the new GAs? This is the first question.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Well, my director would answer this questions.

Pawan Kumar — Director, Commercial

As far as current position is there, Delhi is contributing to around 65% of sales volume. Noida, Ghaziabad and Greater Noida is contributing to around 21%. Kanpur, Kaithal is just the beginning. Rewari is around 3%, Gurgaon is around 2%, Karnal around 1%, Muzaffarnagar around 1%, and Ajmer just the beginning. So we have laid vast pipeline network in Ajmer area, which we are going to charge shortly. And these stations which are DB stations will be converted to online station. Around 1.5 lakhs domestic connections which have been issued in Ajmer will be gasified in two, three months time.

Generally, we have also laid pipeline in Muzaffarnagar, Shamli, Karnal, Kaithal and Hapur area. And we go with the — charging the pipeline. The statins will become online, plus the public will remain assured that availability is there. So, we presume that more and more vehicles will be bought by the Company.

And secondly, whatever domestic connections we have, they will gasified. So we’ll get the sales from them. And thirdly, the commission for air quality control which controls the air quality in the NCR basically. So all these GAs are in NCR only, including Meerut, Muzaffarnagar, Hapur. We have been given a target connect all the industrial areas by March. So I think few industrial areas are remaining which will be connected by March. So, whatever industry is there, that will also bring us commercial and industrial volume.

Ketan Mehta — — Analyst

Would you be able to quantify the volumes that you are talking for the industrial conversions, how much additional can come from the conversions that we are targeting over the next six to 12 months?

Pawan Kumar — Director, Commercial

So we’re targeting at all 9 million per day by the end of next year, so that one year will be part of –1 million will part of — major will come from these areas only.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

What he is telling you that the additional sale expected in the next financial year end is 1 million cubic meter per day and in the year after that another 1 million. Out of this R2 million, 50% to 60% will come from CNG sale in these new GAs that he has referred to, which is Ajmer, Pali, Rajsamand, then Kaithal, Karnal, then Muzaffarnagar, Meerut, Shamli, and Kanpur, Fatehpur, Banda, Chitrakoo et. These are big areas. They have got good highways going through them, and we are targeting to set up CNG station on these highways which have got huge volume of traffic. Once these stations come up, our sales and they will be on online mode, our sales will be definitely improving by these numbers that we’re talking about.

Ketan Mehta — — Analyst

Thanks, sir. Thanks for a sort of detailed answer. Just one more follow-up around the same CNG volumes. There is also sort of some of the BS-VI norms are kicking in March-April. Do you think that that can also translate into additional CNG volumes?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Sorry, your audio is not very clear, can you repeat?

Ketan Mehta — — Analyst

I was asking that there are some BS-VI norms kicking in April where the cost of conversion would go up for some of the vehicles as well. So does that translate into additional volumes for us or additional conversions for us?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

See, direct CNG vehicles anyway are costlier than the petrol, diesel vehicles, when you buy a new vehicle, whether it is a car or a truck. They are anyway costlier by about 8 lakhs to 10 lakhs. There are still much cheaper than the EVs, so there will be some increase in these cost because of BS-VI new launch that will kick in on 1st of April. We don’t foresee much impact of that. We have not quantified what is the exact increase in the price of the bus and car. We will do that now, now that you’ve given us this input.

Ketan Mehta — — Analyst

Sure. And one more just follow-up in terms of your long-haul buses where we are running the pilots. So are there any approvals needed before we can scale this up?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

No, these are existing permits. They were available with Uttarakhand and there are some more cases in Uttar Pradesh, then in Chandigarh, then for Jaipur etc. So the same permits will be used for running CNG vehicles, instead of — because we are offering them lower-cost on operating basis. See, Vs cannot go long distance. In no scheme of thing the EV can go in the next 10 years for 500 kms and come back, because nobody would like to wait for charging a bus for six hours, seven hours or four hours or even three hours in a roadside Dhaba or in a roadside charging joint so that is where we saw the opportunity. That is what Director Commercial was referring to that we have cultivated this and now we are in serious discussion with some carriers and State Transport Corporation for taking up this kind of CNG usage.

Ketan Mehta — — Analyst

Sure, sir. Thank you for this clarification. If I can squeeze in one more last question.

Operator

Ketan, can I request you to come back in queue.

Ketan Mehta — — Analyst

Sure.

Operator

Thank you. Vedhasri, we’ll take the next question from Rajesh Aynor. Hopefully now he should be able to ask the question.

Rajesh Aynor — — Analyst

Hello, am I audible now?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, please.

Rajesh Aynor — — Analyst

Yeah, thanks for the opportunity. Sir, my question is around EBITDA per SCM which we have recorded. In the third quarter it was around INR5.7 and if I look at your initial comment, you’re saying we will try to maintain between INR7 to INR8. So one thing is, what are the variables which have gone into this INR5.7 number which we have reported, because I guess we have accounted $8.45 APM as the cost and not what is recommended by Kirit Parikh Committee, right? And how do we expect it to improve it back to the INR7, INR8 range?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

We cannot account for anything lesser than what we have paid, and the committee does not say that they will reduce the cost on a retrospective basis. So whatever payment is to be made to the gas seller for APM non-APM gas that is gone. So that is why the EBITDA is at INR5.66 per SEM, and we hope that this committee — Kirit Parikh Committee report will be implemented by 1st of March to 15th of March. That’s the usual time that takes for approval of any such high impact proposal and how we will get to INR7 — what my reference to INR7 was on a yearly basis and we are sure because of softening of the prices we will be able to maintain INR7 per SCM EBITDA for the full financial year. We are not talking about any quarter that is the…

Rajesh Aynor — — Analyst

And sir, on a…

Pawan Kumar — Director, Commercial

I would also like to add that we have recently taken one price hike in December. So this quarter it had impact for only one month. In the next quarter it will have an impact for the full quarter. So that might help increase the per SCM EBTIDA.

Rajesh Aynor — — Analyst

And, sir, if we look at ATM gas price formula itself, now Henry Hub, as well as the European in-license they had a large rate in that. And if I look at the Henry Hub price itself has actually collapsed from order high $8, $8.5 to almost $3.5 now. So even if we have to go by the normal calculation as per the formula which was earlier before — or through which we are paying right now, do you think there is a significant downside which is possible in the APM price itself because $8.5 can actually come down to maybe…

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Rajesh, the 1st April price of APM, non-APM will be based on 12-month data of four indices, Henry Hub, Canadian gas, Russian gas and NBP. And the calculation period is 1st of January 2022 to 31st of December 2022. So that period is already over. We expect the prices if it is not moderated by Kirit Parikh Committee, it may actually go up by $0.50 to $1 or $2, it will not go down if there is no implementation of Kirit Parikh Committee report. So I would be open about it. If the Kirit Parikh Committee is not coming, then this price may actually increase by $0.50 or $1, that is my hunch.

Rajesh Aynor — — Analyst

Okay, and then when will the recent fall get reflected in the APM price formula, by the third quarter or fourth quarter or will it be CY’24 itself? Hello?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Rajesh, could you get me?

Rajesh Aynor — — Analyst

Yeah, I asked a subsequent question that when will the recent fall in Henry Hub and other indices get reflected in the APM price formula?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So on 1st of October 2023 if — see I’m assuming that there are more changes in the mechanism, and Kirit Parikh Committee report is not implemented and it goes on as per the domestic gas pricing guideline of 2014, then 1st of October 2023, the calculation period will be 1st of July ’22 to 30th of June ’23, so then this impact will be visible in the APM price.

Rajesh Aynor — — Analyst

Okay, understood. Thanks a lot, sir. I’ll get back in the queue.

Operator

Thank you. Vedashri, can we take the next question from Maulik Patel. Maulik go ahead.

Maulik Patel — — Analyst

Thanks for the opportunity and thanks for this initiatives. We hope that you continue with these initiatives in subsequent quarters. Sir. I have one question. Can you just highlight that…

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Can you be louder, please?

Maulik Patel — — Analyst

Yeah, sure. I will be. So can you just highlight that post this almost 50% increase in CNG price over the seven, eight months, what has been the impact on the retrofit market, has your convergent came down significantly from the top, 15,000, 16,000 per month.

Manjeet Singh Gulati — General Manager-Finance

Maulik, this data is available on parivahan.gov.in. We used to see conversion in our geographical areas of around 16,000, 17,000 per month. Presently, it is around 13,000, 14,000 per month. So people are buying, people are converting their old vehicles to CNG, they are buying CNG vehicles, but it had gone down and we are very sure with the implementing of Kirit Parikh Committee report the traction would come back and people will be back again.

Maulik Patel — — Analyst

Sir, I lost you in last line. You are not audible.

Operator

Manjeet, Ji, there is some issue from your line. Can you please check? We are unable to hear you.

Maulik Patel — — Analyst

Yeah, not. Yeah, now we can hear you, sir.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Could you hear our reply? Are you getting me?

Maulik Patel — — Analyst

Yes, now we are getting you, sir.

Manjeet Singh Gulati — General Manager-Finance

That time, you were not getting us.

Maulik Patel — — Analyst

Last last line only I couldn’t get you.

Manjeet Singh Gulati — General Manager-Finance

What I was telling is that.

Operator

Sir, again we are unable to hear you. There is some — I don’t know what is the issue, but.

Manjeet Singh Gulati — General Manager-Finance

Report implementation which is expected in few weeks, we should get back the old numbers. And what our CFO added that the conversion is actually new vehicles as well as the retro-fitment in the old vehicles off CNG

Maulik Patel — — Analyst

Okay, got it got. And, sir, one more question. In terms of the time frame which you are looking to set up the network or large part of the capex for your new GA starting from the Muzaffarpur and subsequently, how many years we can see that the elevated capex level of around INR13,000 to INR14,000 of capex every year? How many years will we have that number. Sir, did you my second question?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

We had actually lost you. Now, can you hear us?

Maulik Patel — — Analyst

Yeah, I can hear you.

Manjeet Singh Gulati — General Manager-Finance

Can we go to the next question.

Maulik Patel — — Analyst

Yes sir, my second question is that is for how many years this elevated capex which we are doing in new GS that will last. Currently we are doing capex of around INR1,300 crore, how many years you see that numbers?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So we have got some large geographically areas, like Ajmer, like Banda, Chitrakoot, Kanpur. So we expect this high capex to continue forthree to five years.

Maulik Patel — — Analyst

Okay, got it. Thank you.

Operator

Thanks. Next question is from Nitin Tiwari. Nitin, go ahead.

Nitin Tiwari — — Analyst

Hi, good evening, sir. I hope I am audible, and thanks for taking. [Technical Issues] Sir, am I audible?

Manjeet Singh Gulati — General Manager-Finance

Yeah.

Nitin Tiwari — — Analyst

Yeah. So, sir, my question is related to the Kirit Parikh recommendation that you pointed out and also the conversion rates that you pointed out. So there is a decline in rates that we’ve seen as far as vehicle conversion is concerned. So once Kirit Parikh recommendations are implemented, would you pursue a margin improvement or would you pursue a price reduction and hence a volume growth? what would be your focus area?

Pawan Kumar — Director, Commercial

We will balance the [Technical Issues] as well as consumer interest. We have not increased the CNG prices very high level, so we will offset that and we’ll utilize the part two gain on the margin and a part will be passed on to the customers.

Nitin Tiwari — — Analyst

Okay, sir. And, sirs secondly, LNG prices have started declining. So given that you pointed out earlier in the call that the allocation of incremental APM gas was difficult and incremental of domestic — incremental domestic gas allocation is also difficult. So would you be looking to get into more LNG contracts going ahead, are you having those discussions with suppliers?

Manjeet Singh Gulati — General Manager-Finance

So we, about 2 million cubic meter per day of LNG contracts already with us and which we are getting some — some part of that is not coming, but we are getting lot of RLNG volume and [Technical Issues]

Operator

Hello. I think the connection is lost. Hello, sir, I lost your. I cant hear you now, sir.

Manjeet Singh Gulati — General Manager-Finance

So we have many LNG contracts. We will add up some more LNG — RLNG contracts, but instead we are also analyzing the domestic gas available because there is lot of increment in domestic volume also and there are some new biddings which are going on, and we hope to, win some gas there so that we don’t need to actually source RLNG. The strategy is being worked out. It will depend on how much of domestic gas is available at our end, because that is the bidding part. So you don’t know what volume you will win, how much you will win.

Nitin Tiwari — — Analyst

Sure, sir. Thanks for answering my questions, sir. I’ll get back in queue.

Manjeet Singh Gulati — General Manager-Finance

Okay, thank you.

Operator

So we’ll take a couple of questions from the chat box. One question is from Ronak Chheda. His question is, on the capital allocation. So the question is, given the strength of the balance sheet, why does the Board not think of increasing the payout ratio for the company?

Manjeet Singh Gulati — General Manager-Finance

So we already yesterday declared INR3 dividend that we are working in that direction. For the first time ever we have declared an interim dividend. Normally, we used to declare only once I think. So we have given INR3 per share dividend which the record date is I think 7t of Feb. I hope you got the point.

Operator

Yeah, thank you very much, sir. So there is another question from in the chat box, it comes from Vikash Jain. So his question is, hi Sanjay Ji. Is it fair to assume volume growth of 10% to 12% Y-o-Y going ahead in FY’24 as well as FY’25?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

So the answer is, Vikash ji, we are definitely working on that, $1 million next FY, another $1 million the year after that.

Unidentified Speaker —

Sure, thank you. So we will come back again in live Q&A. The next question is from Devansh Nigotia. Vedashri, can you unmute his line. Yeah, Devansh go ahead.

Devansh Nigotia — — Analyst

Yeah, so thanks for the opportunity. Sir, I just wanted to understand, if we look at Q-o-Q, the APM has increased from $6 to $8.5, which I think 75%, 80% of procurement, but our RNV per SCM has just increased by 10%. What do you understand is with $1 per MMBtu is INR3 per SCM the raw material cost for SCM.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Devansh, can you be a little slower because we are not getting you. Can you be louder also please? Devansh.

Devansh Nigotia — — Analyst

Is this loud? Am i audible?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes.

Devansh Nigotia — — Analyst

So my question was regarding the raw material cost, procurement for gas, So you mentioned that 75%, 80% is APM gas procurement for us and that has increased Q-o-Q from $6 to $8.5 per MMBtu. And what we understand is with every $1 per MMBtu, INR3 per SCM raw material cost increase. But when we look at our branded raw-material cost per SCM for this quarter and we compare it Q-o-Q it has increased from 35.12 to 38.3. So just a little confused, if you can help us understand then how much has the non APM fallen and even within that we mentioned that there are three different sources of procurement. So if you can.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Last quarter the cost of gas was mainly consisting of APM, non-APM price of about $6.2 I think, plus the taxes and the RLNG cost of $25 approximately. This quarter the cost is $8.5 APM, non-APM, plus the taxes and RLNG cost of about $14, $15.

Devansh Nigotia — — Analyst

Got it.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

It depends, every day the volumes are different. Actually we run a –It’s a nightmare for us. We run a linear programing Model there. We can’t let any CNG station go dry. So we have to really — even in the night we have to arrange gas for next day and all that, but that is the team IGL. The have the expertise, they have been working in this field for last 25 years. We are the best people actually for last 24 years and we are the best people to manage any such movement or any such supply constrain. So that is how we have been able to manage these costs. What I hope — what you meant was that if the APM, non-APM price has gone up by more than $2 why your cost has only gone up by few rupees per meter cube. I hope I have answered your question?

Devansh Nigotia — — Analyst

Yes, yes, answered. Another one was relating to — the capex that we mentioned for the GS that we have won for next three to five years, you have guided an elevated capex. Beyond that, let’s say, if you don’t win any GA, how much would the capex drop and what would that amount be, and if you can just share some data point over there?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

There will never be any new GAs which will be allotted but PNGRB. The new G&As which will be a lot by PNGRB are up in hills only, like Jammu Kashmir, Ladakh, etc. There will be GS which will be after five years you may be aware PNGRB allows them through M&A to sell the GA rights to some new player. So that kind of addition to the GAs is possibly. Normally it is a competitive process or a discussion process which goes through there. The capex that we’re talking about for next three to five years of INR1,300 crore to INR1,500 crore or INR1,600 crore is actually in GAs which are already there with us, which is Banda, Chitrakoot & Mahoba, Kanpur, Fatehpur, Hamirpur, then Ajmer, Ajmer, Pali and Rajsamand. We are actually talking about these only and also Karnal and Kaithal. So in all these places the stedl pipeline is going to get commissioned. And there we will get the additional volumes that we have been talking about for last one hour about 1 billion and 2 billion cubic meter in next two years.

Devansh Nigotia — — Analyst

And out of that how much percentage is — 1,300 that you mentioned, percentage towards the new GA and what is the percentage towards the existing maintenance capex for existing GAs. If you can just dissect between that?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

That’s negligible. Most of it is in new GAs’ only because laying the steel frame — steel frame and by steel frame what I mean is the rim of pipeline, the outer ring. That is very costly. Steel pipeline costs are more than INR1.5 crore to INR2 crore per kilometer. Whereas MVP pipeline costs about INR20 lakhs per kilometer. So the major cost is actually towards new GA’s. Specifically in Delhi we are laying steel pipeline just to connect some of these stations where we are having pressure problem just to improve the pressure, just to improve the supply security of the National Capital Territory.

Devansh Nigotia — — Analyst

Okay, and in case of the CNG you mentioned that from 16,000 peak we are at 13,000 conversion, but when we look at CNG volumes they are flat Q-o-Q. So can you help us understand how the volumes are actually shaped up and why it has not translated into to Q-o-Q growth?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Can you repeat the question please?

Devansh Nigotia — — Analyst

For CNG you mentioned that the conversions are from 16,000 per month vehicle peak is now 13,000 per vehicle peak — 13,000 vehicle per month currently, but when you look at the CNG volume December over September has actually been flat or slightly degrown. So if you can just help us understand how conversions are getting affected?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Any conversion is actually addition of the pool of CNG vehicle. So it should typically have gone up. But because there were some festival days, followed by some holidays, etc., school closures, etc., and because of that the volumes have come like this.

Devansh Nigotia — — Analyst

Okay, sir, thanks a lot.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

We will have major impact in the volume when our steel pipeline in Ajmer and in Kanpur gets commissioned in next two months, three months.

Pawan Kumar — Director, Commercial

Just to add that, you might be aware that generally the winter vacations in school are for one week. This time it was two weeks. So that has also impacted the CNG volume growth.

Devansh Nigotia — — Analyst

Got it. Thanks a lot.

Operator

Thanks, Devansh. V, w’ll take the next question from Siddharth Chauhan. Siddharth go ahead.

Siddharth Chauhan — — Analyst

Hi, sir, can you hear me.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Yes, please.

Siddharth Chauhan — — Analyst

Yeah, so I wanted to ask, so what are the margins on industrial volume versus CNG. Can you shed some light on it?

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Industrial margin is approximately INR4 to INR5 rupees per SCM. And a similar amount for the DPNG also. Gas allocated to these sectors are different so the margin is approximately 3 to 5 rupees.

Siddharth Chauhan — — Analyst

Okay. Thank you so much. So how many new CNG stations have you set up in 9 months period.

Pawan Kumar — Director, Commercial

This year we plan to set up 75 stations, 40 have already been commissioned. Our major thrust this year is to commission online stations only, where operating cost is optimal and we are trying to convert also DB stations to online stations. so that we can rationalize our operational cost. [Technical Issues]

Operator

First question is, can you share some insights from your discussion with the ministry on APM gas price volume and the timelines, particularly now that Kirit Parikh recommendation is in the public domain.

Pawan Kumar — Director, Commercial

No, discussion should be shared here,

Operator

Thank you.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

I would just like to clarify that IGL is not a part of, was not a part of the the committee, Kirit Parikh Committee. So we are, we only know what is there in the report. We are not aware about any internal discussions about the approval of that.

Pawan Kumar — Director, Commercial

Sure, just the government is committed for public, so we expect that a final outcome will be favorable to IGL. Okay. Any update on smart metering and the natural gas cylinder for forary. That’s another question in the chat box.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

Smart metering. We are working on. The problem is that the smart meter cost is wise between 100% more to 150% more than the AMR meters. And AMR meter is 100% to 150% more than the normal meter. This is battle between feasibility of such high cost meter versus the gains that we will make out of it. We are trying, we are working on setting up a metering plan where all these options we are putting. The normal meter, the AMR meter, which is automatic meter reading property of the meter and the online meter, where prepaid meter where you can put money and then only the gas will come. The metering plan we are working on would, we will start job on that most likely now, in three, four weeks.

Operator

Sure sir, thank you. The next question is from Vishnu Kumar. Vedashri, please unmute his line.

Vishnu Kumar — — Analyst

Thank you sir. My question is on the volume and gas percentage of [Indecipherable] Now, you mentioned that, we may target 1 million and SCM of incremental volume for next two years. And we currently are at about closer to about 90% of gas domestic gas. When you see this number going to 60% to 65% because incrementally domestic gas will not be available. So how should we see this scenario. One, whether we go to 50% to 60% in three, four years. And what is the EBITDA per SCM that do you think will happen in this month.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

For the FY24 the EBITDA that we expect will be more than INR7, it would be INR8 even. The volume that we expect — additional volume of one MMSCMD in FY24 and additional two MMSCMD in FY 25 will come from market sources. Market sources by which I mean free price gas in the domestic market as well as LNG. We do not expect any higher allocation of APM non-APM gas. See, one thing I would tell you, Vishnu, gas market has never remained at this kind of price for so long, it’s about one year now and eight months that the prices have been more than $18 and if you look at the history of gas market in the last 25 years, never has it remained as such elevated level for so long. By your principles by CFA principles and the normal market chit chat that we are hearing if something goes up to that extent, it should go down and remain low for longer. We expect that here be a golden period for us very soon when the prices will remain at around $10 to $12 and we will be able to force the required $2 million cubic meter gas in two years and manage our margins also effectively. This is our view.

Vishnu Kumar — — Analyst

But the there is a point on the same question is that the, however we are going to replace the two MMSCMD of gas, the new one from a…

Sanjay Kumar — Managing Director, Chief Financial Office & Director

That’s what I told. We will buy that gas from the market.

Vishnu Kumar — — Analyst

Got it, sir, thank you and all the best.

Pawan Kumar — Director, Commercial

Yeah of. So, last question. It’s from Varatharajan. Vedashri, lease unmute his line.

Varatharajan — — Analyst

Thanks for that. My question was about the first question which somebody asked about the segment wise demand. So you had given the number for DTC and carriages. I you can give the same number for CVs, cabs as well as private car owners, percentage share of the demand currently.

Pawan Kumar — Director, Commercial

Around 40% is from private cars and another 40% is from taxis and then other commercial vehicles and 20% is from buses. So that is the broad breakup.

Varatharajan — — Analyst

Any breakup between CVs and the other part of the…

Pawan Kumar — Director, Commercial

That data, we do not have separately, we combined.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

We can work and come back to you, Vartha.

Varatharajan — — Analyst

Great sir, I’ll come back. Thanks a lot.

Pawan Kumar — Director, Commercial

No question.

Operator

Sir, That’ was actually the last question.

Pawan Kumar — Director, Commercial

There need to be last question.

Operator

Sorry?

Pawan Kumar — Director, Commercial

Just a minute. Sorry, did I interrupt you, sir. The vehicle population is 51% out of the 100%, if I take.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

We will come back, Vartha ji.

Varatharajan — — Analyst

Sure sir. Thanks.

Operator

The call was actually the last question, sir. On behalf of IGL Securities, I thank you all for attending this webinar. And my special thanks to the IGL management for letting us host the call. Really appreciate, sir. Ladies and gentlemen, in case your question has remained unanswered, please feel free to drop the line to me, I’ll forwarded to the management and have it answered. Any last remarks, sir, would you like to make before we conclude the session.

Sanjay Kumar — Managing Director, Chief Financial Office & Director

First of all, thank you very much for sparing time in hearing us. I just wanted to assure that [Foreign Speech] The good time will start very soon and we are hopeful that IGL will ensure that investor are rewarded suitably because the decrease in gas prices and increase in volumes, we are sure that IGL will progress well and we’ll take care of the investors interests. Please have full confidence is in us.

Pawan Kumar — Director, Commercial

And also from our side the contact point is Manjeet Gulati, he is sitting here. So whatever be the additional queries, please send to him. And if any other investor wants to talk to us, please talk to him. I can’t actually speak to you without his clearance. He is the main man.

Operator

Very helpful, sir. Loud and clear. Thank you very much.