Mahanagar Gas Ltd (NSE: MGL) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Ashu Shinghal — Managing Director
Rajesh Patel — Chief Financial Officer
Rajesh Wagle — Senior Vice President, Marketing
Analysts:
Probal Sen — Analyst
Amit Murarka — Analyst
Sabri Hazarika — Analyst
Nitin Tiwari — Analyst
Yogesh Patil — Analyst
Nirmal Gore — Analyst
Hemang Khanna — Analyst
Kartik — Analyst
Saurabh Handa — Analyst
Madhur Rathi — Analyst
Kirtan Mehta — Analyst
S. Ramesh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Mahanagar Gas Q2 FY ’25 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Probal Sen from ICICI Securities Limited. Thank you, and over to you, sir.
Probal Sen — Analyst
Thank you, Palak. Welcome everyone to the post Q2 FY ’25 earnings call of Mahanagar Gas Limited. With us, we have members of the senior management, including y Mr. Ashu Shinghal, Managing Director; Mr. Sanjay Shende, Deputy Managing Director; Mr. Rajesh Patel, Chief Financial Officer; and Mr. Rajesh Wagle Senior Vice President of Marketing Division.
Before starting the call, I would like to mention that some of the statements made in today’s discussion may be forward-looking in nature and we do believe that expectations contained in this statement are reasonable. However, these statements do involve a number of risks and uncertainties that may lead to different results. So we urge you to consider that quarterly numbers are not a reflection of long-term trends or indication of full-year results.
With that said, I will now hand over the call to the management for their opening remarks, post which we will have a Q&A session. Over to you, sir.
Ashu Shinghal — Managing Director
Yeah, a very good afternoon. I’m Ashu Singhal. I’m joined by my colleagues here. A very good afternoon to all the investors and posing confidence on the Mahanagar Gas Limited and all the analysts who are on this earning call of MGL for the second-quarter of the financial year ’24-’25. At the outset, I would like to thank you all for attending this call and wish you a very Happy Diwali and auspicious occasion for all of us and a prosperous new year in advance.
MGL continues to create CGD infrastructure across its business segments in the license areas. During the quarter, 58,845 domestic households were connected and thus we have established connectivity for nearly 2.58 million households. We have laid 70.59 kilometer of steel and PE pipelines, taking the total length to over 7,124 kilometers. We also added five CNG stations during this quarter. And with this, we have 352 stations as on 30th September ’24. We also have added 99 industrial and commercial customers during this quarter and therefore as on 30th September, we have 4,920 industrial and commercial customers.
In respect of our RA — Raigad GA, up to September, we have connected 83,364 domestic households and 49 CNG fishes, which are currently under operation. During the quarter, we have laid 10 kilometers of pipeline in Raigad, thereby taking the total length to 433 kilometers. With respect to UEPL, that is Unison Enviro Private Limited, a wholly-owned subsidiary, the company has added seven CNG stations during this quarter and a total of 64 CNG stations as on 30th September. During the quarter, 1890 domestic households were connected and accumulative household connections are 29 for UEPL and they have 59 industrial and commercial customers as on 30th September.
We also commissioned first LNG station in Aurangabad in month of October under the joint-venture company, which is Mahanager LNG Private Limited. This LNG station was set-up within six months from the availability of land, one of the fastest commissioning of LNG stations. Coming to MGS operations during the quarter, overall average gas sale volume was for the Q2 as of the current year compared to the corresponding Q2 in the previous year has increased to 4.042 mmscmd from 3.575, which is an increase of 13.07%. Q2 volume consists of CNG volume of 2.886, PNG of — domestic PNG of 0.528 and 0.628 mmscmd was supplied to Industrial and commercial segment.
Compared to-Q1 this year, overall sales volume for Q2 has increased by 4.75%. Current quarter EBITDA is INR399 crores compared to previous quarter EBITDA of INR418 crore. Net PAT is INR283 crore for this quarter as compared to INR285 crore in the previous quarter. Coming to UEPL, during the quarter, company achieved an overall average sales volume of INR0.16 crores as against 0.168 mmscmd in the last quarter. The current quarter volume consists of CNG volume of around 0.152 and CNG volume of 0.012. Therefore, MGL as a consolidated entity has achieved total sales volume of the quarter of 4.206 mmscmd.
On October 7, this year, MGL has entered an indicative and non-binding term sheet with International Battery Company USA for setting up an EV battery cell manufacturing facility in India under proposed joint-venture company, which is called International Battery Company Private Limited. The plant initial capacity is 1 gigawatt hour, which will be developed in two phases of 500 megawatt each. The proposed equity investment by MGL in the range of INR385 crore in this joint venture with the equity stake of approximately 40%.
The Board has also approved the scheme of merger of Unison Enviro Private Limited with MGL. The scheme is subject to necessary statutory and regulatory approvals from NCLT and other regulatory authorities under applicable laws. MGL has been awarded four Golden Star Under National Safety Conference of India safety rating for our occupational safety, health and Environmental management system at CGS Mahape.
With this, I conclude and would like — now like to open the floor for the questions. Thank you very much for your patience.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Amit Murarka from Axis Capital. Please go ahead, sir.
Amit Murarka
Yeah, hi, thanks for the opportunity, sir. My first question is on this the APM gas allocation reduction. So I understand that there is a change in classification of the APM gas by ONGC, which has led to this. My thought was that if all the new production is going to come from — I mean, it’s going to come from the wells, which will be priced higher, does it mean that the $6.5 gas that comes to you will keep falling now every quarter from even the current levels? So could you just help understand that?
Ashu Shinghal
Amit, the point is well taken that at a one point APM reduction has happened, but this is not a very regular phenomenon because maybe there are certain decisions and the government has taken a call for the one-time reduction. After this, it will be gradual on year-on-year basis. It is not expected to be sudden cut on the APM.
Amit Murarka
No, but the new production that comes in will be from the newer wells, which do not qualify under the $6.5 gas. So even if you get the domestic gas, it will all be higher-priced at, let’s say, $9 or so. Is that understanding correct?
Ashu Shinghal
Yeah, that is correct. Because the APM allocation — APM production is in two categories. One is the old wells and the second is new wells for which ONGC and other producers are putting more money into it. So as per K. Parikh recommendations and as per the guidelines approved by the cabinet, the new wells will qualify for a different price regime, which is around 12% of the Indian oil basket. So whatever new gas will be coming will be priced higher. But again, CGD is getting priority there also, like in HPHT, the whole gas which is available from new well will be allocated on CGD on priority before giving to other companies.
Amit Murarka
So you’ll get the volume, but basically, it will be at a higher price.
Ashu Shinghal
That’s right. And HPHT volumes are also expected as and when they come on all the older contracts are expiring, that gas will come on the bidding and there again CGD will get the first priority.
Amit Murarka
Right. But like I’m sure you must be taking this up with the ministry, but if, let’s say, the gas price is going to go up consistently and — I mean the blended gas cost because of the newer wells issue, how do you kind of stay competitive versus the liquid fuels and also kind of push LNG — push gas into newer markets.
Rajesh Patel
So as I think MD said, some — whatever cut is there of that almost 50% will be available to CGD on priority basis at 12% of the Indian quote basket, okay, that could be as you said, maybe around $9 or so. So it will increase the weighted-average cost to a certain extent definitely right now. So we will be attempting how do we optimize our cost by — initially we may have to blend spot, but we will slowly optimize by signing-up a term contract and we’ll work upon how do we devise our long-term gas sourcing strategy so that — and one more point I would like to bring is, yes, we were always prepared as a company or as a city gas industry also people are prepared that this is likely to go down. But yes, it has happened a little faster. So all of us are working on strategy in the long-term, how do we have our sourcing contract strategy in place, which gives you an age and our dependence reduces day by day on the APM, which was a scenario already known, but yes, the speed has — with this cut slightly gone up.
Rajesh Wagle
Just to supplement that, since you asked how would we be placed against alternate fuel, currently, our CNG prices are the lowest in the country. So by a corrollary, the headroom which we have is comfortable — more comfortable compared to what other people have. So that also helps us a bit.
Ashu Shinghal
Plus, one more point I would like to add on to what CFO and Rajesh has mentioned is that our gas, whatever we are getting new well gas is linked to oil linked prices and the alternate fuel for industrial and commercial is primarily linked to oil linked prices, plus CNG is competitive to petrol and diesel, which again is oil linked prices. So, obviously, there will be costlier procurement in terms of APM allocations, but still as far as we are concerned, our one-to-one competition with alternate fuels will be more in tandem.
Rajesh Wagle
So — and just last question, is there any baseline margin that you look to protect that will not go below this?
Ashu Shinghal
Not be given a number that this is what we target, but general guidance which we have given is INR10 to INR12 EBITDA per SCM, which we have still maintained. If you have seen our Q2, still we are at around INR11 per SCM. So that margin — that range we expect to continue for some more time and let us see how the prices vary of LNG and APM gas and Indian crude basket and petrol and diesel plus, we will keep an eye on the volume growth, which we think as you might have seen in the results, the volume growth has picked-up quite substantially in this particular quarter. And last year — last quarter, quarter-on-quarter, we had more than 2% this year — this quarter-on-quarter we have more than 4%.
So the whole last year-on-year growth was 5.5%, whereas in one-half yearly, we have seen a growth of 7%. So this has come out because we have launched CNG schemes also. Our prices are very competitive as compared to petrol and diesel. So it is a mix of all these factors that we will decide on the margins. It is not that we have a set number in our mind.
Amit Murarka
Thanks. That’s all from my side.
Ashu Shinghal
Thank you.
Operator
Thank you, sir. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead, sir.
Sabri Hazarika
Yeah, good afternoon, sir. So a few questions. Firstly, the — I think the opex per SCM was also higher during this quarter. So any particular reason or it is the normal run rate?
Rajesh Patel
The operating expenses marginally higher, you’re right, around INR0.25 per SCM, okay. There were one or two one-off items during the quarter. In case of employee cost, there was an actual valuation hit that has slightly increased in the quarter, linked to revision in the policy of the company linked to income tax limit being increased from INR20 lakh to INR25 lakh. So that has given some increase. Also in this quarter, there was an expressure [Phonetic] payment which has been accounted. So these two items are costing maybe around INR7 crores, INR8 crores in a quarter, which is a one-off item.
Apart from that, there were some costs booked on account of repair maintenance. We have taken up some aggressive repair maintenance and improvements in the network for monitoring the consumption geography-wise within a GA, DRS-wise or so, so that we have a better control. And some small amounts have been spent at least in this quarter towards marketing or promoting the CNG vehicles, okay. So maybe our expenses on promotion of CNG will continue for some time to come. But these are some of the one-time initiatives to ensure the long-term volumes by capturing more and more vehicles and making these systems more robust.
Sabri Hazarika
Okay. Secondly, regarding this volumes, so it has been like if we focus now that your volume growth is very strong and you have always maintained that 6% is the guidance. So is there a relation to the guidance and also the fact that what exactly is driving so much of growth? And both CNG as well as industrial, I think both of them are growing very rapidly and CNG have stayed the marketing schemes and all, but can there be any other factor in industrial what industry you are talking?
Rajesh Wagle
Industrial, in the last couple of quarters, we have managed to add on some large-volume customers. In fact, one of our largest volume customer has ramped-up to his full volume requirement in September. That happened on some phases. So these customers whom we have reached out and managed to connect in GA2 and GA3 especially have contributed to this. And this is the outcome of a almost one and a half, two-year initiative, which we have been pursuing by convincing these industries to switch from liquid fuel to gas by giving them a guaranteed 10% discount to the [indecipherable] what the bunch, that has paid-off, started paying-off and that is giving a double-digit increase in industrial volumes.
Sabri Hazarika
So guidance remains same or is it now further up from 5%, 6%?
Rajesh Wagle
Sorry. Could you repeat your question, please?
Sabri Hazarika
Your guidance will remain same at 5%, 6% or are we going to increase it?
Rajesh Patel
So we are — see if you — I was just mentioned earlier also, 5.5% was the overall volume growth year-on-year. This first half, we have clocked 7%. So our guidance was around 7%, 8% by the year-end. Now first half we have been around 7% growth on the volumes as of 31st March this year and 30th September this year. So by year-end, we expect another 2%, 3% to grow. So we will be touching around double-digit number for the year-end. And for next year, we will see how it rolls out, but the momentum is there. As mentioned earlier that we have launched certain CNG mahotsav very recently once again, and we are promoting PNG also very aggressively in domestic and investing and commercial. In fact, industrial and commercial has grown by more than 10% last year and this year, again, we expect it to be in double-digit. So these initiatives and competitive costs have made the fuel more viable for all the segments.
Sabri Hazarika
And a couple of bookkeeping questions. What was EUPL revenue and EBITDA for the quarter?
Rajesh Patel
For H1, it is around INR173 crores and EBITDA was in the range of around INR11 or so. N
Sabri Hazarika
O PAT, I mean PAT.
Rajesh Patel
PAT INR6 crores for the quarter.
Sabri Hazarika
Okay. And revenue you said INR173 crore for H1, right?
Rajesh Patel
That was half year.
Sabri Hazarika
Half line. APM allocation for the quarter was how much percentage?
Amit Murarka
UEPL?
Rajesh Patel
No for MGL segment.
Amit Murarka
So 71% was the overall CNG and PNG, we were getting 105% as per the government policy. So CNG has come down in this last reallocation to around 57%, 58%.
Sabri Hazarika
So you mentioned 69% in Q1, so that has become 71% in Q2, but now it has gone up — gone down to 57%, 58%. Is that right?
Rajesh Patel
Overall APM that is domestic plus CNG both put together was around 71%, okay.
Sabri Hazarika
Right.
Rajesh Patel
And now on an overall basis around 16%, 17%, but if you consider only on CNG after allocating full requirement for domestic towards out of APM, then on — only, CNG if you consider it is 20% down.
Ashu Shinghal
20% from the earlier allocation. So, overall, 13%, 14% down from earlier in absolute number.
Sabri Hazarika
Got it, sir. Thank you so much. I’ll be in the queue.
Ashu Shinghal
Thank you.
Operator
Thank you, sir. The next question is from the line of Nitin Tiwari from PhillipCapital. Please go ahead, sir.
Nitin Tiwari
Hi, sir, good evening. Thanks for the opportunity. Sir, my questions are partially answered, but just staying on that topic of deallocation of APM Gas and how the strategy would evolve post that deallocation? Because as you also pointed out, this deallocation has just accelerated the change which was already happening, right? So essentially it all boils down to how we are going to price the products, CNG particularly, in order to maintain our growth and margin. So again, I mean, like we want to question you on, do we maintain our guidance — are we going to maintain our guidance of 5% to 6% growth that we were looking at earlier and along with a margin of INR10 to INR12?
Because I mean the way we look at it given this deallocation, a broad sense is that a INR5 to INR6 revision in CNG price might be required for you to maintain the margin. And when that happens, I mean the gap certainly closes with a petrol price and a lot more with a diesel price. So would that not impact conversion of vehicles and growth of volumes? And I mean, this is certainly a near-term problem. a corollary to that is that essentially this change was any which ways happening. So what’s your strategy like four or five years down the line when your APM allocation would be really low and you would largely be dependent on imported gas or expensive gas. So how do you see the scenario panning out then? So if you could throw some light on that, sir.
Rajesh Patel
Your question is primarily divided into two parts. The first part is which we have already discussed that the volumes in this year has already touched 7% growth from 31st March of 2024. So in six months, 7% growth is seen, which we were thinking about whole year 8% guidance was there. So in the remaining six months, we can see another growth of 3%, 4%. So we will be touching around more than 10% of growth for this particular year.
Now coming to the long-term perspective, yes, you are right, APM will be definitely not available to the extent it is available right now. And we have sufficient legroom available, one, and we have our operational efficiencies coming in place. We have our assets which are slightly depreciated. We have volumes in our place. We are doing procurement efficiencies. We are going to different sources. We keep on examining what are the alternate availables like Bent link, Henry Hub link, HPHT, new well gas. APM gas, which is not connected to the grid can get connected and that can get allocated to CGD.
So overall, if we see, we have been selling CNG and PNG at the cheapest in the country and we have some margins are also in the reasonable range of INR8 to INR12 or INR13. Having said that, we don’t think that we will not be able to manage these cuts in APM in future. And as and when things roll out, it also depends how crude moves, how gas moves, what is the delta between the two and how the petrol and diesel are priced and how CNG because once a CNG vehicle is in, it is there to stay for 15 years. We don’t expect that CNG vehicle will be sold out or whatever happens. Because see petrol, again, there are projections about oil getting costlier and gas getting cheaper because gas several terminals are coming across the globe, mostly Qatar is adding capacity. Australia has already added capacity, U.S. has already come onboard.
So we have a scenario where gas costs will be competitive as compared to oil prices. So we feel that we will be able to manage, but it’s very difficult that down — four years down the line, what will be the margins. So we can’t predict anything on that. But nevertheless, we are prepared to have position in different scenarios which unfold over a period of time.
Nitin Tiwari
Fair enough, sir. That’s very helpful what you pointed out. We were just looking at it from the perspective that like once the gap really closes with petrol, I mean, when your breakeven time period basically increases substantially and it starts like inching closer to maybe a productive life of the vehicle. So, I mean, correct me if I’m wrong, a CNG vehicle is about INR1.25 lakh costlier than a petrol vehicle, right? And essentially the breakeven right now would be at about four or five years roughly. So given the gap between CNG and petrol prices. I mean, once this gap closes and your breakeven reaches eight, nine years or more than that, then certainly, I mean, it doesn’t make any sense to own a CNG vehicle.
So like again a second part to that question, would you also then start looking incrementally more at LNG as a sales product rather than like focusing purely on CNG? And what is happening, sir, on the tax front? I mean, we did hear some rumors or media bites during July about excise cut or possibly like inclusion of natural gas in GST. So any incremental development on that front, if you can throw some light on that aspect as well?
Ashu Shinghal
Again, the volumes, let me respond first and why we see that. We will sustain in the coming years also. There are three primary sources from where the CNG volumes are coming. One is private cars, factory prepared OE, a lot of OEs now are pushing and encouraging and the percentage of CNG cars sold out of the total cars sold in the country is continuously increasing. Today for a new car buyer, CNG is offering almost a 50% fuel cost compared to petrol today’s price. Tomorrow, even if that goes down to 40% or 30%, there still remains a substantial incentive for the subsidy. This is about the private car section.
Secondly, we get volume is from three-wheeler also. We’ve written [Technical Issues] eyes closed decision for them, so savings are very attractive. The last segment where we are getting traction, especially from the last few months is the commercial goods vehicles and especially the intermediate and heavy commercial goods vehicles segment. And we are — even though the competition there with diesel, we are targeting those segments by giving very attractive discounts, through fuel cards, etc., [Technical Issues] favor of the transport or the buyer.
So we still believe that there is enough of a long growth runway to maintain this 6% to 7% or whatever, even in the head of a few pricing challenges, which are again, these are commodities, there will be times when they’ll move one-way, there will be times when they move the other way. But we see the volume growth sustaining there without too much of a problem.
Coming to your two questions which you mentioned right now that one that the CNG vehicle cost versus petrol vehicle. I think there is lot of noise coming from background. Yeah. So there are different costs involved in different segments. If we talk about passenger vehicle, the delta could be in the range of INR50,000, INR60,000 from petrol versus CNG. If you go to commercial vehicles or heavy segment of around 18 tons, 20 tons truck and the delta could be in the range of INR3 lakh, INR4 lakh. So in bikes, it is different. In three-wheelers, it is different.
So the payback also depends on the running of the vehicle. If it is a commercial vehicle, the payback could be less than a year. If it is a passenger vehicle, the payback could be as long as three years. But definitely it is not in the range of eight years. And over a period of time, if you see the history that in 10 years also, the CNG and petrol delta has been maintained quite substantially over a period of time despite fluctuations in both petrol versus CNG prices or oil versus LNG prices. So going forward also, we think a substantial delta should be available at least in petrol vehicles.
In case of diesel vehicles, the technology is improving, the infrastructure is improving and we are funding, as Rajesh correctly mentioned that part of the upfront capex we are funding for diesel commercial vehicles. And also, we are promoting retrofit of the diesel or diesel commercial vehicles from diesel to CNG. Because in Mumbai, after eight years, you can’t run a commercial vehicle on diesel in the municipal limits. So they necessarily either have to sell those vehicles or take it as a — either they have to sell those vehicles outside Maharashtra or they have a option to retrofit it and in case of retrofit we are funding 50% of that cost.
So that’s a very good incentive for the owner of the truck because here trucks are sometimes owned by a single person and it’s not a very big fleet. So they are very sensitive to the price and it gives a delta of around 15% to 20% also over diesel, they will be more than happy to continue with CNG.
The other part related to excise cut and GST, this has been under discussion for quite some time. GST again is a GST council subject and the excise cut was talked about during the budget also. So let us wait. If that happens, it will be very good for the industry.
Nitin Tiwari
Sure, sir. Thank you so much for answering my questions and best wishes for Diwali. Happy Diwali to all of you, sir.
Ashu Shinghal
Thank you. Yeah.
Operator
Thank you, sir. [Operator Instructions] The next question is from the line of Yogesh Patil from Dolat Capital. Please go ahead, sir.
Yogesh Patil
Thank you for taking my questions. Sir, as you mentioned the EBITDA margin guidance of INR10 to INR12 and we are still waiting for the CNG price hike, which is due. So this guidance is considering the CNG price hike or without CNG price hike? That’s one.
Ashu Shinghal
See, EBITDA margins, right now we have INR11 for the half year basis. Now we have still six months to go. What we are doing is we are evaluating all the options of getting the gas at the cheapest price. Also, we are taking operational efficiencies, the volume efficiencies are with us. So we will see, but INR10 to INR12 guideline is still we can maintain. We hope that we will be able to maintain it. But even if it is certain, it has to be taken to maintain the volumes and to maintain the price stability for giving confidence to the customer, we will always be for it. But as of now, we think INR10 to INR12 is the margins after considering the allocation cut.
Yogesh Patil
Sir, quickly reframe my question. Suppose we do not pass on the gas cost to the consumer. What kind of hit will come to our gross margins levels overall basis because of this reduction in gas allocation? Any ballpark number if you have?
Ashu Shinghal
See, the point is industrial and commercial any which way are going from LNG contracts which we do have. The PNG is getting 100% allocation. The main effect on the reallocation is on CNG segment. As we said earlier, we are trying to figure out that how the cost gap can be procured at different sources. We are also going for procurement tenders. The rate discovered will determine about how we can — how much we can retain with ourselves and how much we have to pass on. And what is the volume growth we want to see, what is the EBITDA margins, which is in the comfortable range. It is not a very strict range that INR10 to INR12 is some requisite number.
It is just a guidance. It can go up or it can go down also depending on the cost of procurement of gas because we will be floating the tenders, there will be gas, which will be coming on HPHT with gas, which is on new well gas, which further will be enhanced on the exchange, then there is IGX, then there is rent linked contracts, there are Henry Hub linked contracts, then the spot is available. So all these things are very dynamic in nature. So as I said that, we are still comfortable with INR10 to INR12, but it can vary slightly up or down as few months go by and we get more clarity on what the procurement cost is.
Yogesh Patil
So sir, during the quarter, how many CNG vehicles are added and if possible, please provide a breakup of vehicle additions in terms of taxis, three-wheelers and personal cars? And if you have any updates on the two-wheeler additions, that would be helpful.
Ashu Shinghal
In the quarter, we have added 23,000 vehicles, around 15,000 private cars, 6,000 three-wheelers and rest are others all put together, small commercial vehicle and few MSRTC buses are there, taxis are there. Two-wheelers around 1,200 two-wheelers have been added this quarter, which has — Bajaj has launched. So if you see the whole year, last year, we have added 77,000 vehicles. And now this half year itself, we have touched around 44,000 vehicles. So we have seen a traction, but more than the absolute numbers, what is more critical is the commercial vehicles which are getting added, because each commercial vehicle will — can take much more CNG volume as compared to, say, three-wheeler addition.
So, I mean, we are very hopeful and the two-wheelers are again a new segment which has opened up for CNG and two-wheeler running cost is almost 40% of a petrol two-wheeler. So this we find is a segment which is going to attract some volumes going forward maybe two, three years down the line. Anything Rajesh, you want to add?
Rajesh Wagle
No, so volume addition we have been seeing has been maintaining momentum. And with the relaunch of our incentives for commercial goods vehicles in this month October, we are hopeful of seeing the momentum continue.
Yogesh Patil
Sir, lastly, capex during the quarter and planned capex for FY ’25-’26?
Rajesh Patel
So half-year capex has been little more than INR400 crores and we maintain our capex in the range of INR800 crore to INR900 crore depending on availability of pipeline laying permissions, availability of plots for setting up CNG stations, etc. So we are confident that we will do around INR800 crore if things move positive will be more than that also. As far as budget is concerned, we are geared up to do around INR1,000 crores.
Yogesh Patil
Thanks a lot, sir and wish you happy Dipawli.
Rajesh Patel
Thank you. Same to you.
Operator
Thank you, sir. [Operator Instructions] The next question is from the line of Nirmal Gore from Aditya Birla AMC. Please go ahead, sir.
Nirmal Gore
Hi, thanks for the opportunity. My question is about the APM gas reallocation. Just wanted to why there was a sudden reallocation done because considering the fact that the allocation towards CGD was anyway declining, but the sudden decline of 20%. Just wanted to know why this was done, what was the rationale? And in addition to that, if you could throw some light on where this APM gas has been diverted?
Ashu Shinghal
I think we are not the right agency to answer this question in particular because government at a macro-level looks at all these aspects about where to allocate the gas at what price. So pricing and allocation is a rerogative of the ministry. So we don’t want to comment much on it and we don’t have freebie to what the information about where it has been allocated and why it has been allocated to any segment.
Nirmal Gore
Okay, sir. Thanks so much.
Ashu Shinghal
Thank you.
Operator
Thank you, sir. The next question is from the line of Hemang Khanna from Nomura. Please go ahead, sir.
Hemang Khanna
Hi, sir. Thank you for taking my question. Sir, again, just going back to the APM allocation. Wanted to get a sense on the raw material side following the cut and with the sourcing efficiencies you’re currently employing, what is your current increase in raw-material prices of gas sourcing currently? And a follow-up to that is that do you — what is the view that do you believe that you’ll be allowed to fully pass on the impact of the higher input cost to consumers? We appreciate that you’re the lowest-cost CNG provider in the country right now, but even in that landscape, will you be allowed to fully pass on this impact to consumers?
Ashu Shinghal
There are two parts of it. One that you mentioned about what is the cost impact or procurement cost impact. So that we are still working out. As I mentioned earlier also, we are — we will be going to force some inquiries, get the rates from the market about Brent, HPHT gas, new well gas, spot, IGL. So that portfolio will be determined depending on the bids we receive maybe next month or so. And then we will take a call on what will be the procurement cost.
Coming to your question on the ability to pass on, I think that question is very well understood by the market that it’s an independent decision of the Board of the company or the delegated powers of the Board of the company to decide on pricing, depending on the alternate fuel price, cost of procurement, operational cost, our volumes and the margins which we want to have and overall strategies of the company. So I don’t think we are under any compulsion to pass on or not to pass on. It is a pure business decision taken by each individual company.
Also depends on what the other CGD entities are doing, what is the price in the adjacent geographical areas, what are the volumes, all those things are taken into consideration before taking a call on price hike or price reduction.
Hemang Khanna
Got it, sir. Got it. Thanks. And just as a second question, what do you — what are the current volumes which are currently in the network?
Ashu Shinghal
It’s around 4.05 mmscmd for the whole quarter Q2 and on year-on-year basis, it is 3.95 for the whole half year basis as compared to 3.6 for the financial year — full financial year ’23-’24 and 3.5 for H1 of the last financial year. So we have seen a growth of around 13% on Q2 of last financial year versus Q2 of this. So you see the amount of effort we are putting to make the volume grow and that is one of the main reasons that we decide on when to pass on the price or not to pass on the price because the customer has to be given a very comfort that their interests are protected, a person who takes a decision to purchase a CNG vehicle or a diesel vehicle or a petrol vehicle is very critical for the company because then he is hooked up for 15 years with the fuel.
So therefore, those decisions are taken by — as a business decision by the company like we have launched this CNG II Mahotsav scheme, which almost subsidize or pass-on the 50% cost to the — is taken by the company to make sure that the more volumes are attracted.
Hemang Khanna
Got it, sir. No, definitely. Your volume trajectory in the past few quarters has been exceptional and that’s clearly visible. Just as a last bookkeeping question, could you just help with the EBITDA for UEPL? I just missed that.
Ashu Shinghal
EBITDA for UEPL, just give us one minute. around INR10 per SCM EBITDA.
Hemang Khanna
Got it, sir. Thank you so much and wishing everyone a very Happy Diwali. Thank you.
Ashu Shinghal
Thank you. Same to you.
Operator
Thank you, sir. The next question is from the line of Kartik [Phonetic] from CLSA. Please go ahead, sir.
Kartik
Hello, sir. Thank you for taking the question. I had one question on what do you think is the current discount versus diesel in percentage terms? And based on your experience, what is the level of discount that you think customers are fine so that your volumes are not impacted?
Rajesh Wagle
Currently, the discount level is at about 16% or 17% to diesel and we have — empirically in the past, we have seen that you know, as long as the discount levels are in 15% to 25% kind of a range, the traction continues and we get a continuous stream of new vehicles — new CNG vehicles and conversions. So while we are at a lower discount level, but there is still — it’s still in a doable range. And again, the discount to diesel is relevant in commercial vehicles where the competition is with diesel. For the private car and for the auto rich or two-wheelers, etc., the competition with petrol where there is a very large incentive anyway for the customers.
To offset this relatively low discount and to promote heavy commercial vehicles, we have restarted this incentive scheme. But if you look at the sale number of our small or light commercial vehicles, that remains at 1,000 plus and that has not got impacted by lowering of a discount from, I think one or two quarters back, it would have been about 19%, now it is down to 16%, but we haven’t seen any decrease in adoption because of that.
Ashu Shinghal
In the petrol discount to petrol is around 45% to 50% range, maybe 47%, 48%. So there is a substantial delta for attracting petrol vehicles. Now just keep in mind, there are several other things which are happening when a person decides to take CNG or petrol or any other vehicle is that lot of infrastructure is getting added up. Typically, we have been adding around 25 stations every year. This year combined with UEPL, we expect to add 85 to 90 stations this year itself. So OE models are available and there is a lot of choice even original equipment manufacturing like TATAs and others, Marutis are very aggressive about promoting CNG vehicles. They are redesigning their vehicles. More and more CNG stations are added up by other CGD companies also.
So the whole highway is getting created. What I want to say is that the whole ecosystem over last three decades for CNG vehicles have been created. So we want to take — make sure that this ecosystem is maintained properly for next few years, at least to make sure that the volume growth is maintained and proper delta can be arranged or tweaked to make sure that the volume growth happens.
Kartik
Got it, sir. And just to follow-up. Do you think customers care more about the running cost or the overall cost like the upfront cost that they have to bear in this case for CNG versus petrol?
Ashu Shinghal
We just discussed sometime back, there are two type of users. One that private car owners, if they purchase a vehicle, they see two things, one that convenience to fill CNG and second, how much they run, what is the operational efficiency. Typically, private cars don’t run too much. So their payback is high. For commercial vehicles, if the CNG is available, they have to be competitive in the market. That type of pressure is not there in private vehicles. So for remaining competitive, they will always go for a cheaper running fuel. They typically take account the total cost of ownership and running kilometers is very important for a commercial vehicle.
And therefore, the delta also is not very significant because if you see the life of the vehicle for 15 years, 20 years, then this original — the upfront capex can be quickly paybacked in one and a half year or less than a year for a commercial vehicle. So the decision point is what is the delta between diesel and CNG or petrol and CNG for a commercial vehicle.
Kartik
Thank you, sir. Thank you so much for that.
Operator
Thank you, sir. The next question is from the line of Saurabh Handa from Citigroup. Please go ahead, sir.
Saurabh Handa
Yeah, thank you for the opportunity. Sir, my first question is, just on this APM allocation cut, now the perception is that the CGD sector has been singled out in bearing the brunt of this whole reallocation to say ONGC petrochemical plant. Now in your discussions with the government and the ministry, do you get a sense that there is indeed a shift in their stance towards the priority for the sector or this is just something which needed to happen and it’s a sort of one-off? And if it was a one-off, then why not do a pro-rata cut across sectors by just the CGD sector?
Ashu Shinghal
I think, again, this was asked some time back. There are — I mean, this is a government prerogative at a macro-level that what type of allocation and what pricing they give. If you see, it is not one single point which you can single out and take as a general — I mean, general consensus about it. You have to look at last 15 years or so, the CGD sector has been promoted over a period of time. The first priority has also been given to CGD. The HPHT gas allocation was given to CGD. The APM prices were readjusted once we found that LNG prices have gone over the roof in terms of war and corona times.
So it’s not that one decision can be taken as a general guidance for what the priorities have shifted or not. Anyways we are not the party to decide those things and we don’t think that — those are the things which we can take as a general guiding for the future also because the first priority to CGD is still there as far as the norm — as far as the government guidance is concerned.
Saurabh Handa
Okay, sir, fair enough. Sir, my second question is on the recent exclusivity whatever end of exclusivity notices that have been sent by the PNGRB. Now in that, I think all three GAs of yours are covered. So what — could you talk us through if there are any implications of this or could this again be subject to legal challenges, etc.?
Ashu Shinghal
I think if you have seen the notice — public notice which PNGRB has taken out maybe yesterday, there are 73 geographical areas which have been called for the consultation. And if you have gone through that notice, it says that the matter is subjudive and the court has asked — I mean, they’ve given the freedom to PNGRB to go for consultation. But if any action is to be taken, that needs to be checked through the court if in case it is having any adverse impact on the CGD. So it is the prerogative of the regulator to move ahead with the procedure, any which way the regulation allows for going for exclusivity.
So as has been discussed earlier, also exclusivity is a beneficial thing for all the sector also. We are not against it. Only as a matter of fact, the matter is subjudive because if exclusivity is ending, there is a opportunity for us to go to other geographical areas to work upon. So we have a market to work with. And since our GAs will be covered, so we will be getting paid for the infrastructure cost plus certain returns on it. So it’s not a thing which we are very much afraid of as such. But any which way, the matter is subjudive, so we don’t want to comment on that. What PNGRB is doing is very well within their rights and they are going for the growth of the sector. We are very much for it.
Saurabh Handa
All right, sir. Thank you so much.
Operator
Thank you, sir. The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead, sir.
Madhur Rathi
Sir, thank you for the opportunity. Sir, like just wanted to understand your perspective on the previous question, sir, do we see the Indian CGD ecosystem or the gas pipeline ecosystem going towards a common carrier over the next few years whereby we would receive some kind of rental or for the — you — our infrastructure utilization by different players, so on that front, some view?
Ashu Shinghal
I think if you are talking about main gas grid, it is already on common credit basis. When we talk about CGD, there are two types of exclusivities under that. One is infrastructure exclusivity, which is for a period of 25 years and there is a provision in that to go for 10 years extension after the expiry of 25 years. So across the globe also we have seen that the infrastructure exclusivity is maintained in terms of one geographical areas, there cannot be two parties who build the physical infrastructure.
Now coming to marketing exclusivity, as discussed earlier, also the matter is subjudive. There is a provision in the act — in the regulation not in that five to eight years time is given for ending of marketing exclusivity since the matter is under subjudive. So we don’t know when it will end. If you say two years, three years, we can’t say it is two years, three years or prior to it. It is very difficult to give any numbers when the court case will be decided. And in which manner of fashion it will be decided. So let us wait for that and see how it rolls out.
Madhur Rathi
Okay. Sir, my next question was, sir, how is APM gas allocation decided between different CGD? Is it based on the number of GA that a particular CGD has or has the marketing rights to or how is it decided in the CGD ecosystem?
Ashu Shinghal
It is not on number of GAs, it is based on one that it is done on unbiased manner. Second, it is on the availability and the demand. And third, it is on the last month consumption. We are consuming 100 units in the last month. Next month all the demand is aggregated, all the availability is aggregated and then it is divided. The percentage cut is applied to all the CGD entities irrespective of [Technical Issues] or number of GAs.
Madhur Rathi
So, sir, basically like how much volume you can offtake — how much volume your stations can offtake will determine how much APM gas you can bid for. Is that understanding right?
Ashu Shinghal
No, no, it is actual average consumption of the last month, last one month. Last quarter not — sorry, I’m corrected, it is not month, it is last quarter average consumption is taken as the base figure that is the demand aggregation of all CGD entities and the availability projections are then taken and demand divided by availability or the other way around.
Madhur Rathi
Okay. Thank you, sir, and all the best.
Operator
Thank you, sir. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead, sir.
Kirtan Mehta
Thank you, sir, for the opportunity. One question to understand about the sort of our vehicle pool, would you be able to sort of divide it into two pools where the vehicles use typically 30, 40 kilometer of run every day and the one which have the significantly higher run of 100 kilometer plus? Is it possible to give some approximate number?
Amit Murarka
I think…
Rajesh Wagle
Sorry, can you repeat the question?
Ashu Shinghal
Are you saying 30, 40 kilometers or 80 kilometers? There are different — I mean, passenger vehicle run maybe 40 to 50 kilometers in a day, whereas commercial vehicle will run around 200 kilometers a day or maybe more than that.
Rajesh Wagle
And it depends on the class of vehicles. If you take a, let’s say, Uber or Ola, it may run 150 kilometers a day also. A typical MSRTC bus would run about 400 kilometers in a day.
Ashu Shinghal
Commercial vehicle?
Rajesh Wagle
Commercial goods vehicle, again, it will depend on the class of vehicle, if it’s a small light commercial vehicle doing from Rewandi warehouses to city two, three trips a day it may be about 80, 100 kilometers a day.
Ashu Shinghal
And heavy commercial vehicles run maybe 300 kilometers.
Rajesh Wagle
The vehicles which run on the highway is typically run hundreds of kilometers a day. Private individual vehicles typically the per-capita is a bit lower because they mainly use it for commuting etc.
Ashu Shinghal
And even three-wheelers run 100 kilometers a day.
Rajesh Wagle
Yes, three-wheelers also run about 80, 100 kilometers a day.
Ashu Shinghal
Is that the question was or something else?
Kirtan Mehta
The way I wanted to understand was how much percentage of our CNG consumption will be coming from the higher usage vehicles, which would be less impacted by or which would be subjected to sort of the price change in the CNG? Would it be something like 40%, 50% of the CNG consumption exposed to that very sensitive to price change.
Rajesh Wagle
No, no. Look once the vehicle is on CNG, the vehicle has to run, it will buy CNG, it doesn’t have any other choice. So, typically, if the discount decreases or CNG price increases, etc., what tends to happen is incremental addition of new vehicles, growth rate starts dipping a bit.
Ashu Shinghal
Just to add to what Rajesh said is that diesel vehicle, there is no choice. In petrol vehicles, there is a choice that they can run on petrol or CNG, like small passenger vehicles, they can run on either petrol or CNG. But for a diesel vehicle, for a heavy truck, if it is converted to CNG or if it is a OE truck, then it can run only on CNG. They don’t have choice to switch back to diesel or petrol, small commercial vehicles also.
Kirtan Mehta
Yeah, I do understand that. But basically, if at all the savings enjoyed by the existing vehicle goes down, typically the addition also goes down because of the sentiment. So how much percentage of the pool would be basically in that category?
Ashu Shinghal
It’s a very small number. The commercial vehicles and heavy commercial vehicles and buses, they are as far as overall numbers are concerned, very small in numbers. But the typical per-capita consumption is high in commercial vehicles.
Rajesh Wagle
Look, they would not be contributing more than about 12% to 15% of our overall CNG sales. A big chunk of the CNG sales comes from private cars, taxis and auto rickshaws. The transport undertaking put together would be about 7% or 8% of the overall CNG sales.
Kirtan Mehta
Another question was about basically, we understand that short-term allocation of the new well there has been given up to the 31st March ’25. So what is the allocation that we have got for the short-term till 31st March, is it 50% of the APM requirement that we lost?
Ashu Shinghal
Not exactly. We will come back to you on this number, but new well gas we have also bidded and there more gas is expected to come online. So we are waiting for that also, but we did not get the full quota of new well what we quoted for.
Kirtan Mehta
Sure. And the last question was about the industrial commercial. We are seeing a very good growth in this segment. So against sort of the volume that we have agreed, how much percentage is already sort of ramped up to and what is the balance that can come over the next year or so?
Rajesh Wagle
We are expecting a low double-digit growth to continue for at least another year or year and a half in the industrial segment.
Ashu Shinghal
Industrial and commercial put together, we got 12% high-growth last year and maybe 10% to 12% this year. So the sourcing of this volume is already done by us in terms of some contracts of LNG.
Rajesh Wagle
And we have signed contracts with new industries for pretty good volume, which we will be connecting in the coming construction season or the ongoing construction season and next year. So that will contribute to additional volumes.
Kirtan Mehta
Sure. Thanks for this clarification and wish you all Happy Diwali.
Operator
Thank you, sir. The next question is from the line of Ramesh from Nirmal Bang Equities. Please go ahead, sir.
S. Ramesh
Thank you very much and wish you all a very Happy Diwali. So if we were to look at your plan to acquire that 40% stake in International Battery, can you take us through what is in it for you in terms of your long-term business plan in that business? And what is the kind of size and profitability of this company and can you tie in with some numbers, whichever you can share in terms of how it would help you generate the return on that investment?
Ashu Shinghal
I think it is an opportunity which has come out from the strategy of the company to diversify into, say, non-fossil fuel segment also. We want to have at least a 20%, 25% revenue bottom-line on non-fossil diversified new areas. So as a matter of fact, we export several opportunities and one such opportunity was this that we are going to set up a new battery manufacturing company, which is a cell manufacturing company. And this will be, I mean, one of the first in India because as per our understanding goes, all cells are getting imported in India through China, Korea and other places across the globe. What Indian companies are doing is importing the cells and packaging them to make the battery pack. So this will be one of the first company or maybe one of the few companies to start cell manufacturing in India.
The size will be — if we start with, we will have 1 gigawatt factory and it can be scaled-up to 5 gigawatt factory in at least two, three years time. We will see the performance of first gigawatt. It’s a Korean partner company, U.S.-based company, which is — which we have joint ventured with and they have set up a plant — pilot plant in Korea. The product is out and it is being tested in Indian road conditions also. The capex size in the first phase will be around INR850 crore and for Phase 2, it will be around INR3,500 crores. The revenue once we have 5 gigawatts will be in the range of around INR4,000 CR on the top-line and maybe INR700 crore, INR800 crore in the bottom line.
So it’s a good segment. It also depends on what is the duty structure the government gives because government is promoting a lot of Make in India campaigns and also since almost 80% batteries are getting imported from China. So we feel that there is a likelihood to put duty on Chinese imports, especially in battery segment that will further increase the profitability of the venture. So depends on the product, the type of quality which we produce, the type of chemistry, the acceptability, the rate of prediction and so on and so forth. So it’s a newer area for us, a new venture for us and we are very optimistic and excited about this whole opportunity. And if it makes sense, then it can be a good game-changer for the company.
S. Ramesh
So in terms of the timeline, when do you expect to finalize the shareholder agreement and get started on this project and what is the execution timeline?
Ashu Shinghal
It’s a non-binding agreement which we have signed and we expect to close this signing of SHA in few months time from now.
S. Ramesh
Okay. So on the LNG retailing business, what is the kind of roadmap you have for, say, two, three years? You already talked about adding some stations and that you are doing certain amount of volume in your Savroli station. So when do you see some kind of critical mass in the LNG retail outlet in terms of number of stations and LNG volumes? And how much do you think it can add to your top-line and bottom-line, say, in two to three years?
Ashu Shinghal
It’s a very nascent stage. Right now in India, around 17, 18 retail outlets are working of LNG. One is, Savroli which we have already commissioned from MGL. And very recently, a few days back, we commissioned another station from Mahanagar LNG, which is a joint-venture company of MGL at Aurangabad. Now next two years, there will be several stations which are coming onboard from MLPL and some other parties like, GAIL, IOCs, OMCs Petronet and so on and so forth. So what we think that LNG’s infrastructure is — I mean, the puzzles are solved in terms of regulations, in terms of safety standards, in terms of technology, in terms of OEs coming up, in terms of retail outlets coming up, in terms of giving some discount to diesel.
And also if we have to see the environmental impact, if we have to replace diesel, there are very few alternates available and one such good alternate is LNG, because LNG, one fill can take you to 1,000 kilometers run. And if we talk about electric vehicles on long-haul or heavy commercial vehicles, it is not feasible considering the very prohibitive capex, the range anxiety, the charging time and the weight of the battery and the replacing of the battery in a period of time. Again, hydrogen is 10, 15 years down the line, then you have to have green electricity to produce 60 units of — units to produce 1 kg of hydrogen, again burn it or uses a fuel-cell to run the hydrogen, creates the whole ecosystem cores, technology, adoptability, infrastructure.
So we think if we have to go for net zero compliances and almost 3% of commercial vehicle is emitting 35% of carbon CO2 emissions in the transport sector by heavy commercial vehicles to commercial vehicles. That is the segment which LNG is trying. Maybe in two years down the line, if we see NGL, we will have good numbers because more and more ecosystem is getting ready, more OEs will be coming, more customers will be ready to reduce their carbon footprint. And we as a company find that LNG will be a good segment to work on.
Exact numbers will depend on how many number of stations we put up, how much volume we are able to attract, but it will not be very substantial in the overall scheme of thing in terms of revenue and profitability for at least two, three years. But down the line five, six years, it can be a substantial number.
S. Ramesh
Okay. If I can squeeze in one more last question. So when you talked about the growth outlook in the second half and you said additional 3%, are you talking about a 10% volume growth in the second half? How should we read that?
Ashu Shinghal
No, no, no. I think let me make it clear. seven-year — 7% growth we have achieved from 31st March ’24 till 30th September. So if we talk year-on-year from 31st April ’24 till 31st April ’25, it will be 10%. So 7% plus 3%.
S. Ramesh
So for the full year, it is 10%. That’s what you’re saying.
Ashu Shinghal
That’s right.
S. Ramesh
Okay. Thank you very much and wish you the best of seasons and Happy Diwali. Thank you very much.
Ashu Shinghal
Thank you very much. Thank you. Thank you, sir. As there are no further questions, I would now like to hand the conference over to Mr. Probal Sen from ICICI Securities Limited for closing comments.
Probal Sen
Thank you, Palak. Thank you very much for all the attendees as well as the management for taking their precious time out and taking an extended time beyond the set time to answer all the questions with as much as they could. Wishing everybody and their loved ones a very happy Diwali. From the management side, sir, any closing remarks you would want to make, otherwise, we’ll cut the call.
Ashu Shinghal
Thank you so much, Probal, and all the investors who have joined and taken time out to have this conference. Wishing you again and your family a very Happy Diwali and a new year, prosperous New Year. Thank you so much.
Probal Sen
Thank you, everyone. You may exit the call now. Thank you.
Operator
[Operator Closing Remarks]