Mahanagar Gas Ltd. (MGL) Q4 FY22 Earnings Concall Transcript

Mahanagar Gas Ltd. (NSE: MGL) Q4 FY22 Earnings Concall dated May. 11, 2022

Corporate Participants:

Nitin Tiwari — Executive Vice President

Neha — Company Representative

Sanjib Datta — Managing Director

Analysts:

Probal Sen — ICICI Securities — Analyst

Unidentified Speaker —

Aishwarya Agarwal — Nippon India MF — Analyst

Vikash Jain — CLSA — Analyst

Sabri Hazarika — Emkay Global — Analyst

S. Ramesh — Nirmal Bang — Analyst

Maulik Patel — Equirus Securities Private Limited — Analyst

Iqbal Khan — Edelweiss — Analyst

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Niharika Jain — Equitas Investment Consultancy — Analyst

Harsh Bohra — VT Capital — Analyst

Lokesh Manik — Vallum Capital — Analyst

Kirtan Mehta — BoB Capital — Analyst

Ankit Agarwal — Phillip Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Mahanagar Gas Q4 FY22 Earnings Conference Call hosted by YES Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari from Yes Securities. Thank you, and over to you, sir.

Nitin Tiwari — Executive Vice President

Thank you, Aman. Good evening, everyone. I welcome everyone to Mahanagar Gas Limited’s fourth Quarter and FY22 earnings call. We have the pleasure of having with us today, the senior management team from monitor Gas Limited represented by Mr. Sanjib Datta, Managing Director; Mr. Sanjay Shende, Deputy Managing Director; Mr. Rajesh Patel, Chief Financial Officer and Mr. Rajesh Wagle, Senior Vice President, Marketing. I will now hand over the floor to the management for their opening remarks and that shall be followed by an interactive Q&A session. Over to you, sir.

Neha — Company Representative

Yeah, This is Neha here from EY. Thank you, Nitin. Before we begin, I would like to mention that some of the statements made in today’s discussion may be forward looking in nature and we believe that the expectations contained in the statement are reasonable however the nature involves a number of risks and uncertainties that may lead to different results. The risks and the uncertainties relating to these statements include but are not limited to risks and uncertainties regarding fluctuations in sales volume, fluctuations in foreign exchange, other costs and our ability to manage growth, I urge you to consider that quarterly numbers are not a reflection of a long-term trend or an indication of full-year results. They should not be attempted to be extrapolated on interpolated into a full-year number. Thank you, and over to you, sir.

Sanjib Datta — Managing Director

Thank you very much. Good afternoon and welcome to the earnings conference call of Mahanagar Gas Limited for the fourth quarter of the financial year 2021-2022. I would like to thank all of you who have connected for our earnings call today.

India is witnessing recovery in economic activity after COVID. Accelerated pace of vaccination, uptick in consumer and business confidence with better outlook on the general economic situation have resulted in greater degree of optimism. However adverse residual effects of the pandemic across the globe coupled with major geopolitical upheavals have resulted in a surge in commodity prices matched by high inflation. Crude oil price has soared to over $100 per barrel and likewise imported RLNG prices have touched new highs.

For MGL Q4 of FY2021, 2022 was impacted by the third wave of COVID resulting in lower sales volume but the recovery has been passed and the average gas volumes sold in March 2022 increased by 14% as compared to that of January 2022. Despite the second and third waves of COVID, we could fast track our infrastructure creation efforts across MGL’s existing license areas during the last financial year. During the last quarter 79,130 domestic households were connected and that we have established connectivity with about 1.86 million households. During FY21,’22 we provided connectivity to 2.62 lakh households and bettered our previous best of providing 1.98 lakh connectivity. We laid 1.25-kilometer of steel and PE pipelines in the quarter thereby taking the aggregated pipeline lengths to about 6,221 kilometer. We added 14 new CNG stations in the last quarter. With these, we currently have 290 stations. We also added 107 industrial and commercial consumers and thus as on quarter end, we have 4,339 industrial and commercial customers.

In respect of our Raigad geographical area, we are connected to 53,030 domestic households and 23 CNG stations are currently operational. During the quarter, we laid 26.23-kilometer of pipeline in Raigad GA thereby taking the total length of pipeline to 346 kilometers. Such expansion of our pipeline networks has also resulted in commissioning of the first online CNG station in Raigad GA at Somatane [Phonetic]. In January 2022, the company achieved inch kilometer target as per PNGRB’s Minimum Work Program for Raigad GA. You may recall that we had already achieved the cumulative number of domestic PNG connections target by March 2020. So with this, the company fully met its minimum work program target for Raigad. Possibly MGL is is the only CGD company which has completed its minimum work program against a bid out license area. This shows the company’s sincerity in adhering to its commitments.

Coming to MGL’s operations, average sales volume for the year ended 31st March 2022 is 2.999 MMSCMD whereas it was 2.211 MMSCMD in the corresponding period last year. Thus there is an increase of 35.63% in the overall sales volume compared to the previous year. Average sales volume for the year ended 31st March 2022 of 2.999 MMSCMD consists of CNG volume of 2.114 MMSCMD, domestic PNG volume of 0.466 MMSCMD and industrial and commercial segment volume of 0.419 MMSCMD. Compared to the previous year, sales volume in case of CNG has increased from 1.415 MMSCMD to 2.114 MMSCMD which is an increase of 49.4%. In case of industrial and commercial sales volume has increased from 0.332 MMSCMD to 0.419 MMSCMD which is an increase of 26.2%. Domestic CNG sales volume has increased marginally from 0.464 MMSCMD to 0.466 MMSCMD which is an increase of 0.43%.

EBITDA for the financial year 2021-2022 is INR924 crores compared to previous financial year EBITDA of INR934 crore. EBITDA margin is at 25.96% for financial year 2021-2022 compared to previous financial year EBITDA margin of 43.39%. Net profit after tax for financial year 2021-2022 is INR597 crores compared to net profit after tax for the previous financial year of INR620 crores. Aggregated sales volume to the priority sector was more than available APM gas allocation, which resulted in shortage in the range of 15% to 17% during the quarter. This gap was net through purchase of market price gas. Spot prices remained high due to various global factors. Thus, priority set sales volumes beyond APM gas allocation and substantial increase in spot gas prices had put pressure on the margins of priority sector during the quarter. Nevertheless, as a customer-focused company, we met the total demand of priority sector without imposing any dry out. However, the company undertook upward division of CNG and domestic PNG prices in January 2022 from INR63.50 per kg so to INR66 per kg and from INR38 per SCM to INR39.50 per SCM respectively.

Government of Maharashtra reduced VAT on natural gas from 13.5% to 3% with effect from 1st April 2022 and consequently prices of CNG and domestic PNG were reduced to INR60 per kg and to INR36 per kg per SCM respectively. Further notified price of APM gas was revised from USD2.97 per MMBTU to USD6.14 per MMBTU with effect from 1st April 2022 and the company passed through the above increase in gas costs through its retail CNG and domestic PNG prices in a phased manner during April 2022 and revised CNG and domestic PNG prices from INR60 kg to INR76 per kg and from INR36 per SCM to INR45.50 per SCM respectively by the end of April 2022. In case of suppliers to the I&C, industrial and commercial customers. high RLNG costs had put pressure on margins as the industrial and commercial sales prices are linked to alternate fuels which did not see similar increases. The company has partially recovered the margins by charging premium over alternate fuel linked prices. To reduce dependent on spot gas and optimize the overall gas purchase portfolio, the company had entered into a contract for purchase of term gas during Q3 [Phonetic] for a period of 18 months and during Q4 another term contract was signed for a period of 5 years.

Coming to quarter-on-quarter comparison, average sales volume for Q4 of FY2021-2022 is 3.170 MMSCMD and is lower than previous quarter average of 3.303. This reduction is mainly due to third wave of COVID which struck in January 2022. Such average sales volume of 3.170 MMSCMD consists of CNG volume of 2.277 MMSCMD, domestic PNG volume of 0.474 MMSCMD and industrial and commercial volume of 0.418 MMSCMD. Q4 EBITDA has substantially improved to INR215 crore as compared to INR103 crores in the previous quarter. EBITDA margin has increased to 19.83% for Q4 compared to previous quarter EBITDA margin of 10.03%. Net profit after tax for the quarter has increased by 132% to INR132 crore from previous quarter net profit after tax of INR57 crores.

As you would be aware that on 6th of May 2022 Ministry of Petroleum and Natural Gas has come out with the guidelines for domestic gas supply to CNG and domestic PNG segments of CGD networks. The guidelines aim to meet 100% of CNG and domestic PNG requirement of CGD entities through a mix of domestically produced APM non-APM and HPHT gas duly supplemented through term or spot RLNG as required. CGD entities are now expected to get such pooled natural gas 2.5% over and above their 100% requirement of CNG and domestic PNG segments of each geographical area calculated on the basis of consumption in the previous quarter. Such revision in gas allocation policy is expected to have a positive impact on CGD sector with regards to availability and overall pricing, thereby facilitating the CGD companies to deliver better results.

MGL’s Board of Directors has approved final dividend of INR15.50 per equity share for financial year 2021-2022. Thus along with the already paid interim dividend of INR9.50 per equity share total dividend for financial year 2021-2022 stands at INR25 per equity share which is an increase of 20% from the 230% dividend paid for financial year 2020-2021.

With this, I conclude and would now like to open the floor for questions. Thank you very much.

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Probal Sinha — sorry, Probal Sen from ICICI Securities, please go ahead.

Probal Sen — ICICI Securities — Analyst

Thank you for the opportunity. Good evening, sir. Sir, the first question was with respect to the gas supply new guidelines that you mentioned, which should be net positive. Just to understand what has been put out is basically that 2 things. One is the shortening of the review period to a quarter from 6 months and second, it is still basically they intend to supply 100% gas on a best effort basis but if we look at the domestic gas supply that been made available over the last several months, very clearly, there is no additional domestic gas that will be made available and the balance has to be met from premium gas as well as spot LNG. So I’m just kind of trying to understand how does it change things for us from what is there currently where in any case 15% to 18% gas is being met by market price sources. So what changes with respect to these guidelines, sir. If you can just give us some thoughts on this.

Unidentified Speaker —

Yeah, I mean it’s just a couple of days. So we still haven’t got to do a full analysis yet but what we believe would — the way it would pan out will be that immediately whatever spot gas or term gas which we are procuring on our own and pushing into the priority segment will get replaced by whatever market price gas GAIL is able to procure immediately. Maybe in the immediate term, it could be spot. So maybe our spot may be treated as GAIL spot but at a commerce price for all CGD companies and since this is a lot of untimed thing, this is sustained kind of a policy thing. Overtime GAIL will try to procure some HTHP gas at whatever price ceiling which is coming in as per the formula and pull that into the requirement for CGD. If that HPHT gas contracting takes some time until then, our understanding is GAIL will also explore getting into some term RLNG contracts which could be cheaper than the current spot prices and pull that into the CGD gas requirement pool. So it looks like a positive step. How much actual the quantum of reduction in gas cost, that we will have to see as time goes by.

Probal Sen — ICICI Securities — Analyst

Right. And just to — as a follow-on to that in the near term, sir, mentioned mentioned that you have signed a term LNG contract which has extended even in this year for another year or so. So can we get a sense barring whatever domestic allocation is there, what kind of — how many term LNG contracts do we have and what volume have we tied up for the next year or 18 months right now.

Unidentified Speaker —

We have got 3-term gas contracts, not all are RLNG, one is for domestic gas and that is with Reliance. We have one with GSPC and we recently have entered into one with GAIL for the Henry Hub.

Probal Sen — ICICI Securities — Analyst

Okay. So is it possible to share the volumes that have been tied up, sir.

Unidentified Speaker —

The volumes for these contracts are confidentiality clauses. So volumes, I don’t know how much term down you can go, et cetera, that we will not be able to disclose.

Probal Sen — ICICI Securities — Analyst

Okay. Sir, the other small question I had was with respect to the margin profile. I think it was mentioned that alternate fuel pricing, at least in the initial part of Q4 was adverse compared to your LNG-based pricing for industrial and commercial. What we’ve seen is if we look at one major alternate fuel for us tends to be commercial LPG prices and those have obviously gone up very sharply in line with the fact that Asian LPG prices have been going up very, very fast and we are also seeing LNG prices have come off a little bit, at least in April. Is it fair to assume that in this kind of a scenario, the margin profile can improve fairly sharply at least over Q1. Is that something that you’re seeing on the ground on your pricing front.

Unidentified Speaker —

Could you repeat your question please.

Probal Sen — ICICI Securities — Analyst

I was saying that for the industrial and commercial, sir, LPG tends to be a fairly material alternate fuel for us from a pricing standpoint and our understanding is that LPG prices have been going up fairly sharply and at the same time LNG prices and spot LNG prices have come off a little bit in the last couple of weeks in April. So, are we seeing any improvement in terms of our pricing power and therefore margins in Industrial Commercial segment in 1Q of FY23.

Unidentified Speaker —

Yeah, all other things being constant, yes. These 2 factors would lead to increase gross margin. However, we also need to keep in mind that we — when the LNG prices are very high, we had gone through a substantial premium over alternate fuels. So once the prices of LNG have cooled down a bit, we have also given some relief for our customers from that very high premium level but on overall basis, yes, hopefully, it should be positive.

Operator

Thank you, Mr. Sen. Request to join the queue for any follow-up. [Operator Instructions] We have the next question from the line of Aishwarya Agarwal from Nippon India MF. Please go ahead.

Aishwarya Agarwal — Nippon India MF — Analyst

Yes. Thank you, sir. Have we taken enough price hikes for the CNG so that our margin reaches to INR10 per SCM.

Unidentified Speaker —

If you noted MD’s speech, price of CNG was INR60 rupees per kg as of 1st April and currently it is at INR76 per kg and in similar proportion increase has happened in domestic also. This price increase fully covers the APM gas cost increase from 6.1 — from $2.97 per MMBTU to $6.14 per MMBTU.

Aishwarya Agarwal — Nippon India MF — Analyst

So my question remains, sir, are we — generally we used to do some INR10 per SCM margin. So have we reached there or we need to take some more price hike to reach there because lots of volatility in the prices in between, which has led to volatility in margins also, which we have been reporting in last few quarters.

Unidentified Speaker —

If you look at the price rise which was taken up to Q4, it covered the amount of RLNG being used in the priority sector. So current price rise, which we have taken is mainly towards APM prices rise from $2.97 to $6.14 and now spot prices coming down and also the way just now we spoke pooled gas, I think prices are likely to remain and it covers more or less the pooled cost as well at the current level.

Aishwarya Agarwal — Nippon India MF — Analyst

Sure, got it. Again, sir, yes, go ahead.

Unidentified Speaker —

If you look at margins, I think overall company per SCM margin is in the range of around INR13.60 or something. And if you look at margins for priority sector also, we are almost making similar level of margin if you look at ’19 and ’20 level of margin. Of course, I think 2021 slightly abnormally high because of APM prices were very low. So barring that year, more or less we are in line with the margin, which we have been making in the past as far as priority sector is concerned.

Aishwarya Agarwal — Nippon India MF — Analyst

Sure, sir. That’s helpful. Second question is with this — I mean how do we see the growth as of now, the growth in the CNG volumes. What I can see that the fourth quarter has a weaker growth on a quarter-on-quarter basis and that may be because of the COVID, I guess, and lesser number of days. But how do you see the growth now on a year-on-year basis at this point in time.

Unidentified Speaker —

If you take out the COVID period, typically last 4, 5 years we seen a CAGR of about 5%, 6% or so. But now we are seeing better growth come back to that. A lot of growth is coming out from the CNG segment. There is a combination of factors which has resulted in that. One is that petrol and diesel prices were at historically high levels. Second is almost all OEs now are coming up with factory fitted CNG variants at not just entry level, even mid-level cars, et cetera. Apart from that, off late, a lot of commercial goods vehicles have started coming with CNG variants as OE from factory end and because of the price of diesel, there is one good number of new CNG fueled commercial vehicles which are coming on to the market.

Unidentified Speaker —

I may add to that, the commercial vehicles addition is very good. Every quarter-on-quarter and almost 2,800 numbers of vehicle has been added in this quarter as well and this number is likely to continue for some time because of OE vehicles on CNG.

Aishwarya Agarwal — Nippon India MF — Analyst

Sure, sir. That is very good. And the last question, sir. if I may, that from 1st October when this APM gas prices will further move up to say $9 and we have some gas available from the GAIL as per the new policy. I mean, at that point of time, I don’t know what the diesel prices will be, but I mean, our growth and the margins are also dependent on the diesel price, right?

Unidentified Speaker —

You are right, I think it is anybody’s guess what will be the price in October of alternate fuels like diesel and petrol and also currently the spot price is at a particular level. That may also come down. So we’ll have to wait and watch how it pans out with respect to APM price, spot price, what is this pooled price which comes up and also as you said alternate fuel prices and accordingly we will have to take an appropriate decision, keeping in mind, how does it impact the CNG vehicle conversion, et cetera. So we will try and balance out the volume growth and pricing both. However, our endeavor will be always on to add on to new vehicles an add on to the gross margin on absolute terms going forward.

Aishwarya Agarwal — Nippon India MF — Analyst

But there is no clarity of ONGC’s gas prices being having some cap which can help city gas companies.

Unidentified Speaker —

No, not really. We haven’t heard anything on those lines and only thing we are hoping that by September or so, GAIL should be in a position to source some term gas or HPHT gas too which will replace the spot gas which currently may go into the pool. So that decrease in cost to some extent will offset the cost of APM price increase. For the final number, as Mr. Patel has said, we’ll have to wait and see how it pans out. Currently we do have sufficient headroom because petrol is INR120 plus in our GAs [Phonetic]. Diesel is also about INR104. INR105. We are at INR76.

Aishwarya Agarwal — Nippon India MF — Analyst

Sure. Thank you, sir. That was my–

Unidentified Speaker —

In present terms, we are almost at a discount of around 55%, 57% compared to petrol and almost 28%, 30% compared to diesel as of today.

Aishwarya Agarwal — Nippon India MF — Analyst

Sure sir, thank you. Best of luck.

Operator

Thank you. The next question is from the line of Vikash Jain from CLSA. Please go ahead.

Vikash Jain — CLSA — Analyst

Hi, thanks for taking my questions. Sir, on the LNG, on the contracts that you mentioned, you mentioned 3 of them, one was — one is with GSPC, the other is with I think the U.S. LNG contract. And thirdly is the new gas contract or the deepwater gas. So all of those 3, what is the tenure of these contracts. These are like 5-year contracts. These are — how long are these contracts.

Unidentified Speaker —

Two of these for 5-year term. One is for 18 months. Reliance–

Unidentified Speaker —

It is 6 years, One is 6 years, one is 5 and one is 18 months.

Vikash Jain — CLSA — Analyst

Okay. And so in the current scenario where after this policy has come into being, is it fair to say that these contracts will be more than your requirement of industrial and commercial gas in terms of volumes because you’re–

Unidentified Speaker —

Not really. The way all these contracts are structured — within the the contract, they will not be any impact as far as industrial and commercial volumes are concerned. It is within the minimum threshold, not planning to really take or pay there.

Unidentified Speaker —

We have got enough downward flex freedom in these contracts to ensure we don’t land up in our take or pay regime.

Vikash Jain — CLSA — Analyst

Okay, basically you’ve been doing industrial commercial about 0.4 MMSCMD or a little more than that and these contracts add together to be lesser than that. Tou have enough flexibility around that.

Unidentified Speaker —

The industrial and commercial volume is also growing at a good rate now.

Vikash Jain — CLSA — Analyst

Of course, yes. And so for the remaining, now, just coming back to this new policy that has been announced. Now, is my understanding correct that the domestic gas allocated to city gas has been fixed at the level which were prevailing as 6 months back. So — and as city gas demand rises, the gap between that level and whatever is the demand will all be filled up by either spot or term or the new deepwater gas. So domestic gas will not keep falling down for now. Is that understanding correct.

Unidentified Speaker —

No. We don’t have that kind of clarity available to us right now. So I don’t think the ministers, ministry pricing or order also goes to that level of detail.

Vikash Jain — CLSA — Analyst

Okay. But it does mention that there’ll be some domestic gas and remaining has to be fulfilled by LNG or whatever way or deepwater gas, right?

Unidentified Speaker —

What is the shortfall.

Vikash Jain — CLSA — Analyst

Yeah, whatever is the shortfall. I mean, so that’s what I meant that shortfall is based on a fixed level of domestic gas. That you think is not sure. That you’re not sure, right?

Unidentified Speaker —

No. That explicit clarity is not available in public domain.

Vikash Jain — CLSA — Analyst

Fair point. So this, is it fair to now understand that first will be on 16th I think, 16th is when it starts. So from here on, at the start of every quarter or will it be at the start of every month, a pooled cost price will be declared by GAIL or who is running the pool.

Unidentified Speaker —

GAIL is running the pool.

Unidentified Speaker —

BPSC will probably vet the price

Unidentified Speaker —

Vet the price and GAIL will run the pool.

Operator

Thank you, Mr. Jain. Request you to join the queue for any follow-up as we have several participants waiting for their turn. Thank you. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead.

Unidentified Speaker —

Yeah, good afternoon, sir. I have 2 questions. The first one is related to this domestic guidelines only. Wanted to know, I mean, if you are getting the allocations say from 16th of May for this quarter, then it would be the total priority sector volumes of last quarter which should be considered, which is both APM plus the amount of LNG you are using or would this be just APM.

Unidentified Speaker —

So it be considering the sales volume of priority sector of last quarter and on to that 2.5% as per the circular or the ministry guidelines.

Sabri Hazarika — Emkay Global — Analyst

Not last quarter’s APM allocation. It will be last quarter’s total volume.

Unidentified Speaker —

Not last quarter’s APM allocation, it will be last quarter’s priority sales volume plus 2.5% over that.

Unidentified Speaker —

That is the CNG and domestic PNG sales volume.

Sabri Hazarika — Emkay Global — Analyst

So for example, just a hypothetical situation in Q1 suppose if you’re doing say, you are doing certain amount of priority sector volumes where a sizable say 25% component is LNG. So next in the subsequent quarters, this LNG part of priority sector would also be part of the pool. And on top of that you will get 2.5%. Is that right?

Unidentified Speaker —

Obviously, otherwise it does not make any sense, correct? If today–

Sabri Hazarika — Emkay Global — Analyst

Yeah. Okay. Then I mean it is basically at this juncture also, last quarter. I mean spot LNG whatever you have been using that will be replaced with the pooled gas. That’s what you are saying from this quarter.

Unidentified Speaker —

Yes.

Sabri Hazarika — Emkay Global — Analyst

Okay, sir. Secondly, I’ve got a few small bookkeeping questions. The first one was, what was the overall shortfall of priority segment for the full year. You said 15% to 17% in Q4. What would this be for the full year.

Unidentified Speaker —

Full year was in the range of — see, very difficult to answer but around 8%, 9% on an average full year April till — April ’21 to March ’22 including the period of COVID when pool allocation was available, roughly 8% to 9% it was.

Sabri Hazarika — Emkay Global — Analyst

Okay. And what would be our average industrial and commercial price for the full year.

Unidentified Speaker —

Average commercial and industrial price for the full year. Industrial roughly INR47 per SCM, I’m talking price realization and commercial roughly INR55, INR56 on average for the full year.

Sabri Hazarika — Emkay Global — Analyst

Okay. And what would be the Q4 industrial volumes and commercial volume breakup.

Unidentified Speaker —

Industrial volume was 0.252 MMSCMD and commercially is 0.166 MMSCMD, Q4 this year.

Sabri Hazarika — Emkay Global — Analyst

Thanks, and all the best.

Operator

Thank you. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead.

S. Ramesh — Nirmal Bang — Analyst

Hello good evening and thank you very much. The first question is in the–

Operator

Your voice is breaking. Request you use the handset. There is an airy disturbance.

S. Ramesh — Nirmal Bang — Analyst

Can you hear me now?

Operator

Not very clear, sir. Can I request you to please be a bit loud.

S. Ramesh — Nirmal Bang — Analyst

Yeah. Can you hear me now?

Operator

Yes.

S. Ramesh — Nirmal Bang — Analyst

So with reference to the gas allocation theme to be managed by GAIL per case, in terms of your ability to respond to changing your overall blended cost of gas, how would it change in terms of the need of land because so far you’re controlling your gas procurement and the blended cost and the price of all the CGD companies. How do you see this impacting the way you change prices every month or every quarter, particularly for the industrial and commercial segment where you renew it every month and for CNG and domestic PNG prices as and when you take in the cost of gas, warrant [Phonetic] it, how do you see this play out.

Unidentified Speaker —

Let me clarify. I think you are mixing up the two things. The APM gas allocation was always given by government. Only in whatever post COVID because of the shortfall, we started buying and using spot for this segment. Whereas industrial and commercial, we always had market determined gas and it will always remain that way. Whatever new guidelines has come, it is only for the APM. So whatever happened post COVID and individually the CGD started blending or putting their own spot, now that part is being addressed through this pooled gas mechanism. So there is no change as far as our freedom to buy gas and other things is concerned. Priority gas was always available through government and it will be available going forward as well. However, it now will be in this new guideline and it will be a pooled mechanism through which the gas will come to CGD.

S. Ramesh — Nirmal Bang — Analyst

Okay. The second thing is, in terms of the notes of the accounts regarding the trade commission payable to OMC, what is the impact which you have provided for in this quarter. And what is likely to be the full impact once the trade commissions a pipeline.

Unidentified Speaker —

See, as far as impact is concerned, we have taken appropriate provisions in the beginning, so there is no impact as such additional in this quarter compared to earlier quarter or earlier 9 months. Okay.

S. Ramesh — Nirmal Bang — Analyst

So for the full year, what would be the impact in rupees per SCM or in rupees crores or can you quantify that.

Unidentified Speaker —

See whatever is the ministry guideline, in line with that we have made appropriate provision. There is no additional impact as such for Q4.

S. Ramesh — Nirmal Bang — Analyst

No, sir. So for the full year, if we have to understand how it’s going to impact your future pricing and margin, it would be useful if you can share that information in terms of what is the value of that impact you have provided for because obviously in terms of the commercial impact, there is a reduction, right?

Unidentified Speaker —

Just like gas price increasing and we do the factor in the pricing, similar is the manner for which trade discount also we factor in while doing the pricing, so we have already done gas factoring and it will continue to — we continue to do so.

S. Ramesh — Nirmal Bang — Analyst

Okay.

Unidentified Speaker —

There is no impact on the margins per SCM on account of these factor at all.

S. Ramesh — Nirmal Bang — Analyst

May I just squeeze in one last question. What is the kind of capex you have in mind for FY23 and ’24.

Unidentified Speaker —

Current year, I think we have spent in the range of INR600 crore. It should be maybe INR600 crore or little more than that. However, company is ready to go for more capex than that also and we have approval in place on both but it depends on how things pan out with respect to permissions which we need from local authorities, sometimes railway crossing, availability of land for putting up CNG stations, et cetera. So we are geared to do required amount of capex and it could be in the range of INR600, INR700 crores for the next year as well.

Operator

Thank you. The next question is from the line of Maulik from Equirus. Please go ahead.

Maulik Patel — Equirus Securities Private Limited — Analyst

Thanks for the opportunity. So one question. CNG volume took a relatively larger dip in this quarter on-Q-o-Q basis. Was there any impact of this MSRTC strike, which was happening in Maharashtra since November 2021.

Unidentified Speaker —

MSRTC has only a couple of hundred buses, negligible not even 0.2%, 0.3% of our volume. So–

Maulik Patel — Equirus Securities Private Limited — Analyst

Okay, and second question is that on related to this policy as you mentioned that you had a term contract signed in the last 4, 5 months; one with GSPC and second was one with GAIL for Henry Hub. Now, if I understand that both of their — the pricings are currently lower than the spot LNG prevalent spot LNG prices but that you will have as increase in cost post implementation of this policy for the priority sector volumes.

Unidentified Speaker —

Obviously it had just come out on Friday, so can you give a little more specific, what you are referring to.

Maulik Patel — Equirus Securities Private Limited — Analyst

Basically, in your current — in your priority volume mix, you have one on the APM and you have this 2-term contract which you have signed in the last couple of months, right? These term contract pricing are currently probably in the range of $12 to $16 per MMBTU assuming that it’s is in a term contract, whereas the spot LNG currently is in the range of $20 plus MMBTU. Now, if GAIL gives you this APM price, GAIL creates a pool of APM and the spot LNG which is currently only spot LNG is available and then supply to you. Do you think the pooled price will be higher than the current price what you are getting it today.

Unidentified Speaker —

No. For whatever is the gap in our priority volume requirements, mostly it was catered through spot. So that will get replaced by the spot which is going to get tied up by GAIL for all CGDs put together. That’s not going to have any–

Unidentified Speaker —

In the immediate term, we are not expecting to see any material change in our cost of gas. However, going forward, maybe a month to 3 months depending on how GAIL is able to source, term gas be it domestic or be it RLNG, we are hoping that our cost of gas will go down.

Maulik Patel — Equirus Securities Private Limited — Analyst

But now this term contract which you have signed entirely from your–

Unidentified Speaker —

Last year there was no clarity and everybody was using spot. At least now there is a clarity and it will be replaced in the medium to short-term with term RLNG or HTPT gas which will reduce the cost substantially.

Unidentified Speaker —

There is a big uncertainty which has gone away in our gas sourcing.

Operator

Thank you, Mr. Maulik. Request you to join the queue for any follow-up. [Operator Instructions] The next question is from the line of Iqbal Khan from Edelweiss. Please go ahead.

Iqbal Khan — Edelweiss — Analyst

Hi, sir. I have two questions, one is bookkeeping question. Sir, you mentioned in the industrial and commercial is estimated around 4,339. Can you give us the breakup of the industrial and commercial sector and are you also–

Unidentified Speaker —

Hello. We are not able to hear you clearly.

Operator

Mr. Khan, request you to use the handset please. Your voice is muffled.

Iqbal Khan — Edelweiss — Analyst

Can you hear me now. Is it better now.

Unidentified Speaker —

Yeah, please go ahead, let us see.

Operator

Little better.

Iqbal Khan — Edelweiss — Analyst

Yeah. I wanted the breakup of the industrial and commercial customer which you estimated as 4,339. So I wanted the breakup of that and also if you can give us the breakup of–

Operator

Sir, your voice is still breaking. Request you to come in network area please.

Iqbal Khan — Edelweiss — Analyst

I hope it’s better now.

Operator

Yeah, this is much better.

Unidentified Speaker —

Breakup of the industrial and commercial customer.

Iqbal Khan — Edelweiss — Analyst

Yeah and that I also breakup of the BEST fleet. In the last quarter, you had mentioned that it was around 2,400 CNG buses, 800 diesel and 200 EVs. So, could you please give us the current breakup of the BEST fleet.

Unidentified Speaker —

Can I answer your first question because your voice is not very clear.

Iqbal Khan — Edelweiss — Analyst

Yeah, please.

Unidentified Speaker —

First question, answer is we have around 88 industrial customers and rest is commercial customers. Number 4000 odd, 88 is industrial and rest is commercial which is around 4,200 plus.

Iqbal Khan — Edelweiss — Analyst

Got it, got it.

Unidentified Speaker —

Okay. What is your next question

Iqbal Khan — Edelweiss — Analyst

Yeah. And the next question was the current BEST fleet. So in the last quarter you had mentioned that there is around 2400 CNG buses, 800 diesel buses and 200 EVs. In the last quarter you had mentioned about this, so could you please give us the breakup as of now.

Unidentified Speaker —

Around 2500 buses from this BEST TMT, et cetera and around 600 odd buses from private operators. So it makes around 3,100 buses roughly.

Operator

Thank you. The next question is from the line of Varatharajan Shivakrishnan from Antique Limited. Please go ahead.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Thank you. Thanks for the opportunity. Sir. I just wanted clarity on the 5% CNG volume drop. You addressed the question, but basically the full explanation what drove that decline.

Unidentified Speaker —

Sorry, can you please repeat the question. You are not audible.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

On a Q-o-Q basis CNG volumes are down 5%. So what drove that decline? Was it that you were holding back because of supply demand.

Unidentified Speaker —

It is hardly 0.43% down compared to — you are saying CNG only.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Yeah, that’s right.

Unidentified Speaker —

Yeah, CNG volumes are down by 4% compared to the previous quarter mainly due to the January and February we had impacts of third wave of COVID. So, I think there were restriction on traffic and all that mobility. So that has impacted.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

So I think that 2800 CVs you mentioned for the quarter, is it all new vehicles or OEM vehicles [Technical Issues] as retrofitted and if you can give us some–

Unidentified Speaker —

We are actually not able to hear you.

Operator

Mr. Varatharajan, please use the handset, sir.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Is it better now?

Operator

Yes.

Unidentified Speaker —

Yes.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Yeah, the 2800 CV numbers you’ve mentioned, were they all OEM vehicles or was there a significant portion which was retrofitted as well. Maybe you can put–

Unidentified Speaker —

Very few retrofits. Retrofits and commercial good vehicles are almost negligible.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Almost negligible. And would you have a similar kind of a feel in terms of the private vehicles. What proportion could be OEM or what proportion could be retrofitted.

Unidentified Speaker —

So again, predominantly probably maybe 90% will be OE. Retrofit is now slowly going away because all the manufacturers are coming factory fitted variants which customers typically are more comfortable with. There is a warranty behind it. There is a manufacturer standing behind it, the quality is much better. So previously when OE fitted models were not there, then a lot of people use to retrofit.

Varatharajan Shivakrishnan — Antique Stock Broking Ltd — Analyst

Great. Sir. Thanks. I have a couple of questions. I’ll come back in the queue.

Operator

Okay, thank you. Next question is from the line of Niharika Jain from Equitas Investment Consultancy. Please go ahead.

Niharika Jain — Equitas Investment Consultancy — Analyst

Hello, good evening, am I audible.

Unidentified Speaker —

Yeah.

Niharika Jain — Equitas Investment Consultancy — Analyst

Yeah. Okay. So in the current quarter, the total domestic sales is of 2.75 MMSCMD which CNG and PNG domestic, so and we’re already in last quarter we are told that we have 0.15 MMSCMD of 18 months of LNG contract and some 0.1 MMSCMD. So how much of our quarter 4 quantity did we get from contract and how much did we procure from spot.

Unidentified Speaker —

It should be roughly 0.45 to 0.5

Niharika Jain — Equitas Investment Consultancy — Analyst

0.45 to 0.5 of spot, are we talking about that.

Unidentified Speaker —

Term contract, you are asking, right?

Niharika Jain — Equitas Investment Consultancy — Analyst

Yes, so term contract, how much will we be able to procure in quarter 4.

Unidentified Speaker —

See, contracts put together roughly 0.4.

Niharika Jain — Equitas Investment Consultancy — Analyst

Okay and spot would be around you mentioned around 14% or so. So, out of 2.75, 14% would be the shortfall towards APM, is it?

Unidentified Speaker —

You are now, right now asking only about — I gave you the figure for the company level. Are you asking right now about only priority sector?

Niharika Jain — Equitas Investment Consultancy — Analyst

Only priority sector, yes.

Unidentified Speaker —

Okay. So 2.75 was average, roughly 2.5 was APM and rest is spot, not term contract, spot, 0.25.

Niharika Jain — Equitas Investment Consultancy — Analyst

So contract went towards commercial and industrial unit. I’m just trying to understand the 2.5–

Unidentified Speaker —

Some contract is primarily for industrial and commercial. You are right.

Niharika Jain — Equitas Investment Consultancy — Analyst

Okay, got it.

Unidentified Speaker —

And if there is any volume flexibility in it, we can try to optimize our cost of gas, if that gas is cheaper and if additional flex is there, we can push some into the priority segment in place of spot and vice versa.

Operator

Thank you. Ms. Jain, request to rejoin the queue for any follow-up. Our next question is from the line of Harsh Bohra from VT Capital. Please go ahead.

Harsh Bohra — VT Capital — Analyst

Hello, am I audible.

Operator

Yes.

Harsh Bohra — VT Capital — Analyst

Yeah, sir. My question was regarding the mobile refueling unit. So is there only one MRU or have you added more during the quarter.

Unidentified Speaker —

We are on the verge of giving 3 more LOIs for — again, there is a change in terminology. This is not a MRU, this is now called CDU, composite dispensing unit and in a few days time we are expecting to give 3 more LOIs.

Harsh Bohra — VT Capital — Analyst

Sir, and what will be the timeline after issuing the LOIs, the time it will take to commit on to the ground.

Unidentified Speaker —

Well, it is difficult to pinpoint that but we are hoping that maybe 6 or 8 months, there should be some movement because currently safety regulations, et cetera, they are slightly — the one which we ran, we got under a pilot program kind of a thing. Now that we want to run this as a regular business probably the safety and other regulators will be taking a closer look before giving their final approvals for commercial applications.

Harsh Bohra — VT Capital — Analyst

Okay, sir. And what are the GAs you are looking to implement this new composite dispensing unit like Mumbai, Thane and Raigad.

Unidentified Speaker —

It’s primarily for city areas where land parcels of sufficient size are not available. Because if we get 400, 500 square meters of land we can easily set up a — if the pipeline is not there, you can set up a conventional DBS there, which is usually more cost effective than a CDU. It is only in case where it’s only 150, 200 square meters of land and that land is not available for 10, 15 years, it’s of a shorter duration, then we can deploy this CDU there and after 3, 4, 5 years. If the rights over the land go away, you can always relocate that CDU to another parcels of land.

Operator

Thank you. The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.

Lokesh Manik — Vallum Capital — Analyst

Yes, good evening, sir. Am I audible.

Operator

Yes, you are audible.

Lokesh Manik — Vallum Capital — Analyst

Sir, just one question from my side. The commission that we obtain to OMC, are there on margin basis or are they on a fixed cost per SCM basis.

Unidentified Speaker —

It is per kg.

Lokesh Manik — Vallum Capital — Analyst

So there is — this is the price of gas and least in the price of gas.

Unidentified Speaker —

Could you repeat your question.

Unidentified Speaker —

There is no linkage to the price of gas.

Lokesh Manik — Vallum Capital — Analyst

So they are fixed per kg.

Unidentified Speaker —

It has got no linkage to the selling price or it has got no linkage to the purchase price of gas. It is a number, a fixed number in rupees per kg which can vary from time to time.

Lokesh Manik — Vallum Capital — Analyst

Sir, this cost that is commissioned can vary.

Unidentified Speaker —

Sorry, yeah, it varies. Usually it is higher in city areas and lower in semi-urban and rural areas. That’s broadly to reflect the difference in the cost of land.

Operator

Thank you. The next question is from the line of Kirtan Mehta from BoB Capital. Please go ahead.

Kirtan Mehta — BoB Capital — Analyst

Thank you sir, for giving this opportunity. You had mentioned about 28,800 conversions happening on the commercial side in Q4. Could you give us sort of the level of conversions that you’ve seen in Q4 across different category of vehicles and also for the annual FY22.

Unidentified Speaker —

You want other than commercial vehicle numbers.

Kirtan Mehta — BoB Capital — Analyst

Yes, sir.

Unidentified Speaker —

Yeah, so in Q4 car and tractors put together roughly 13,300 plus, then 3 wheelers roughly 2,300, buses roughly 140. Other than small LCV trucks roughly 680. Total is around 19,260 vehicles Q4.

Kirtan Mehta — BoB Capital — Analyst

Right, sir. Is it possible to get the similar detail for FY22 as well collective.

Unidentified Speaker —

FY22, full year?

Kirtan Mehta — BoB Capital — Analyst

Yeah, full year.

Unidentified Speaker —

Full year, our total number of vehicle added around 62,500. It consists of cars and taxis in the range of 45,000, 3-wheelers roughly 6,400, buses 200 plus, then trucks around 1,500 and LCV is in the range of around 9,400 plus.

Kirtan Mehta — BoB Capital — Analyst

Thank you, sir. The second question would be in terms of the volume outlook for FY23, would you be looking at sort of repeating a 4% to 6% growth or you mentioned that you are seeing a better growth available. So what sort of the numbers is possible this year.

Unidentified Speaker —

FY23, we are hoping for a growth better than that 5% to 6% and and what the final number is, let’s see what — at least 7%, 8% could be possible if not more. Again, it will depend a lot on various factors. What kind of differential price will be there between CNG and alternative fuels because CNG is the biggest chunk, almost three-fourth of our volumes. Industrial, as we enter into Raigad and a few other places with the pipe gas now, we are expecting some increase in volume there also. Domestic and commercial steadily increases. We — more than 1.2 lakh customers, domestic customers on additional gas every year. They contribute a little bit and that doesn’t add too much to the overall kitty. The per capita consumption is a bit low but yes it also contributes and about 300 odd commercial customers we add on every year, they also contribute a little bit.

Operator

Thank you.

Unidentified Speaker —

But if you look at our base year effect before FY22, April, May there were some issues. Jan ’22 there were some issues. Percentage growth could be double-digits.

Operator

Thank you. The next question is from the line of Ankit Agarwal from Phillip Capital. Please go ahead.

Ankit Agarwal — Phillip Capital — Analyst

Hello, am I audible.

Unidentified Speaker —

Yes, you’re audible.

Ankit Agarwal — Phillip Capital — Analyst

Sir, thank you for the opportunity, Just–

Unidentified Speaker —

Can you speak louder?

Ankit Agarwal — Phillip Capital — Analyst

Is it better?

Unidentified Speaker —

Yes.

Ankit Agarwal — Phillip Capital — Analyst

Just one clarity needed. You said 2.5 MMSCMD is the APM gas volume that you got and the priority sector total production was 2.75, so that implies a shortfall of around 9%, is that right? As you mentioned 15% to 17% shortfall.

Unidentified Speaker —

Yeah, percentage given of shortfall 15% to 17% is also right because January and February, there was a COVID impact. So, that percentage, which we are mentioning is at a peak level. So if you see, March it was higher 17%. Some parts February it was 15%. It was the lowest in the month of January because the sales volumes were impacted and it was lower than available APM also.

Ankit Agarwal — Phillip Capital — Analyst

Okay. Just one clarity I needed also. On the — do you see any visibility. Is there any visibility on the reallocation of the APM volume that you have, some visibility. Is there a chance of increasing the APM volumes or there is as such no clarity on that.

Unidentified Speaker —

A circular on new pricing and new allocation order had come out last Friday.

Ankit Agarwal — Phillip Capital — Analyst

Right.

Unidentified Speaker —

For clarity, that’s the only clarity we have.

Ankit Agarwal — Phillip Capital — Analyst

Okay, alright sir. Thank you.

Operator

Thank you. Ladies and gentlemen, due to paucity of time, that would be our last question for today. I now hand the conference over to the management for their closing comments. Thank you and over to you.

Unidentified Speaker —

So thank you everybody for joining and having a productive discussion. Thank you very much.

Unidentified Speaker —

Thank you.

Operator

Thank you very much. [Operator Closing Remarks]