GAIL (India) (NSE:GAIL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day and welcome to GAIL India Limited Q2 FY27 Earnings Conference Call hosted by Phillip Capital. As a reminder, all participants will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference has been recorded. I would now hand the conference over to Mr. Nitin Tiwari from Phillip Capital. Thank you, and over to you, sir.

0:39 Thank you, Muskaan. Good day, ladies and gentlemen. Best wishes in advance for upcoming festive season. On behalf of Phillip Capital India Limited, I welcome everyone to Yale India Limited's second quarter FY27 earnings call. Today, we have the pleasure of having with us the senior management of Yale, I will now hand over the floor to the management for their opening remarks, which shall be followed by a question and answer session. Over to you, sir.

1:13 Thank you, Nitin. Good evening, everyone. It is always a pleasure to talk to the investors and analysts, and we are deeply thankful for your continued trust and engagement with GATE. The company has declared its results for the U2 FY26-27 today, which you must have seen by now. I will talk about highlights, business overview, outlook, status of capital expenditure, and then we will take your questions. I will start with key business highlights for the quarter. in the category of gas transporter of the year and health and safety.

2:04 Gale recorded is the highest ever natural gas transmission of around 148 mmCMD on 21st September 26th. Quarter 2 of April 26-27 was another quarter of robust and resilient performance. Even as a challenging time continued, the base APR crisis has now gone on for over eight months and the company volume from the Middle East demanded disturbed. This was partly obstructed through portfolio flexibility and spot sourcing. Gale's diversified portfolio again proved to be a key strength in navigating the quarter effectively.

2:52 Gas price continue to be volatile and quite high. This is around $30 to $32 per MMBTU. Throughout this crisis, our teams have been resilient and agile and have kept the win in motion. Even as the times remained challenging, as a company, our prime focus has been to meet our customers' requirements so that they are not left dry run. Our trading arm in Singapore, GGSPS, supported gains in the sourcing export volume from time to time, and we could prioritize supply to our customers. The company continues to focus on operational efficiency and on creating sustainable value for our stakeholders.

3:47 PVT and PAT during the quarter stood at 5838 crores and 4650 crores respectively, almost in line with the previous quarter. For half year, this financial year, PVT and PAT stood at 11611 crores and 8943 crores respectively, which is a growth of more than 116% as compared to the H1 of the previous financial year. Movinging to the segment wise, starting from the natural gas transmission, natural gas transmission volume for Q2 FY27 stood at 130.10 mmHgMd as engaged 122.36 mmHgMd in the previous quarter, an increase of about 6.3% in line with the recovery in the gas consumption in the country.

4:38 During the quarter, we also recorded our highest river transmission volume of 147.55 mmHgMd on 21st September 26th. Overall natural gas transmission volume for 8 months F by 27 stood at 126.25 mmHgMd. We expect that the natural gas transmission volume for F by 26-27 should be around 126.25 mmHgMd. 127 MMC-MD in the prevailing circumstances. Moving to the gas marketing, Gill sourced 18 export cargo during the Q2 FY27 as engaged 8 cargo during Q1 FY27.

5:25 All the cargo were sourced through the GGSPS. Our gas marketing volume for Q2 FY27 stood at 97.23 mmCMD as against 93.82 mmCMD during Q1 FY27, an increase of about 3.6%. Gas consumption in the country was seen returning to the level prevailing before the West Asia crisis. During Q2 FY27, the company earned a natural gas marketing margin of 3,148 crores at PVT level, as against 3,353 crores for Q1 FY27. The Henry Hub linked portfolio continues to generate higher returns on account of sustained high crude prices, whereas gains from the JCC 9-month linked sourcing moderated.

6:20 In view of above, we update our gas marketing margin guidance to the around 9,000 to 9,500 pros at PVT level for FY26-27. The range assumes continued print volatility and accounts for the disturbed long term supply during the year. Moving to the polymer business. Polymer production during the quarter stood at 204 TMT as against 51 TMT in Q1 FY27 and due to the scale of operation the segment remained around breakeven level during the quarter and is expected to be at the same level during FY27.

7:06 moving to the LSE and LPG transmission in the LPG transmission segment volume improved by 5% and stood at 1130 TMT as engaged 1077 TMT in Q1 FY27 primarily due to improvement in volume from flow in BSPS overall capacity realization stood at around 98% for the quarter in the LSE segment production increased by 10% to 256 TMD from 232 TMD in Q1 FY27. In view of ongoing crisis, we restarted operation at our Gandhar plant and LSE production of 32 TMD was achieved during Q2 FY26-27.

7:53 The LSE segment generated a PVT of 442 crores during Q2 FY27 as engaged 772 crores in Q1 FY27 primarily on account of lower price realization by 18,000 per metric ton. Moving to the CGD and Gale Gas business. We have already received PNG-RV nod for transfer of Gale 6 GH to the Gale Gas to have a retail focus approach. Thereafter, Gale Gas Limited will be listed for which necessary action is underway. These 6 CGD have 219 CNGA stations and around 3 lakh built DPNG connections Gale Gas which currently operates 16GH directly and 9GH through its JB has a network of 593 CNGA stations over 8 lakh DPNG connections Quarterly profit of Gale Gas increased by around 50% Gale Gas marketed around 7 mmCMD volume during H1-26-27.

9:07 Moving to the ongoing projects and capex. During Q2 FY27, Gail incurred a capital outlay of Rs 1,425 crores for H1 FY27. The cumulative capex stood at Rs 7,600 crores. Around Rs 12,900 crores is expected to be incurred towards the capex during the current financial year. This sustained investment underscores our commitment to a strengthened gas infrastructure, enhancing downstream capabilities, advancing clean energy projects, and supporting India's long-term energy transition and energy security objectives.

9:52 Moving to the segment-wide CAPEX program, pipeline projects , BDPL, remaining section KKBPL phase 2 Gurdaspur-Jammu pipeline and C2-C3 pipeline are scheduled for completion in the current financial year. Vijayapur-Vena pipeline DPPL capacity augmentation are scheduled for completion in the next financial year. JLPL LPG pipeline capacity augmentation is scheduled to be completed in FY28-29. Petrochemicals project The 1250 KTA PTA plant at GMPL is in the advanced stage of commissioning and should commence commercial production very shortly.

10:39 The 500 KTA PD HPP plant is to be commissioned during the next financial year. CBG Govardhan scheme. The company has one operational CBG plant at Ranchi and others are under construction. Company has registered The company expects the ambient heating system to be Partly commissioned by March 27 and to be fully completed by September 27 post which full 5 mm TPA can be utilized for full year and around 80 cargoes can be served annually.

11:41 Moving to the renewal segment, Gale remains committed to 80 with net zero target by year 2035 for a scope 1 and a scope 2 emission. we have 155 MW of renewable energy portfolio which includes 180 MW wind and raised solar, additional 908 MW renewable power capacity under construction along with 572 MW of the battery energy storage system. With completion of these projects, Gale will have a renewable energy portfolio of around 1 GB. That concludes my overview of the quarter performance segment outlook and key project. Over to you Nikki.

12:33 Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on the touch-tone telephone. If you wish to remove yourself from question queue, you may press star and 2. participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of probelcene from ICICI security.

13:18 Please go ahead.

13:21 Thank you. Very good afternoon, sir, and many congratulations for a very strong set of numbers. Just wanted to understand your thoughts on where this strong gas demand is coming from, in the sense that despite the kind of strength we have seen in LNG, you know, in your book, I mean, if you can just give us some sense of which segments, consuming segments are actually seeing traction, and is it more a function of organic demand or also continued switch over from other alternate liquid fuels which have also obviously seen price increases over the last three or four months. Just your thoughts on this. That was my first question.

14:04 Thank you, Pravalji. As you know, we have major five segments where gas consumption is happening. Number one, fertilizer. Second, power. Third, TGD. Fourth, industry. and fifth, other consumers. So during the Q2, power sector and fertilizer sector consumed more gas as compared to the previous quarter. So power sector consumed, consumption of power sector has increased from 10 to 12% during the Q2 FY27. Similarly, in the fertilizer sector also, gas consumption has increased from 32 to 33%.

14:55 Okay. And this percentage increases versus Q1 or on a YY level, sir?

15:03 Q2. Q2 versus Q1. Q2 versus Q1.

15:07 Okay. So, on a QO cube, sequentially, that is the kind of increase we are seeing?

15:12 Yes.

15:14 Got it. The second question was, of course, around the trading business. You know, obviously, I think this is a question you would have been asked at Q1 itself that the guidance remains fairly conservative. Now, if I look at the run rate that is there for the first couple of quarters, we are already sitting on somewhere around 6,500 crores or so of EBITDA. So one should again sort of assume that this is sort of the 9,000 crore number that you just mentioned. This is again sort of the minimum level that you hope to achieve and if the current situation were to persist, there is a reasonable chance of upside risk to these estimates. Is that a fair way to look at it, sir?

15:54 Basically, based on the internal calculation, we estimated around 9,000 to 9,500 crores based on all the workings and all the gas supply will be happening during the Q3 and Q4. So though at current level, our spot price is hovering around $32 and our HH price is around $10. So we are mixing the gas with the spot as well as HH and other portfolio and we are supplying to gas to the customer. So during the Q3, I think our nine month versus three months, what we currently Uh gaining more margins this will not available during the q3 and q4 Further to add to what our sector finance has said

16:55 This is a reasonable estimation of our marketing activity which we have estimated. So the 9,000 to 9,500 crores is the reasonable band based on current situation which we could estimate. So we are not saying that it is whether optimistic or pessimistic, but it's a reasonable estimation of our marketing activity.

17:20 Got it, ma'am. One last question, if I may. In terms of the transmission segment servers Sinha sir did mention that you reached an all time high of I think somewhere around 147 MMSCMD if I am not mistaken but just your thoughts on 148 MMSCMD so what has been the October run rate sir if one can ask I have already told you that during the current year it will be around 126-127 MMSCMD on early average basis

17:54 And next year, it will be around 134-135 MMCMD. So as on particular date, this was 148. But not regular basis. On average basis, it is around 126-127.

18:10 So that is what we should be working with for the second half of the year. Yes. Got it, sir. If I have more questions, I'll come back in the queue. Thank you so much. Yeah. Thank you. A reminder to all the participants, you may press star and one to ask questions. The next question is from the line of Malik Patel from Equidia Security Private Limited. Please go ahead.

18:40 Thanks for the opportunity. Just two questions. One on this PEDCAM expansion of PDH plant. Where are we in terms of timeline and in terms of commissioning, there has been slight delay in overall project progress. So that's the first question. Second question is related to overall LPG business. Obviously the volume has been flat, but are you getting more domestic gas, APN gas to manufacture, to produce the LPG? Because there has been a shortage in the past, which is currently not there. But has there been any discussion related to that with Ministry?

19:29 Coming to your first question, PDAT plant will be commissioned during the next year. I think as per schedule completion it is June 27th and this may take more six months plus minus time schedules. So certainly this plant will be commissioned during the year 27-28. And second question regarding the LPG. So we are getting around 1.9 MMSCMD domestic gas for production of LPG and other liquid hydrocarbons. So we are fully allocated domestic gas for the production of LPG and other products.

20:14 Do you get any NWG gas for that or the LPG or it's only APM?

20:21 Why seven is the NWG and one point one two is APM gas that we are getting and is only gas profile which we are getting domestic gas profile. This is the maximum we can produce We have restarted our plant as well to meet the country's requirement. And this is the maximum production level based on the domestic gas profile that we are getting from when you see

20:49 Got it, Madam. We are extracting C3, C4 plus. Yes. So, right now whatever molecule available in the gas, we all extracting from the natural gas. So, based on the molecule available, we are consuming gas around 1.9 mm CMD.

21:09 Got it. And I got that 1.1 or 1.2 is APM and remaining is NWG. Yes. Okay. Got it, sir. Thank you. Thank you very much. Thank you. The next question is from the line of Amit Muraka from Access Country. Please go ahead.

21:33 Hi. Thanks for the opportunity. And just on the trading segment, while this year we are raising the guidance now to 9,000, 9,500 crores, as you said, Will you raise it also for next year or like how is the guidance for that?

21:51 Next year I think that situation will be normal so our normal guidance around 4500 to 5000 crores in the next year.

22:02 So as of now you maintain that then?

22:04 Yes.

22:07 Sure. And also on the on the pet can business so you have reported a small positive EBITDA here Just wanted to know what is the source of gas and the cost of gas in the quarter for pet can?

22:22 Basically we have gas From the different sources. We have a HH gas. We have a JC ceiling gas. We have a spot gas So we are providing around 40 to 50 percent HH gas and 40 to 50 percent So based on the deep mix we are able to manage the EBITDA positive in the Q2F by 27.

22:49 And this mix will continue, right?

22:52 Yes.

22:56 But what was the average cost that came in Q2 for the gas?

23:00 Around 13.6.

23:07 Even though you said that 40-50 was portal NG, but the average was 30.6. I mean, HH was $10, right? I mean, as you mentioned that the delivery cost is $10 for HHLNG. 8.8, around 9.

23:18 And the spot is ranging from 20 to 30-32 dollars.

23:34 sure gas to petrochemicals from our existing portfolio which includes JCC some mid-term gas and HH as well so it is based on the availability of gas in our portfolio we are allocating it to our second segment understood understood and also like the transmission OPEX has risen a bit in the quarter

23:58 So any kind of one-off over there, or is it like a normal increase due to cost inflation that you're seeing?

24:08 Just hold on, yeah. You're talking about the Q2?

24:15 Yeah, the second quarter.

24:24 fuel it is basically the fuel cost because the transmission volume has increased so we need to run our compressors to push the gas so it is basically the fuel cost sure sure okay that's it for me thank you thank you the next question is from the line of Nitin Tiwari from Philip capital please go ahead

24:54 Yeah, I said good evening. There were a few questions from my end. So we are seeing a lot of reports about increasing logistics costs as far as food sourcing is concerned. So are we facing similar challenges in increasing freight costs for LNG tankers as well? And is there any shortage that we are seeing for LNG tanker availability while we are scheduling our cargoes?

25:23 Can you come again, Nithin, please?

25:26 Yeah, I was, ma'am, I was asking that are we seeing any challenges with respect to increasing freight cost or availability of LNG tankers when we schedule our cargoes?

25:40 There is no shortage. No shortage. We have six cargoes on our long-term portfolio which are transporting our LNG from US. But we are getting ship cargo.

25:56 The spot cargoes that we are sourcing, I mean, are those on FOB or DES basis and like, you know, all the shipping taken care of in those spot cargo cases.

26:11 Sometimes we are optimizing our shipping portfolio through days, half days.

26:20 The spot card sourcing is on a delivered basis, if that is what you are referring to.

26:27 All right, ma'am. And that's helpful. And secondly, I also wanted to understand that what's the prognosis for petrochemical plant-led Pata? I mean, we have had these facing challenges with its profitability. I understand that these are making a somewhat challenging environment, but when things normalize, what kind of a normalized profitability you can expect from this unit and when can we foresee that happening, if you can throw some light on that?

27:00 Currently the sales realization of FedChem is around 136,000-137,000 per metric ton. We are supplying gas around $14. So based on $14 and 1,40,000 price, We are achieving at break even so if during the next year's price That's going to come down to around ninety ninety five thousand per metric ton There's a daily gas price will also reduce from the existing level to nine ten dollars so I think based on the ninety thousand price and nine ten dollar input cost we will achieve break even Thank you. The next question is from the line of Sabri Hazarikov from MK Global Financial Services. Please go ahead.

28:00 Good afternoon and congratulations on good set of numbers. So my question is pertaining to this 190 MMSCM PLL volumes. So was there a financial benefit from that during the quarter which was part of the marketing earnings?

28:17 Can you repeat your question?

28:18 In this notes to account you have mentioned 190 MMSCM of supply you received from Petronet, LNG, I think which is some of the Qatar volumes which may have come during that period. So was there a financial impact of the same on the marketing earnings?

28:40 Sabri, we got though Qatar energy continues to be under force major, they supplied some cargoes, one such cargo was received in September and we have received three cargoes in October, right? And these cargoes are pertaining to long term portfolio which are supplied back to back to federal No financial implication, we are getting normal margins on this which we used to get earlier.

29:12 Okay, so there is no one-off or anything of that sort in the marketing numbers. It is basically the JCC versus current brand spread and HH versus oil link plus what is driving the second quarter numbers also, right?

29:30 and that's right and in addition to what you have mentioned we have got some margins on our spot sourcing as well we continue sourcing spot and the spot was rising we were buying spot so we got some leverage on that account as well got it and just a granular detail on this marketing guidance for next year so you were at 40-45 billion

29:58 earlier, so now we are at 45 to 50 billion, is that right?

30:03 Yes, we expect that in the next year the things will be normalized, so our in the current year initial guidance was 4500 to 5000, so in the next year it will be around 4500 to 5000.

30:16 And this is on what level of volumes?

30:22 At current level 105 MMCMD, around 100 plus MMCMD for the gas marketing.

30:34 Thank you so much and all the best. Thank you. The next question is from the line of Ashton from .

30:45 Is my audible? Yes, sir. So as the IPO is coming, So how do you see its volumes evolve over the next three to five years and how many CNG stations are you planning to set up over this period?

31:16 Basically right now we are having six CGD, six geographical area and I am going to transfer to the gale gas because the idea of the gale gas will come during the next year, 2027-2028. So whatever increase in the CNG station or the CNG connection will be done by gale gas. So for the next year. For the next two years, Gale Gas target to add around 275 new CNG stations and about 3.7 lakh new deep-NG connectors.

32:06 Got it. And sir, can you give me the FY26 overall volumes and volume breakup in MMACMD for CNG, domestic PNG and industrial PNG for Gale Gas?

32:22 for bill yet just yeah up to point 2.39 PNB and PNB for the day yet for up here up 1.67 PNB 1.58 in the field point you know 5 or but yeah I in point you know 9 domestic the total gap volume is 2.39 MMS GMT so this is for which period and for the TTZ around 1.24 and bulk sales 3.16 the total 6.79 so this is for FI26 correct FI27 H1 H1 H1 ok got it thanks Thank you. The next question is from the line of Vikas Jain from CLSA.

33:32 Please go ahead.

33:37 Yeah, thanks for taking my question, Sana ji and Anjana ji. So my question is about this gas volume increase that we have seen, QOQ basis. Of course, great numbers over there also and overall as well. so that increase from 122 to 130 mm CMD roughly. Is there an element of some seasonality over there? Is there a big element of power or is there anything like that which maybe will kind of dry out soon or something like that?

34:14 The major consumption happened in the power sector as well as in CGT and fertilizer.

34:22 So the extra eight, how much roughly came from power?

34:30 At the country level, power has consumed around two mm CMD more and fertilizer consumption increased by around four and a half mm CMD during the quarter as compared to previous quarter. In addition to that, PETCHEM plants which were not operational in quarter one, they were also started like C2, C3, Opal, and our own PETCHEM plant. So there is an increase in consumption in PETCHEM as well by around three and a half. So overall, country level, the consumption has increased by around eight and a half MMSCMD as compared to previous quarter. And if we compare it to previous year, we are more or less flat.

35:17 So fertilizer was simply because they're returning from shutdowns and all. And again, similar could be said about petcams that they're getting back the volumes. So the power element is only about 2 mm Cmd for the country overall, right? So it's not So even currently, it'll be fair to say that you'll be not too far away from these kinds of numbers. I mean, about 128,129, close to that kind of volume numbers.

35:48 For transmission?

35:50 That's right.

35:52 Transmission, we have already said that for current financial year, we'll be around 126,127. Okay.

36:01 No, okay, fine. So even right now you're working around the ballpark. That's why that gives you the confidence. And so you're building on that 126,127 and saying that it'll go to 134. That extra 67 you suspect, how would that breakup come from? I mean, how much is coming from Citigas and how much from others?

36:20 Mostly Citigas.

36:23 So an extra 7 in the CMD you're expecting from Citigas, is it?

36:28 Refinery volumes we are expecting to come back because refinery currently they are consuming around 5 million less from what they used to consume historically. So this refinery volume 5 MMSTMD will come back. The CGD is growing at a very good pace. Last year the average consumption of CGD was around 45 which has grown to 54-55.

36:56 so the CDD is growing plus refinery volume will also come back okay and so so even at these high LNG prices this this kind of volume of 128 129 130 msmd you see is sustaining around around these kinds of volume right basically we are not supplying 30 32 dollar gas we are supplying based on the mixture of the gas so we are supplying around

37:26 The next question is from the line of Sanjay Mukim from JP Morgan.

37:38 Please go ahead.

37:56 Good evening. A couple of questions from me. On the balance sheet, sir, there is a sharp increase in trade receivables in the first half. Is this just a pricing issue or is there anything else on the receivable side, sir?

38:10 It's a pricing issue. Basically, gas price has increased as compared to the previous quarter. So, within credit collectible has increased drastically around 5,000 crores.

38:21 Correct. So, there's no delays in payment from any customer as such?

38:25 This is a normal state distribution.

38:28 Sure. Second question, sir. Could you update us on the new pipelines that have been commissioned? Are we seeing any incremental gas volumes on, let's say, the Mumbai-Nagpur-Jharsuguda pipeline sections?

38:42 Basically, right now, we are supplying to the CGT sector in Mumbai-Nagpur-Jharsuguda and similarly in the Sirkakulam-Angol pipeline. But certainly... There is a customer in the Jhansul Gora, so we are connecting these customers and they will consume gas in the coming year.

39:01 Do you have a sense of how much of customer conversion you can see along the new pipelines?

39:09 Around 2 to 3 mm CMD.

39:12 I see. And lastly on the Kochi pipeline, sir, it's been delayed continuously for so many years. I mean, you said it will get completed in this fiscal. What is the confidence around that?

39:24 Basically, only three to four kilometers is left. So, we are hopeful that three to four kilometers will be laid by March maximum. So, all the pipeline, including Jagdishpur-Albiya, Kochi-Kanjarkot-Mangalore-Mangalore, SAPL, Lodasco-Jammu pipeline, all the pipeline will be commissioned during the current year by March maximum.

39:50 All right. Thank you, Satish.

39:52 Yeah. Thank you. A reminder to all the participants, you may press star and want to ask questions. Is there no further questions from the participants? I would now hand the contents over to the management for closing comments. Over to you, sir.

40:36 Okay, thank you. Thank you, Nitin, and thank you all the analysts and investor opportunities. for continuing their trust in Gail. And for any further query, you may reach out to our IR team led by Anjana Divamayan. And I would like to wish everyone a very happy, prosperous, and joyful Diwali. Thank you. Thank you so much.

40:59 Thank you. Thank you. On behalf of Philip Capitan, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.