Adani Total Gas Ltd

NSE:ATGL

Earnings Call Analysis

Growth and Expansion in Operations

Adani Total Gas (ATGL) has shown impressive operational growth in Q2 FY '25, with an overall volume increase of 15% year-on-year. This growth can be attributed to network expansion and rising demand for piped natural gas (PNG) by commercial and industrial sectors, thanks to stabilized gas prices. The company has expanded its steel pipeline infrastructure to 12,516 inch-kilometers, which serves as a robust backbone for their distribution operations, enabling efficient service delivery across households and industries.

Infrastructure Development and Network Expansion

ATGL continues to ramp up its network, now boasting 577 CNG stations, with plans to develop more company-owned, dealer-operated (CODO) and dealer-owned, dealer-operated (DODO) stations. Their goal is to increase their CNG network to near 1,000 stations across the country, driven by the growing demand for cleaner fuel alternatives. On the residential front, the company is now supplying PNG to approximately 893,000 homes, adding roughly 34,468 new connections in the recent quarter, showcasing a strong consumer uptake.

Financial Performance Highlights

In terms of financials, ATGL reported a revenue from operations of INR 1,315 crores, with an EBITDA of INR 313 crores and a profit after tax of INR 178 crores during the quarter. The company's focus includes diverse business divisions such as City Gas Distribution (CGD), e-mobility, biomass energy, and the emerging LNG for transport and mining (LTM) segment, which reflects a well-rounded growth strategy.

New Business Ventures and EV Charging Infrastructure

The company has also ventured into electric vehicle (EV) charging infrastructure, expanding its EV charging points to 1,486 across 21 states, with an objective to reach 3,000 points soon. This move not only diversifies their service offerings but also places them strategically in India’s growing EV ecosystem, capitalizing on the shift towards sustainable transportation.

Adjustments to Gas Allocation and Market Challenges

A significant change in gas allocation has been noted, with a 16% reduction in APM gas allocation for the CNG segment effective from October 16th. Despite this challenge, ATGL manages a diversified gas sourcing portfolio which they believe will mitigate adverse impacts. The company is focused on optimizing operating expenses and exploring efficiency improvements to safeguard consumer interests while maintaining growth rates.

Price Management and Consumer Impact

Currently, ATGL has not increased CNG prices despite the reduction in gas allocation. Management aims to adopt a calibrated approach to pricing, ensuring that consumer demand for CNG remains robust while exploring internal cost efficiencies. A potential price increase of INR 3 to INR 5 per kg has been discussed, which could shift the operational benefit from 40% to around 37% versus petrol, still keeping CNG an attractive option for consumers.

Future Outlook and Strategic Focus

Looking ahead, ATGL is focused on maintaining its growth trajectory while enhancing its operational efficiency through digitalization, including a push towards IoT integration in their services. The management is optimistic about the prospects of LNG for transportation, with strategic investments underway to tap into the high-demand segments. The company's margin guidance for the future indicates an EBITDA per SCM around INR 13, ensuring that continued investment is backed by strong financial health.

Commitment to Sustainable Energy Transition

As part of their strategic vision, ATGL emphasizes its role in supporting India's transition to low-carbon energy. The company aims to provide affordable and reliable energy solutions, recognizing its responsibility towards consumers and the larger goal of supporting national energy objectives. The continuous push for infrastructure development, combined with a commitment to operational excellence, positions ATGL firmly within the evolving energy landscape.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Adani Total Gas Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suresh Manglani, ED and CEO, Adani Total Gas. Thank you, and over to you, sir.

[Suresh Manglani, executive]

Thank you. Let me -- good afternoon, everyone. Let me extend a hearty welcome to all our investors, analysts, funds for taking out their time and participating in today's call on Q2 FY '25 results of Adani Total Gas. At the outset, on behalf of the entire team, Adani Total Gas, let me wish you all, our shareholders and consumers, a very happy and prosperous Diwali and festive season.

I'm pleased to share the operational and financial results of Adani Total Gas for the quarter ending September 30, 2024. During the quarter, our overall volume rose 15% when compared on a year-on-year basis. The double-digit increase, which we have delivered is on account of network expansion, coupled with increase in consumption of PNG by commercial and industrial consumers due to the stabilization of the gas prices.

In line with our focus of expanding infrastructure, network across our geographical area, our steel pipeline infrastructure now stands at 12,516, inch-kilometer. We have been stating this that this for us is a backbone CGD infrastructure because this helps us to reach to the large masses to cater PNG to homes, industrial and commercial and CNG to the transport consumers. We also, during this quarter, added 1 more LCNG, LPNG plant where the pipelines are a bit remotely available. This we did it in Lunavada. This is in the Kheda District of Gujarat. Now with this commissioning, we now have 3 LCNG, LPG plants in addition to our large number of inch-kilometer of a steel pipeline.

This is kind of a virtual infrastructure, which we have developed to ensure that we do cater to the PNG and CNG consumers. Our CNG network now increased to 577 stations. Of this, as you have been always noticing that we have been focusing on developing company-owned dealer operated and dealer-owned dealer-operated formats along with our co-located formats with all marketing companies. Out of 577; 113 are in the format of CODO and DODO. Our focus certainly remains to expand both COLO as well as the CODO, DODO format. All 3 formats [indiscernible]. But if I add, the CNG stations of our JV partners, Indian Oil Adani Gas Oil Limited, IOAGPL, we are now closer to 1,000 CNG stations in the country.

On the home PNG front, we are now supplying piped natural gas to 8.93 lakh homes, which is almost touching to the 9 lakh homes now across various geographical areas. During this quarter, we added 34,468, roughly 350 to 400 consumers per day of new homes during this current quarter. If I add the home, which has been done by our JV partner, now we are close to 1.06 million homes. On the industrial and commercial consumers side, we have now reached 8,746 consumers of industry and commercial, which are diversified in various sectors.

If I add our JV partners' numbers, this is something closer to 10,000 members now. As you are all aware that we also have 2 subsidiaries, 1 on e-mobility side business, another is the biomass business. On EV charging network, you all will be very happy to note that now we have increased our EV-charging points to 1,486, which are open to the public, 1,486. This is across 21 states, 213 cities Just to bring to your notice that this is way beyond our geographical areas. This business is independent of the CGD geographical areas. We are not restricted to that. It is all on a merit base.

It could be in our GAs. It could be outside of our GAs because EV charging stations are open for anybody to set up across the country, and that is what we are taking full benefit of that ecosystem. We are progressing well on the plan, and our plan is that in the near future -- we want to touch 3,000 charging points soon in the future. Our focus, as all of you are aware, that we are focusing to identify and set up in early stage in all strategic locations, like airports, all busy highways, touristic spots, religious spots and several key places across major cities. This is what is our focus and strategy for EV site.

We have commissioned. You know that we have -- we are into the CBD business. We have now done e-mobility side, CBG side, the compressed biogas side, our Barsana plant, and we have supported development of Barsana plant, and we have supported development of Varanasi plant.

Now we are entering into another adjacent business called LNG for transport and mining. So we have commissioned our first LNG station in Tiruppur, which is in Tamil Nadu. And as I'm speaking to you, many LNG stations are at various stage of construction and commission.

Let me also give you a highlight of our financial numbers. Our revenue from operations stood at INR 1,315 crores in this quarter. Our EBITDA stood at INR 313 crores. And our profit after tax stood at INR 178 crores. Besides developing and accelerating infrastructure for our all 4 businesses, CGD, E-mobility, Biomass and, LTM, I call it, LNG for transport and mining. This is an acronym which Adani Group has given -- ATGL company has given to this new business, LTM, LNG for transport and mining. Our focus also is to prepare ourselves to make sure that we take full benefit of technology, machine learning and artificial intelligence.

So we call it a digital delight, and you'll be very happy to note that 98%, more than 98%, I would say, are consumers. Collection and engagement is coming through -- now through our homegrown developed application called My AdaniGas app. This is, again, integrated with our homegrown digital business platform. We have given the name SOUL, S-O-U-L. This is our own name, our own platform, which we got it developed. This is to move Adani Total gas from various applications to one digital platform. And you will be happy in the short period of a time, now 93% of our CNG sale is IoT connected, Internet of Things. We are managing through IoT base in the SOUL platform. It's a digital platform, but IoT connected. A large number of our stations, our [ DRSs ], CNG infrastructure is also IoT connected now in the SOUL platform.

During the quarter, you will be very happy, and our CFO is with me Mr. Parag Parikh, and he'll be happy to respond any queries. We secured the largest global financing for City Gas Distribution company, so first time for a CGD company in India by raising USD 375 million from marquee lenders. And during the course of this call, Parag will give you more detail about this.

We plan to utilize this fund to accelerate our network infrastructure development program, which is what has been committed by us to all our consumers that we will reach on a fastest basis to provide them the benefit of PNG and CNG across the country. We have now 34 geographical areas, which includes the Jalandhar, recently acquired geographic area. As you would be aware, that effective 16th October, there is a development of reduction in the APM gas allocation, which we receive CNG for transport sector and PNG for home, we call it PNGD and CNGT. This is a 16% less allocation we have started receiving from 16th of October.

While we are very closely engaged and monitoring this development, our approach would be that since we have a good diversified gas sourcing portfolio, this has been a part of our strategy for a very long time that we have been continuously developing our sourcing portfolio, being an intermediary and CGD company catering to the large masses. So we will ensure to remain as a responsible and prudent utility of Adani Group and Total Energy, and we'll make sure that we calibrate the price in a manner that balances the interest of large end users.

In closing, I would like to say that we remain fully committed to playing a leading role in India's energy transition journey by providing affordable, and reliable low carbon energy for homes, transportation, industry and commercial users and I would like to acknowledge and be thankful to all our shareholders, analysts, fund houses, consumers, dealers, media, suppliers, business partners and all our employees for providing trust and continued support.

So in summary, I just wanted to bring your notice that Adani Total Gas now is into main CGD business and 3 adjacent businesses. It supplies CNG to transport sector. It supplies piped natural gas to homes, commercial and industrial consumers. It is serving the EV charging for EV vehicles of various types, whether 2-wheeler or 4-wheeler or 3-wheeler, then CBG, which is non-fossil fuel being supplied in some parts of our country. We also sell organic fertilizer, which is being produced at our CBG plant. The retail brand, we have given Amrit -- Harit Amrit is our brand, which we have registered now, and we'll soon start the retailing of the organic fertilizer as well from our CBG plant.

And we do LNG for transport, which is basically to cater long-haul trucks, buses. And also, we believe that we will be able to do de-dieselization at the mining spots, which are the mining, which they use a lot of diesel. We are able to cater through the LNG through mobile units that will also bring this significant contribution on the climate change. Thank you very much for listening me patiently. Thank you.

[Operator]

[Operator Instructions] First question is from Yogesh Patil from Dolat Capital.

[Yogesh Patil, analyst]

My question is related to recent development of APM allocation, which has been cut below 50% to the CNG segment, and it was expected that the CNG price hike in the range of INR 3 to INR 5 per kg, but still no price hike. And historically, we have seen the prompt price hike or price cut, if there is any move on the APM side. So whole industry has not taken any price hike. That's one thing. Any particular reason? That's one question.

One more question related to the policy shift. So is there any change in APM gas allocation priority to the sector? And in long run, over the period of 5 to 7 years, how much APM allocation do you expect for the CNG? This is the first question.

[Suresh Manglani, executive]

You can raise your second question. Yogeshji, first of all, I think I must thank you that have been -- generally, I would say, the first participant raising question, very pertinent, following this sector extremely well. And that benefits a lot of other participants who then drops questions from there because you cover most of their anxieties and questions. So thank you very much. Yes, I think, there is -- as I said in my opening remarks as well that there is a reduction of 16% for us. For many, it could be different companies, reduction in the CNG.

On the home PNG side, government is continuously supporting up to 105% allocation for home PNG to take care of a quarter -- in between quarter growth as well, so that home consumers are continuously grown as well as supplied with the piped natural gas.

On the CNG side, yes, you are right that we have not increased the price yet, 2, 3 reasons. One is, as I said, we believe that there is a responsibility casted up on us to be a little more deep dive, to see what we could do ourself improvements in our -- it pushes us certainly that we now see what layer of OpEx we could optimize, which is what, as a management team, we are doing it, what we could absorb and what we could pass on.

So I think it's very important for us to remain as a responsible utility of 2 giant promoters to make sure that we take care of interests of end consumers and in our own interest to make sure that the growth upticking of the volume, which we saw 15% vis-a-vis last quarter and this quarter also is a reasonably good growth. We would like to see this growth happening. We don't want to see that our price rise pushes the volume or the growth coming down or the enthusiasm of OEMs like Maruti, Bajaj and many more should not come down. So we are working on it. You will see the calibrated approach from our side.

Some of the CGDs have already done some increase. Maybe it has not been felt, but there has been some increase in the CNG prices by some entities. We are yet to affect it. We are working on it, and we would make sure that we calibrate our approach. The good part is that, as I said, our West sourcing team, not knowing that this will come down, but certainly, they have been working to make sure that we have a balanced and good gas sourcing portfolio. I think that is also helping us to some extent, I would say. But you will hear. When I couldn't say now, but certainly, we are working to calibrate the pricing. So that is what I would currently be able to give you the response.

The second part you said, is there any policy shifting? See, from a priority perspective, you would also know, we would also know through same notification. But today it is the first and the highest priority for CNG and the PNG home. And that continues to remain. Also, it's a fact that it's a very old ONGC nominated field, which is depleting. ONGC is putting a lot of efforts to announce the recovery through various means, including the new investment.

That's the reason government has started now new volume, which is coming. They call it intervention volume or the new wells gas volume. And that pricing, if you know, if you've been following in the Kirit Parikh also, it was permitted to give 20% premium. So I think government is still giving priority on [ HPHT ] on the CNG and PNG home, the ceiling price. Government would give large extent priority on new wells gas also. So I think we are seeing, as I said in my opening remarks, we are closely monitoring this development how -- as much as I want to take the interest of a consumer, I think government is much bigger stakeholder.

They are always concerned about the last customer who is buying from us. So we are very hopeful that our engagement -- industry's engagement, not our engagement, personally, industry engagement with government and government's concern for end consumer would certainly bring some development, which would continue to help us to calibrate the pricing, make sure growth continues, interest of consumers plays a larger role than our -- any other things. So that is where I don't see any shift in the policy while reduction is happening, maybe for these factors of depletion of fuel basically. Hope I have responded to you.

[Yogesh Patil, analyst]

Yes, yes, yes. Sir, some follow-up question on the same topic. So as you mentioned that new well gas will be supplied to the CNG. Just wanted to understand the pricing terms of that gas because someone is saying that a 20% premium to $6.5 per MMBtu and someone is saying the 20% premium to the calculated APM gas price based upon the average crude basket price for that particular month. So -- and already, you have started getting that gas into your overall crude basket. So what kind of a pricing you are paying in last 8, 10 days. Just wanted to understand. So is it a 20% premium to $6.5 per MMBtu? Or is it a 20% premium to the $7.48 per MMBtu?

[Suresh Manglani, executive]

No. I think good part is your understanding is actually many of us ourselves actually. You're understanding the pulse in the market actually. But yes, currently, what new well gas we are purchasing through the process which GAIL is running. We are buying at 20% of the basket average price, which is -- earlier it used to be 10%, now its 12%. Not -- they're not applying the ceiling currently. Ceiling is not being applied. So [ 6.5% into 1.2% ] is not there. It is -- instead of a 10%, it's 12% and whatever price comes, the prices of the basket -- crude basket, it's changing. That is a 12% price basket. So today, that is the price we are receiving.

[Yogesh Patil, analyst]

So sir, in a hypothetical case, suppose because of any political reasons or any reason the crude goes beyond $100 per barrel or $120 per barrel. In that scenario for a certain period of 1 month, 1.5 months, 2 months kind of a period, will you be able to pay like a $15, $20 per MMBtu kind of a price based upon that average crude price for that particular month? That's one question.

And secondly, what we have seen every domestic gas price is capped somewhere with the help of a different, different formula that we all of us are aware. So is there any talk going on that there will be a cap on these new well gas pricing?

[Suresh Manglani, executive]

So Yogesh bhai, as I told you, like we are concerned for end consumer as an entity. I think, government is much bigger stakeholder, which is concerned or which takes care of the end consumer on pan-India basis for all the CGD or oil marketing companies, the government has this a paramount priority on the top of their mind. So, I think, hypothetically, we cannot look at it. But you have seen whenever the situation has arisen on anything of this nature, I think we have seen the intervention. We saw that Kirit Parikh was one of the intervention, which we saw to protect the interests of end consumer. So, I think, we'll leave it there. I think, as I said, today, our gas sourcing portfolio is supported to some extent. Our OpEx, we'll see how do we -- how much we're able to optimize and how much we pass on to the end consumer.

We will make sure and you have seen our track record, even today's result is also in front of you being a listed entity. Everything of ours is in front of you. I think we are hopefully working that we calibrate in a manner that it takes care of interests of all. So I think we should leave it there. Beyond that, it is difficult that we hypothetically make assumptions of $120 and even if it happens, we have to presume that there will be -- there will be some way that we will work out because end consumer is end consumer. He is the person whose stake interest has to be taken care by all.

[Yogesh Patil, analyst]

Sir, last question from my side. Some news flows are suggesting that the CGD entities are in negotiation with the ministry. So some talks are going on at the excise duty cut. If you could throw some light on this.

[Suresh Manglani, executive]

See, it is not because of the reduction. I think as today, you have a listening government, listening regulator in the country. That's the reason you see so much reforms happening. So much amendments coming, which is positive for the sectors, for the -- across, not only for CGD, infrastructure growth. Why it is happening because government listens continuously, engage with the industry. So this is a continued dialogue. Industry always keep putting its issues, which is -- which can work well for the industrial growth, business growth.

So all these which you stated and many more things are always part of a larger engagement by the industry with various stakeholders. So it's not necessary that it has arisen because of this lesser allocation of gas This is another thing which has developed. But [indiscernible] CGD again, we have seen so many things happening for us. A lot of positive things holistically, if you see upstream, midstream, downstream, a lot of positive things are also happening.

[Operator]

[Operator Instructions] The next question is from Sabri Hazarika from Emkay Global.

[Sabri Hazarika, analyst]

Congratulations for resilient performance. So I have a few questions. The first one is, with respect to this new well intervention gas, which you are getting. So right now, the allocation is happening based on the pro rata of the old APM or is there some sort of like -- I mean, how the government is deciding how much gas to give who?

[Suresh Manglani, executive]

Okay. So is this the only question? Or you want one by one to ask me.

[Sabri Hazarika, analyst]

Then, second question would be overall -- I mean, the overall outlook over the medium term. So somewhere down the line, I think we are all moving to a $10 sort of gas regime for the CGD sector also. So under which scenario, I think the economics, especially versus diesel for CNG would like become almost like -- it's almost become zero. So what is your thought process over the medium- to long-term outlook of CNG versus diesel.

And the third one is a bookkeeping question, what would be the share of domestic PNG in the volume mix for Q2?

[Suresh Manglani, executive]

I think you are testing our memory as well. No problem. So I think I will definitely take the outlook part, but let me hand over to Mr. Rahul Bhatia, who is our Head of Business Development Gas Sourcing. He will give you a little more insight about your questions on new wells gas, the way it is being provided to us, is it APM and all? I think, Rahul, why don't you comment.

[Rahul Bhatia, executive]

Yes. Good afternoon, Rahul Bhatia this side. Regarding the new well intervention gas, GAIL has been in discussions and in formal written communication with all the CGD companies, right, from the -- maybe the third week of September, understanding what is the requirement of the CGD entities with regard with regards to the priority segments. And those information has been provided and based on that requirement of CGD companies, the new well gas has been allocated to the CGD entities with effect of 16th of October. Have I been able to answer your question?

[Sabri Hazarika, analyst]

Yes. So there is no definite formula for this. So this is based on the overall negotiation between the 2 parties. So this could keep changing. I mean, how much you'll be getting for this gas, right? Because compared to, say, spot LNG it is still cheaper. It could be like $9 right now versus say $13, $14 spot LNG?

[Rahul Bhatia, executive]

No, definitely, I wouldn't call it a negotiation. They -- what the allocation has been done has been done for a 6-month period till the 31st of March 2025. So they've actually looked at what is the requirement. And I think they've aggregated and collated the CGD requirement versus the new well intervention volumes, which are available and may have been certified by the DGH till March '25. And based on that, it's been allocated. So I wouldn't call it a negotiation, but it's an aggregation of the demand of the CDG entities, their deficit requirements. And based on that, the aggregation of the total volume is available.

[Sabri Hazarika, analyst]

So 16% that you've sacrificed, you've got back entirely 16%, you've got lesser or more than that?

[Rahul Bhatia, executive]

We've got -- almost that amount we've got.

[Sabri Hazarika, analyst]

That amount only you've got. Okay. Okay. And just to ask you this -- basically, this will be like the Indian basket price for September and that will be like multiplied by 12%, and that will be the price for October. That way it will go, right?

[Rahul Bhatia, executive]

That's correct. That's correct.

[Sabri Hazarika, analyst]

Yes, Suresh, sir [indiscernible].

[Suresh Manglani, executive]

Yes, yes, yes. Definitely. I think you also asked the booking questions. Rahul, why don't you -- Parag, you're going to respond? Parag will respond.

[Parag Parikh, executive]

Sabri, I think, in terms of volume composition, 2/3 is CNG, 1/3 is PNG for the quarter. Within that 1/3 of PNG, your answer on what is domestic comprising of the PNG component, it's about 23%.

[Sabri Hazarika, analyst]

23% only, right? Yes, okay. Okay.

[Suresh Manglani, executive]

So let me now give you the outlook on a medium-term basis. I think as you see the focus of whether it is a government or whether the regulator is to grow CGD. You also see OEMs after OEMs focusing on CNG. In fact, the new -- we are tracking this sector, I'm sure you're tracking also OEM producing the CNG vehicles. We understand and we're seeing the numbers. CNG's vehicle sale has surpassed now petrol or diesel sales. So I think from our standpoint of view, it is now up to the CGD entities as well to look at its own gas sourcing mechanism, work with the government on continuously having a first priority, which we are sure government will continue to maintain. And at the earliest as we see the newer gases coming, will give higher priority to us.

So we still see -- that's the reason you are seeing we went to ECB, we've arranged the funds. We have our own internal accruals. I think our focus continues to remain on growing infrastructure at accelerated pace. And that gives you confidence that we see -- you build a CGD business for a generation. You don't build for 2 years, 5 or 10 years, actually. And we are seeing. We have today CGDs which are operating for 30, 40 years and profitably they are operating.

But it's up to perspective and the outlook of the promoters. And from our perspective, we are looking at is the business, which is part of a nation building. It is a business which is for generation. And these hiccups kind of a small allocation here and there, I think it pushes us to do now our own homework as well while we balance the interest of a consumer. And the entire industry is engaged with the government. So we still are very optimistic and positive on the CGD growth. Anything you want to add? Anything you want to add?

[Sabri Hazarika, analyst]

Okay. Just last one small follow-up. So after this whole thing, whole episode and you have said that you will continue with your CapEx plans and you'll continue to remain bullish on the sector. So if you could give us some margin guidance on an EBITDA per SCM basis after this allocation cut over the next 2, 3 years?

[Parag Parikh, executive]

So Sabri, I think if you noticed while there have been times over the last 2, 3 years, we have seen price volatility, maybe in terms of APM allocation, to at times as far as global prices are concerned. I think, our focus is to always you know marry the margin realization and the volume towards what we can see as a consolidated picture of EBITDA. So there are times where we believe a lower margin per SCM is better because it helps us in building us more volumes. Whilst there are times where we believe that we may not necessarily see the immediate realization of volume. But for that matter, the margin per standard cubic meter allows us to maintain our EBITDA.

So that's the calibrated approach that we are referring to that we've always maintained. If you actually look at in terms of our current margins, our current EBITDA per SCM for this half year is closer towards INR 13. And while certainly so as APM allocation has gone down, it will have its own impact as far as EBITDA realization per SCM is concerned. We will continue to keep a calibrated approach. As we said, we have so far not done any price rise or price pass on to the end consumers. It will remain as a combined between what we do as far as price pass-on is concerned. At the same hand we are moving into a winter season, one of the better seasons as far as volume uptick is concerned. So that's the calibrated approach we'll continue to play.

Longer term, if you were to look at in terms of margin realization, largely CNG has been the contributor in the -- of almost close to 65% of the current volumes, which effectively means faster turnaround and a larger contribution. As we proceed, we will also see gradually industrial volume becoming a significant contributor in the longer run, which would again mean that there will be a lower margin per SGM whilst there will be a larger volume. So that's how we should look at it in terms of our picture. We certainly aim to remain around the same range of margins that we try to maintain, but it will always remain balance between volume versus margin.

[Operator]

[Operator Instructions] Next question is from Kirtan Mehta from BOB Capital Markets.

[Kirtan Mehta, analyst]

Continuing with similar questions. With the probably lowered allocation of probably the gas basket price for the primary sector has increased upwards of $8 or so. And what is the differential that we like to maintain between the diesel and natural gas or in the gas -- petrol and the natural gas which will not deter demand in your view, would you be able to share some color around it? This is the first question.

The second question was you were referring to sort of doing some homework to see where we can reduce the cost. So could you also give us some more color in terms of the areas where you think the cost savings are possible both on gas purchase cost as well as OpEx side?

[Suresh Manglani, executive]

Kirtan bhai, I think as I was telling Yogesh also, I think you have also become part of our extended investor -- analyst family. Thank you. I think you have been taking interest in sector as well as for ATGL, keep -- continuously keep pushing us to prepare more and more better way for your questions.

I think coming to the -- your first question, the color, what should be the spread, which we should leave for the customer to opt for CNG. I think that's the responsibility on us to maintain. And we will do it. We'll leave reasonably -- a reasonable spread. It may not be one generic number, which we could give you, Rahul could put some more light on in specifically. But I think we always see both MS as well as diesel. Sometimes we are depending upon the pricing of a state being [indiscernible] et cetera, what do we get on the diesel versus MS.

Some states are very closely knit on petrol or diesel price. Some there is a good difference. So depending upon the difference, some places, we could be closer to diesel. But largely petrol, I think, will provide a good difference between CNG and the petrol price. We'll leave reasonable spread so that customer continues to operate. It also will depend, Kirtan bhai, that it's not necessarily the larger spread. It is a combination of a spread which we leave and the customer usage of a vehicle.

Now if its a travel agency, even a smaller spread may give him a good saving. If I'm an individual using car for 30, 40 kilometer and larger spread may not give me a good saving. So it depends upon which -- how customer behavior is there on utilization, which geography we are in. For example, in the NCR perhaps CNG is the way people are using for climate change point, environmental climate, air quality point of view.

So being -- as I said in my opening remarks, while everybody you all felt that we should have increased the prices, we still are holding on to make sure that we calibrate in a manner which you all feel that yes, we have conducted ourselves more responsibly and prudently. Same would be being responsible and prudent by leaving some saving on the table for people to continue to buy CNG vehicle, convert their old vehicle to CNG. And we also do these studies of customer behaviors, the area we are operating, travel agency, how many -- like Udaipur, for example, it's full of travel agencies. We work with them. We see that there is a convergence.

So I think, we understand this market. We have been a very old operator in this market. And we have been growing. Our track record suggests that our CNG growth is happening, even in some places we are left a little lesser spread. And we may not see that high growth even if there is a spread a bit higher in some places. It all depends upon the customers which we are targeting and audience.

The second part was the -- your part. Of course, I will certainly give so that you get much better answer from the person who is actually dealing day in and day out for this part. I gave you a bit more of a generic response, I know, but you'll get more better response from Rahul. On the -- color on the OpEx, again, I think we always believe that there is a scope for improvement in every head of OpEx.

We always believe that when we are doing good work on gas sourcing, there's still scope for doing much better work. I think that's the philosophy or that's the management vision that is carrying forward. We could have said there is nothing on OpEx, but we believe once we start laying more deeper hands, there would be, because we've grown significantly in all the geographical areas. So now we have started working. Anyway we would be working on continuously on improving the OpEx, but this has pushed it more. We'll be doing more deep dive. And we are hopeful that we'll be able to balance on our saving, gas sourcing doing a much better way as well as our operational excellence, digitalization, which you saw, it actually saves the cost.

Digitalization certainly helps us to do a lot of OpEx savings in operations and maintenance part and many other. We have billing, collection, recovery. These are the costs for the utility, but we optimize it. Today, just I maybe taking a little longer, we -- our -- there is no even a single paper bill across 1 million -- 9 lakh consumers, whether CNG station, commercial, industrial or homes, everybody gets a WhatsApp bill, that's the saving. You don't print the bill, send it by post. We don't do that. And 98% paying digitally saves the cost.

So I think this is what we keep working. So in my view, I think every component of OpEx, whether it's logistic operations, maintenance, any other head, I think it is important for us to make sure that we continually improve and bring excellence for the customer for whom we're working day and night, continuously working for our customers who come and widen our base. I think Rahul and Parag may add something. Rahul, would like to do something -- add?

[Rahul Bhatia, executive]

I'd just like to add a little -- a couple of data points, which might give a little bit of comfort. So to actually mention upon the spark spread and the benefit, for example, if you look at Ahmedabad, which is one of our main areas, there the current CNG price provides us OpEx benefit -- daily OpEx benefit of 40% versus petrol, which is a very, very significant amount. And just to also share with you because we've been over the last 15, 20 minutes, talking about the increased cost because of APM reduction. Even a INR 3 increase in price, INR 3 per kg increase in price of CNG, will actually reduce the benefit from 40% to about 37%, which is still continuing to be extremely attractive for CNG users. So these are some data points, which I want to leave with you.

Second thing I wanted to mention is that, we were looking at the number of CNG vehicles, which have been registered in India, in Gujarat, which is one of our main areas, in some of our newer areas in, for example, Rajasthan, where we are there in Udaipur and Bhilwara. So to give you a flavor, the increase in the -- in YTD in these 6 months of FY '25 in Gujarat, for example, has been 21% higher than what they were in FY '24.

So while every month in Gujarat -- in the last financial year, the number of CNG vehicles which were entered were roughly around 16,000, there are about 19,700 per month in Gujarat alone -- in these -- as an average for these guys. So pretty much, you can see that customers are expecting and are finding -- continuing to find CNG as very attractive as we move forward.

[Parag Parikh, executive]

And to add to, I think, on your question on OpEx, Kirtan, I think a number of initiatives are being done and the digitalization, moving towards specific tools is enabling us to continue to improve our OpEx preventive -- predictive maintenance. At the same end, therefore, enabling us to reduce in terms of O&M, transport, logistics, et cetera. If you actually go by our current numbers, we were at actually above INR 6 per SCM in terms of our OpEx, which if you see in the first half of this year, we've actually brought it down INR 6. So those are the sorts of improvements that we're doing as far as OpEx per SCM is concerned.

[Suresh Manglani, executive]

Thank you, Kirtan. I hope we have been able to respond to you.

[Kirtan Mehta, analyst]

One or 2 more follow-ups. Basically, sir, in terms of gas sourcing, would your preference for the oil-linked contract will increase looking sort of the oil market is poised for sort of probably a price reduction from here over the sort of the typical current preference for the U.S. exchange-based contract or?

[Parag Parikh, executive]

Kirtan, can you repeat your question?

[Suresh Manglani, executive]

Your audio is not that clear, Kirtan.

[Kirtan Mehta, analyst]

Yes, is this better now?

[Suresh Manglani, executive]

Yes. Yes, yes. Better.

[Kirtan Mehta, analyst]

I was asking whether with this change or lower APM allocation, would our preference towards oil-linked contract will increase when we go for gas sourcing or LNG sourcing?

[Suresh Manglani, executive]

Okay. So I think -- I don't think so this one factor will decide which side we move. I think, again, as you said, this is a complex issue for any gas -- city gas distribution company, which is intermediary. How to remain relevant in the market all the time for an end consumer. I think, we may do what we want to do it, but our responsibility is to remain relevant. If I do oil-linked only, tomorrow if something happens to oil, will I be relevant for the market while exposing my balance sheet. So I think this is bit of a complex issue, whether allocation was prior one or now, our responsibility is to examine all indexes, all tenures, also see domestic production, several ceiling price of gas and come out with a mix in such a manner that, as we have been doing.

As I said, you all have to see the track record that we keep presenting you all that our gas sourcing cost is always there in the system. We want to remain relevant. So it's not necessary this factor will drive us to suddenly move to the oil linkage. We'll continue to have our focus to see which linkages, which cocktails of linkages, which tenure of linkages. We will continue to maintain as the company which provides customers more affordable PNG and CNG.

[Kirtan Mehta, analyst]

And one more question was you referred to about the usage of the vehicle. Would you be able to sort of divide vehicles into 2 classes where proportion of the vehicles, which are actually in the 40, 50-kilometer range per day usage versus the higher usage?

[Suresh Manglani, executive]

Rahul, do you want to respond? This is more specific for you.

[Rahul Bhatia, executive]

Could you just repeat the question, please?

[Kirtan Mehta, analyst]

I was asking in terms of -- out of our total CNG vehicle pool, how many vehicles would be sort of in the lower usage class of 30, 40 kilometers per day?

[Suresh Manglani, executive]

That one has been answered.

[Rahul Bhatia, executive]

Yes. We've got actually a mix of GAs. There are certain GAs where there are customers which are captive customers and they move within the city, which is something around 40 kilometers per day. And then we have got our newer GAs where volumes are now increasing and where there is a lot of transit and floating traffic. So if you look at today, maybe we've got about 60%, 65%, 70% of the total volume may be captive. But as we are moving forward, we are finding that the floating traffic is actually increasing very significantly. Have I been able to answer your question?

[Operator]

The next question is from Somaiah V from Avendus Spark.

[Somaiah Valliyappan, analyst]

So my question is on the gas sourcing. Could you just help us for the CNG, your volumes are around [ 1.8 ] last quarter. So what was the sourcing mix, the APM and other source of gas?

[Suresh Manglani, executive]

Okay. Perfect. So I think either Rahul or Parag will take. I think he's saying what's the mix of gas? Rahul why don't you give him on APM, non-APM something you said. Okay. I couldn't understand because your audio is not that clear.

[Rahul Bhatia, executive]

You're asking for the breakup of our APM portfolio right?

[Parag Parikh, executive]

APM to non-APM.

[Rahul Bhatia, executive]

Yes. Within the CNG basket, just looking for the sourcing split.

[Suresh Manglani, executive]

Within the PNG basket. Is it clear, PNG, you said?

[Somaiah Valliyappan, analyst]

CNG. CNG.

[Suresh Manglani, executive]

CNG basket, APM and non-APM which you purchased. How much if we are breaking APM, and rest is non-APM. That's what I think you must be seeing. How much you could use domestic, how much you could buy LNG?

[Rahul Bhatia, executive]

Okay. So we have hardly any LNG. The proportion that we brought is 50% of our overall volumes that we got are about APMs, about 48%. Let me give you an overall perspective first. Out of the overall, about 48% is APM and now it's sort of very recently gone down by a few percent. And we've got HPHT gas, which is to the tune of almost about 30%. The balance is about -- is RLNG. So in the overall, we've got about 75% to 80% is going to be domestic gas, right?

[Somaiah Valliyappan, analyst]

Sir, also on the RLNG part, so this is -- if you can further break this up into Brent or Henry Hub, or So what would be the mix there?

[Rahul Bhatia, executive]

Okay. So we've got majority of that 20% of RLNG, about 80% of that would be Henry Hub linked. Very stable contracts, which are Henry Hub contracts and about 5% would be Brent-linked.

[Somaiah Valliyappan, analyst]

From now, based on the current -- after this current reduction, so the entire shortfall has been retired with the new well interventional as. The entire, 15%, 16, shortfall in APM has been replaced with new well intervention.

[Rahul Bhatia, executive]

Yes, correct. That's correct.

[Somaiah Valliyappan, analyst]

Sir, also going forward, do we see this 30% HPHT that we are getting currently. The overall HPHT could there be a decline in terms of what is available at the company level and would that impact the 30% mix? Or how do we see HPHT continuing for us?

[Rahul Bhatia, executive]

We -- actually the HPHT is going up -- the availability going up for us specifically, and there are 2 reasons for that. Number one, there are a lot of contracts which other entities have signed up with the RIL BP combined. And they were -- for 4 to 5 years, those contracts are actually coming to an end in January '25. So those molecules will actually come up for auction in January '25 and will be available. And secondly, ONGC is also going to market, it's HPHT gas come January or February '25. So therefore, we are very closely tracking that and hope to be able to contract and take on both more HPHT than we have right now as per our requirement.

[Somaiah Valliyappan, analyst]

So in terms of maybe the APM allocation, they can continue to go down possibly, the rate at which at least it was going down earlier. If this continues, what would be our approach for any shortfall. So it will be more of HPHT, that's how we look at it or we will increase also slightly our RLNG sourcing?

[Rahul Bhatia, executive]

Okay. So in the -- you would be aware that after about 2 years from '26, '27 onwards, the liquefaction capacities globally are increasing by about 40%. And at that point of time, we attractively priced molecules of LNG are going to be available globally. So therefore, as we see today, the cheapest gas is APM, then new well intervention and then HPHT. Depending on the decline of APM, we would try to replace it, first of all, by new well intervention and then by HPHT.

And then as we move forward, we are very hopeful that the LNG that would be available for '27 onwards would also be very competitive and could be very near HPHT type levels. And therefore, we are closely scanning the market and looking at what sort of contracts we could possibly get into at that point of time, which would be very competitive and near to our domestic portfolio as we speak.

[Operator]

The next question is from Pranitha Shetty from Morgan Stanley.

[Mayank Maheshwari, analyst]

Mayank here from Morgan Stanley. Just a bit more long-term question, sir, here, considering I think the gas allocation is one part of the story that you talked about. Well, in terms of our capital allocation, considering you're building all these new GAs, how are you thinking about a shift in capital allocation under the new gas regime, which I suppose happened in 2022 itself. But like is there a shift in your capital allocation perspective in ramping up GAs as well as how you're thinking about kind of growing the volumes and returns?

[Parag Parikh, executive]

Sure, Mayank. So I think whilst we are seeing this APM reduction on 16 October. And I think as you may have heard, a, we are, of course, hopeful of seeing what happens next as far as lower allocation is concerned; b, how do we ensure the calibration on price pass on to the consumers. As far as our newer geographies are concerned, a lot of CapEx is yet to be incurred. And our recent sort of financing actually enables us to look at CapEx over the next 24 months.

So I think from a pure capital allocation perspective at this juncture, we would continue to do so as being planned for the newer geographies of the 11th round more so and continuing where we are at the ninth and 10th round. So no change as far as the CGD capital allocation is concerned. I think, what you would only see along with the CGD allocation is an allocation towards some of the newer businesses that are -- will be coming.

So whether it is on the LNG for transport, EV, bio, so you will gradually start seeing some capital allocation also there as an add-on. So purely from a CGD perspective, whilst we'll do. From an ATGL basket perspective, you will see some portion of that also getting allocated in its own independence to these 3 new businesses.

[Mayank Maheshwari, analyst]

Got it sir. And sir, I was just thinking from just not the CNG perspective, but from the industrial side as well. How are you kind of thinking about -- like getting on the industrial side in terms of what you said around 2026, '27 on LNG prices that you are thinking, how are you thinking in terms of ramp-up there? Could it be faster or slower? Or are you saying that will be pretty much what you have planned for in the last few years?

[Suresh Manglani, executive]

Yes, yes. Rahul, why don't you do this.

[Rahul Bhatia, executive]

Sorry, what ramp up are you...

[Parag Parikh, executive]

I'll just add it and then Rahul will add in. So I think as far as -- Mayank as far as CapEx is concerned, the base infra network will continue to be set up. So I think to that extent, it does not change as far as the base infra network of CapEx is concerned.

As far as ramp-up is concerned, and I think to that question on how we are seeing the C&I side of the network, I think this will continue to build over a period of time. Certainly, so, as you've heard from Rahul that post 2027, we are expecting global prices to be more attractive and in a manner that could balance out today, otherwise, what is being procured as HPHT contract for some of the C&I segments. Rahul, would you like to add?

[Rahul Bhatia, executive]

So as we -- we feel that the volumes that would be available to us moving forward in terms of the global liquefaction capacity is being increased. Based on that, the volumes that would be available to us to contract would be very attractive for the C&I customers. And therefore, we feel confident that we will be able to garner a lot of C&I customers in our newer GAs as we move forward.

[Parag Parikh, executive]

I think, one thing that will happen, Mayank, from a longer-term perspective. Today, when you look at C&I as a basket from a pure CGD side point of view, all said and done, these are relatively shorter contracts. Over increasingly with time, we see a scenario possibly emerging where on one hand, you have longer-term contracts as far as RLNG is concerned, as well as efforts similarly are being made to tying into the C&I customers on a slightly longer tenure.

[Operator]

Next question is from Harsh Maru from Emkay Global.

[Harsh Maru, analyst]

So sir, my question pertains to LNG station. So right now, we have 1 station and 2 more in the pipeline. So could you throw some light on the unit economics and the kind of volume traction that you are seeing at this station currently?

[Suresh Manglani, executive]

So, Harsh, you referred EV station or LCNG plant because that is where -- or LNG station you said, LNG is one, and we are building up more. Which one you stated, Harsh?

[Harsh Maru, analyst]

LNG, LNG.

[Suresh Manglani, executive]

LNG. Sorry, I thought EV. So we have -- actually, what you have seen us that we try to be a bit of an early mover on the opportunities which we are seeing are emerging, whether it was a CBG EV and now LTM, which I call it, LNG for transport and mining, we see -- as we have seen the other parts of the world and government commitment on climate change is that now they are looking forward how do we reduce or minimize the utilization of a diesel for transport. Now longer term, the vision is for hydrogen, of course. But what we see is that one of the immediate solution for this is the LNG for the heavy trucks or the long-haul trucks and buses. So we are seeing traction in policy formulation. We are seeing kind of demand getting now. There is a traction of a couple of things.

We are also seeing Indian carbon market is also getting developed, plus the European Union coming restrictions, which are coming on the Border Adjustment tax, which is coming up from '26 onwards. That is also pushing pressure on -- because European regulations are end-to-end emission, whereas Indian carbon market today is talking about only the plant-based emissions. Still it's not gone on to the end-to-end, but eventually, that will happen.

So these developments and combined assessment by us is that the LNG for transport and mining could be another big opportunity for us to seize. And in that process, we have set up the first station. We believe this will deliver a good outcome, whether it is the physical side or the financial side. Today, it's too early for us to look at. It's just we commenced the first station to look at unit profitability. But how the policy formulation takes place, we would certainly see that then it will start providing whether Indian carbon market makes more mandatory, whether the European market comes or how Rahul and team, as I said, as gas sourcing team we procure the LNG part. How do we derisk ourselves when we want to give customer maybe [ HSD ] linked prices or HSD referent prices.

So we are still developing this entire modules from our side. But we want to just showcase that there is this opportunity for us, and we want to set up some of the fuel stations initially to bring the customers to our side, large corporates, large transporters, and we are seeing interest around it. It all depends upon what kind of a pricing traction they want to see, stability at pricing they want to see. So we are working on it. We are providing those kind of solutions to the -- to the transporters or the corporates who are using heavy trucks and vehicles. So it's a bit of an early, but from our assessment appears to be a good emerging opportunity.

[Operator]

That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

[Unknown Analyst]

Yes. Thank you, thank you, all the participants for attending the conference call. In case of any further questions, queries, please do write to us. Thank you very much. Thank you. Have a happy Diwali.

[Suresh Manglani, executive]

[Foreign Language]

[Unknown Analyst]

Thank you for the entire management on ATGL side. Thank you, everyone.

[Operator]

Thank you very much. On behalf of Adani Total Gas Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.