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GAIL (India) Ltd
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Ladies and gentlemen, good day, and welcome to GAIL India Limited Q2 FY '25 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari from PhillipCapital India Private Limited. Thank you, and over to you, sir.
Thank you, Shilpa. Good day, ladies and gentlemen. On behalf of PhillipCapital India Limited, I welcome everyone to GAIL India Limited's Second Quarter FY '25 Earnings Call. Today, we have the pleasure of having with us, the senior management team of GAIL, led by Director of Finance, Shri R.K. Jain. 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.
Thank you, Nitin. Thank you very much. My dear friends from investors and analysts community, good morning to -- and warm welcome to you for this earnings call for Q2 financial year '25.
At the outset, I thank you all for attending this earnings call and would briefly touch upon the major highlights. And I'm happy to inform you that GAIL has registered highest ever PBT and PAT of INR 7,095 crores and INR 5,396 crores for first half in financial year '25. And this is mainly driven by strong marketing margins, increase in transmission volumes and better petchem performance.
On a stand-alone basis, in Q2 financial year '25, GAIL has reported gross turnover of INR 32,814 crores, EBITDA of INR 3,453 crores and PAT of INR 2,672 crores. On a consolidated basis, in Q2 financial year '25, GAIL dropped a turnover of INR 33,861 crores, PBT of INR 3,470 crores and PAT of INR 2,694 crores.
GAIL gross turnover stood at INR 32,814 crores in Q2 financial year '25 as against INR 33,627 crores in Q1 financial year '25. The PBT during this quarter stood at INR 3,453 crores as against INR 3,642 crores in Q1 financial year '25. PAT during the quarter stood at INR 2,672 crores as against INR 2,724 crores in Q1 financial year '25.
Consolidated turnover in Q2 financial year '25 stood at INR 33,861 crores versus INR 34,753 crores in Q1 financial year '25. PBT in Q2 financial year '25 stood at INR 3,470 crores as against INR 4,114 crores in Q1 financial year '25. PAT in Q2 financial year '25 stood at INR 2,694 crores as against INR 3,183 crores in Q1 financial year '25.
The gas marketing volume sold during Q2 financial year '25 was 96.60 MMSCMD as against 99.47 MMSCMD in Q1 financial year '25. The decrease is mainly on account of reduced gas consumption by power sector due to prolonged monsoon and reduced average temperature. Natural gas transmission volume was almost flat at 130.63 MMSCMD in Q2 as against 131.79 MMSCMD in Q1 financial year '25.
The average capacity utilization stood at 62%. Volume of production was 234 TMT as against 162 TMT in Q1. Capacity utilization for the quarter was 116%. LHC production was 252 to TMT as against 216 TMT in the previous quarter. The capacity utilization stood at 71%.
LPG transmission throughput stood at 1,124 TMT as 1,065 TMT in previous quarter. The capacity utilization was 98% during the quarter. [indiscernible] having the infrastructure of 194 CNG stations and 3,48,000 DPNG connections in the 6 geographical areas authorized to GAIL. During the quarter, 3,765 new DPNG connections were added. The physical volume remained at 0.38 MMSCMD during the quarter. The share of APM and RLNG in the physical volume is around 0.23 MMSCMD and 0.15 MMSCMD, respectively. In the next 2 years, GAIL targets to add around 80 new CNG stations and around 1,20,000 new DPNG connections.
GAIL Gas Limited. Turnover was up by 5% at INR 3,150 crores as against INR 2,987 crores in Q1 financial year '25. The increase is mainly on account of 8% increase in sales volume from CNG segment, 15% from Industrial segment and bulk trading segment by 5%. PBT stood at INR 167 crores as against INR 149 crores in Q1 financial year '25, an increase of 12%. PAT stood at INR 124 crores as against INR 110 crores in Q1 financial year '25, up by 13%.
During Q2 financial year '25, GAIL Gas, along with it's JV, added 26,795 new DPNG connections and 8 new CNG stations and is having infrastructure of 10,30,000 DPNG connections and 580 CNG stations.
I will take you through project performance. Mumbai–Nagpur–Jharsuguda pipeline, work is under progress and the entire pipeline is anticipated to be completed progressingly by June '25.
Jagdishpur-Haldia-Bokaro-Dhamra pipeline. This pipeline is having length of 3,289 kilometers. 2,896 kilometer has been commissioned, and the remaining part is expected to be completed progressively by March '25. Kochi-Koottanad-Bangalore-Mangalore pipeline, this pipeline is 901 kilometer pipeline, 579 kilometers has been commissioned and remaining part is expected to be completed progressively by March '25.
Srikakulam-Angul pipeline, work is under progress. And this pipeline is of 421-kilometer working under progress and likely to be completed by June '25. Gurdaspur-Jammu pipeline. This pipeline is 160 kilometers, work is under progress and is expected to be completed by July '26.
The Dhamra Haldia pipeline, this pipeline is of 253 kilometers, 154 kilometer has been completed and remaining part, this is basically West Bengal section, is expected to be completed progressively by March '25.
Petrochemical projects, PDH-PP at Usar, capacity of this plant is 500 KTPA, project cost is INR 11,256 crores. Completion date is at -- mechanical completion is by April '25, and project is expected to be commissioned by up toward 2025.
Currently, the progress of project is 75%. PP at Pata having capacity of 60 KTPA, project cost is INR 1,299 crores, having target mechanical completion date of December 2024, and current progress of projects is 91%. GMPL is GAIL Mangalore Petrochemicals has a license capacity of 1,250 KTPA and approximate project cost is INR 4,200 crores, having scheduled completion date of June '25.
CapEx during Q2 '25. During Q2 '25, CapEx incurred is INR 1,885 crores, and this is mainly on pipeline, CGD projects, net 0 renewals of operational CapEx and others. Now I will take you through the segment-wise outlook for short to medium term.
Gas marketing business continues to demonstrate enduring performance and as informed in our earlier earnings calls and investors meet, GAIL will be able to earn at least INR 4,500 crores of marketing margin from this segment in financial year '24, '25. Since we have already earned gas marketing margin of INR 3,287 crores in first half of financial year 2025, which is approximate 73% of the [indiscernible] annual gas marketing margin guidance. Same will be again reviewed for further guidance and revised during the result of Q3 financial year '25.
Gas transmission volume for '24, '25 is expected to be 130 MMSCMD. Average gas transmission volume for H1 stood at 131.21 MMSCMD, which is in line with the guidance given to you. Further, during next 2 to 3 years, transmission volume is expected to increase by around approximate 10 to 12 MMSCMD on year-on-year basis.
Polymer production stood at 396 TMT in first half financial year '25. This segment has returned to profitability in first half '25 with a PBT of INR 116 crores against a loss of INR 461 crores in financial year '24, first half I'm talking. We expect to make reasonable profit before tax from this segment in financial year '24-'25. We further plan to optimize our sourcing to increase the bottom line of petrochemical business.
LHC production stood at 468 TMT in first half '25. During the year, production is estimated to be at the same level as was in financial year '24. Also to protect the margin [indiscernible] segment, GAIL is, time to time, taking hedging for its prices, the LPG prices, that is propane and butane.
I think this is all from my side regarding the overview of performance and projects. The management of the company is available and would be able to clarify on any questions that we may have. I now hand over to you, Nitin. Thank you.
[Operator Instructions] The first question is from the line of Probal Sen from ICICI Securities.
The first question is a little bit of a clarification. You mentioned at your opening briefing that trading volumes decline is due to the reduced gas consumption by power sector. However, if we look at the transmission volumes, they have remained broadly flat. I just wanted to understand, sir, on a very basic level, how should we basically then look at the mix between transmission and trading volumes, which seems to be sort of reducing, if I look at last few quarters trends. So in terms of building in numbers, even transmission is at 130, trading volumes can actually fluctuate between 96 to 98, depending on which segments we are supplying to, sir?
Thank you, Probal. Actually, our marketing volume, as I said, has gone down by 3 million, whereas the transmission volume remains almost flat, though it is down by almost 1 million, if we compare quarter-to-quarter.
And there are 2 factors. While the transmission volume almost remained flat, maybe 1 million down and marketing volume has gone down, the fact is that in Q1, power sector consumes significant amount of gas because of the weather conditions and Q2, because of monsoon, it has gone down. That is the major reason.
And while transmission volume remains almost same and marketing volume came down because of this reason. Second that in Q2, we did not supply to power, whereas our power plants, Pata were on the [indiscernible], which was not there in Q1.
Okay. So basically, sir, the transmission volume remaining flat meant that those -- the 2 MMSCMD or 3 MMSCMD went to either internal consumption, all sectors where we don't actually get any marketing margin.
The marketeers have -- because we were short of volume, and we could not get the [ VPMC ] bid, which comes regularly because we were not having volumes. So we don't participate during those bidding process. But based on our prices, which we were to source, we could not get those volumes. So that is the reason that marketing volumes were not available to us and have gone to other.
Got it. Okay The second question I had was with respect to the petrochemicals. Obviously, we have seen a good recovery in terms of volumes. Just wanted to understand that what kind of run rate should we be looking at for the second half. Are we confident we can maintain basically this 220, 230 TMT on a quarterly basis, sir, for the next couple of quarters?
Yes. We have, in our guidance, also said that, and now I continue to maintain that this year, we will be producing at the nameplate capacity of Pata, which is 810. We will be reaching around that level.
So the run rate will continue to be maintained.
Right. Last question, sir, if I may. The overall CapEx guidance, sir, you mentioned INR 1,885 crores, done in Q2, and we get a sense of overall CapEx done in H1 and H2 guidance?
CapEx, you are talking?
Yes, sir.
CapEx, we have planned to incur around INR 8,000 crores to INR 9,000 crores of capital expenditure during this year. So we will be maintaining the current rate of CapEx maybe a bit higher than current rate, because in the second half, always the CapEx will be more than the first half. So we will end up around INR 8,000 crores to INR 9,000 crores when we end this financial year.
We have next question from the line of Amit Murarka from Axis Capital.
Sir, first question is on Gas Marketing segment. So I know that you've guided for a full year of about INR 4,500 crores, but...
A bit louder. I'm facing a problem of getting your question.
Yes, sure. Yes. So I was saying on the first question is the Gas Trading segment. So I wanted to understand like what's the reason for the drop in the contribution EBITDA and EBIT contribution from the segment in Q2 versus Q1?
Actually, Q2 is a normative return. Q1 was a bit higher. I will put it differently. We have given guidance of INR 4,500 crores on a yearly basis. If you see Q2, it was around INR 1,200 crores. So Q1 was higher than normative guidance. And why it was higher because we marketed -- there are 2, 3 reasons if you want to know specifically.
Once we marketed almost 3 million volume more, that is one. Secondly, the arbitrage available between the upstream contract that is the Henry Hub and downstream contract that is the crude-linked contract. If you see crude prices during quarter 1 was higher as compared to quarter 2. Henry has prices who were lower as compared to quarter 2. So therefore, those arbitrage, which were available in Q1, has reduced to some extent. These are the 2 primary reasons for our marketing margin reduction as compared to Q1. But we continue to maintain our guidance of INR 4,500 crores.
Sure, sure. And sir, is that the only reason the lower spread between, let's say, the crude-linked LNG and Henry Hub LNG or is there some other factor in Q1 as well? So is there any other factor beyond this because the fall is about almost 30%, 35% on a Q-o-Q basis. So is that the only reason that the spread reduced between Henry Hub and...
There are 2 more reasons, if you want to. Third, as I said during questions by another participant that in Q1, we were having volumes for market in Q2, we sourced the volume to fulfill our commitment. There was some shortage of volume, and those volumes did not give those margins which are available in Q1.
We source these 4 cargoes. And fourth reason is the reason that our -- one of the upstream contracts has got 9-month average, and the stream contract has got 3 months average. So 3 months average gives us less return as sourcing, we will pay higher. But over a period of time, it gets settled.
Sure. Got it. On CapEx, I thought like in the last call, I think the guidance was about INR 11,500 crores for FY '25. So are you guiding it lower now?
No, it is not lower. I was a bit conservative when I was explaining INR 9,000 crores. It may even touch INR 10,000 crores plus, INR 10,000 crores. So we'll be touching that.
Okay. And also, any update on the transmission tariff revision that you said that PNGRB would soon decide upon?
We have submitted our tariff petitions to regulator, and it's almost more than 1.5 months when we submitted. We expect the regulator to process our tariff petition because there is a process of analyzing, analysis by them, then making a public consultation document, having public comment and then analyzing and then making the tariff order.
We hope that this tariff will be available as an approved tariff by March 31 and expect it to be applied from 1st April. That's our current estimate.
We have next question from the line of Sachin Mehta from [ DiamondAsia ].
Sir, I basically wanted to get your guidance on the petchem project that we are expanding on the CapEx side and the rationale behind doing this to justify the kind of ROC because I think even if you look at the mean margins that we are -- that you would be making, there would be a significant dilution on the ROC. So if you can guide something on this?
Which petrochemical project you are talking about?
The petchem expansion.
Sorry?
The petchem expansion project.
So if you're talking about the PDH-PP plant at Usar. So this project, we consumed way back in '18, '19, as I explained that this is likely to be commissioned mechanically by April and also the commercial production by October.
Actually, we do not have -- there are various reasons. We do not have PC in our suite. We currently produce PE. We want to also have PP. Second, this is not natural gas based production. This will be based on propane. So I have been continuously giving this information that there is an excellent correlation -- good correlation between propane as a feedstock and polypropylene as an output.
When we realize this and it continues to remain same even today, we are getting and we are getting more than our hurdle rate, and that's the reason. Third reason is that you know that our country is growing maybe at the rate of around 7%. And the polymer demand is also going in similar range. Therefore, the demand side, there is no problem. The [indiscernible] margin side also, there is no issue because it is propane versus polypropylene. And third, it will help us in marketing because we do not have polypropylene in our market.
But we are also looking to expand our Pata capacity as well, right?
No, we are not expanding Pata capacity. What we are doing, 2 things we are doing. A small capacity addition in terms of polypropylene, that is 60,000 KTA, we are putting. And the reason for the same is that we have polypropylene available from Pata. Currently, we are marketing that in order to utilize and make better use of polypropylene, we envisage the PP plant at Pata, which is a very small capacity plant, 60,000 KTA at a CapEx of INR 1,299 crores. That's the reason we are putting.
Second expansion is not an expansion. What we have said, we are laying a line, the pipeline from Vijaipur to Pata plant for carrying C2C3. What is currently happening, we are expecting C2C3 at Vijaipur, mixing in natural gas. Again, we are expecting at Pata. This actually results in 10% loss.
In order to capture that loss, we are putting that line, and that is rather efficiency and improvement. And those CapEx would give us better returns than the current capital expenditure. These 2 things that we are doing at PATA, there's no third thing.
We have next question from the line of Puneet from HSBC.
Congratulations. My first question is, are there any new pipeline projects that you envisage? Because I think, other than Gurdaspur-Jammu, you'll be pretty much done with the projects by June to October 2025. Anything new in the pipeline yet?
Yes. We are working on that. Rather, we have been expecting that regulator either will authorize directly or through bidding process, we do not know. But the pipelines, which are authorized to other entities and have been canceled by the regulator, we expect that those pipelines either will be authorized directly or maybe through bidding route. Those pipelines may come up in future very soon, we expect. And those are the pipelines we expect to be in our pool.
Understood. And is it possible to get a breakup of the other income for this quarter?
Other income?
Yes.
Hold on. Other income includes the interest. Other income includes the [indiscernible]. The sale of [indiscernible], which we are producing at Gandhar around INR 52 crores. BCPL, the product which we are marketing those commissions, sale of scrap. That's how the other income improves. And dividend income of INR 364 crores, right?
And the interest from customers on delayed payment interest of loan, which we have given to our joint venture subsidiaries, which is INR 163 crores. Customers delayed payment is INR 51 crores. These are broad, broad things I have explained to you.
That's very helpful. And lastly, if you can just update on what is still stopping you from updating your marketing business guidance? You're already 73% plus, nearly the INR 3,700 crores plus. So why not increase it this quarter?
Yes. As I said that, we are close of meeting the guidance of INR 4,500 crores, as you already know that almost 73% we achieved, and we are only -- we have completed 2 quarters. So right now, I will say that we are on the course of meeting our guidance.
In respect of revisioning guidance, as we did in last year, we come to you in third quarter.
We have next question from the line of Maulik Patel from Equirus.
Just a couple of things. One, on the recent government notification, where they reduced the location, APM locations to the district jury sector. Your thoughts on that, what kind of outlook one could have for the GAIL gas, which is your subsidiary? And second is that where do you see the gas consumption in the country in the next one year or so?
So if I -- because there is some issue of clarity of voice, if I understood you, the impact of the reduction in gas allocation, the impact on subsidiary and also if you are not on GAIL. So GAIL gas, we expect the impact of INR 16 crores per month, right? And for GAIL, around INR 6 crores.
GAIl as a company has an opportunity. There are 2 things which we are -- sorry, I have been corrected, INR 16 crores per quarter for GAIl gas and INR 6 crores per quarter for GAIL. GAIL as a company has an opportunity now to source and market more and more volume in terms of LNG to meet those demands, which have come up because of the allocation. So we are very, very positive in terms of GAIL and the company.
And do you think that in the future, there will be less and less gas which will divert from the CNG sector from -- within the CGD and will go to the other sectors? From a policy perspective because what we understand that there was already a MMSCMD reduction in the last one year or so to the CMG sector and this additional for MMSCMD income. So what's your thought, will the government make CNG much more a market-driven business compared to what the significant cheaper gas within the [indiscernible] location?
So this is very difficult for me to answer what will happen which our history suggests that in view of increased consumption by CNG gas distribution expansion of geographic areas. Certainly, history suggest that this allocation may come down.
And you have raised the prices in your -- the GAIL gas, the CNG prices or the price revision is yet to be taken?
So this call will be taken by GAIL gas. We are analyzing it. Certainly, there is impact. But during the course, they will certainly review their prices and they're considering the customer's demand, how it will be going to impact, they will take action. But as on net, the price revision has to take place.
And just last question. What's the outlook on this spot LNG given that there are like -- this spot LNG been very steady at $13 per MMBtu for the last couple of months. And the inventory levels in Europe are at a relatively high level, but the price is not coming down. What's your thought overall on the spot LNG price which you expect in 2025?
Actually, this is abnormal situation. Normally, you find that the spot prices, except the Ukraine war situation, the political situation remains lower. Currently, the spot prices are a bit higher than normally it used to be. We expect the spot prices to come down, but all this is in future.
We will proceed with the next question, which is from the line of Sabri Hazarika from Emkay Global.
A few questions. Firstly, on the OpEx side, I mean it shows that there is some increase in transmission OpExs. Are there any particular sector during the quarter?
The OpEx in transmission has increased because of increase in fuel consumption during this quarter.
And this is because of?
Fuel increase -- fuel consumption in compression.
Okay. And this is going to remain like this or that can be declined going ahead?
Actually, more or less, when volume increases, certainly, the levels of what we have seen recently will likely to be maintained, there -- with plus/minus. But that's not an area of concern because in terms of regulatory provisions, we are going to get back.
Okay. Second is you mentioned that there was some shortfall in their sourcing due to which you have to rely on what the investor marketing volumes were also down. So any particular long term and in the contract where the shortfall happened or you got the list of thing?
Actually, [indiscernible] sometimes happens in such a way that you feel that -- see, you don't get cargo in particular part of 1 or 2 cargo shortfall. This is ideally not from long-term contracts. As I explained, basically, we regularly source from spot market. Almost you see our 10% to 15% volume of LNG from spot market. We continue to source and we participate in various bidding, which come particularly from fertilizer sector. That is larger one.
As I said earlier also, because the spot prices were higher, we did not source or when we source, we wanted to source, it was not actually meeting our marketing margins or kind of arbitrage was not available. So this particular situation has happened in Q2. And we continue to, of course, take the sourcing from a spot market. So this Q2, there are 2 reasons. One, the allocation of cargo based on [indiscernible] secondary, there is no source spot because the prices were higher.
Right, sir. Got it And 2 more questions.
Sorry for Interrupting, sir. I would request you to rejoin the queue for more questions.
[Operator Instructions] We will proceed with the next question, which is from the line of Mayank Maheshwari from Morgan Stanley.
Just a question in terms of your CapEx spending around petchem expansion on the PET side. Can you just give us an update of how much has that been completed? What's left in spending on that?
Okay. So as I said in the opening remarks, actually, our major petrochemical project is PDH-PP Usar, and we have project cost of INR 11,256 crores. The project, currently, progress is 75%. So you can assume that around 25%, that is around INR 3,000 crores of spending to be incurred on CapEx for petrochemicals.
The next question is from the line of Saurabh Handa from Citigroup.
I had 2 questions. Firstly, on the tariff filing. Is this a part of your regular tariff filing? And when can we expect the public consultation process to begin?
It's a part of regular tariff filing. Actually, it's very difficult for me to comment on the regulators working when they will come up. But based on our past experiences, we can expect that maybe by December, we can come up for public consultation.
Okay, sir. And just my second question on your city gas investments, whether they are at the stand-alone entity or in GAIL gas. Is there any thought process to look at restructuring the streamline these investments?
So we, as a company, GAIL gas has not yet taken any call for restructuring of GAIL gas. This is in our mind. But nothing concrete we can -- I can share with you right now.
Okay. Nothing at the parent level or the various JVs as well?
So also, we are looking for listing 1 or 2 JVs, which are -- which we are in the process. And once we move forward and we take a call, we'll come back to you, but that we are certainly working and we are in a good space.
Okay. So when can we expect an update on this, please?
Q3.
We have next question from the line of Vikash Jain from CLSA.
Just sir, firstly, on depreciation, what has made it come down so much Q-o-Q certainly from the...
Yes. Vikash, depreciation, actually, there are -- in Q1, we had onetime depreciation, like we -- as you know, that part of petrochemical was under shutdown for annual plant maintenance. So whatever expenditure we do on plant maintenance, we actually have to book in terms of the accounting standards along with the plant lives.
The plant life has Pata has already been completed or almost completed. So we have to book one go those expenditure. Second for overall -- similar expenditure has happened for pipeline maintenance. That is around INR 99 crores, INR 100 crores. And thirdly, one of the shifts will lead -- completed its leasing period, and that also goes to depreciation. So all these 3 sectors have led to reduction in depreciation. So if you are interested in figures, the Pata INR 41 crores, overall at Hazira INR 99 crores, a shift of INR [indiscernible] crores. So these 3 elements totals up to INR 234 crores, which were onetime in Q1.
And so ongoing, this should be the rate other than the capitalizations, which are pending?
Yes.
So I mean, if you -- I'm sure synergy would have ready. For FY '25, what is the kind of depreciation number that we are looking at given the pending capitalizations that we are talking about?
Around INR 3,600 crores.
Around INR 3,600 crores. Okay, which is going to be lower than FY '25 you mean?
No, no.
Sorry, yes. Okay, sorry. So no, no, sorry. it was even lower. That was -- yes, correct. And at the same point of time, if I were to also look at the -- you said INR 6 crores was the impact due to this cash allocation change for GAIL. That is coming from where, if I may understand that?
I said INR 6 crores per quarter for GAIL and what is your question in this regard?
That is coming from where, sir?
[indiscernible].
Okay, the ones which are sitting in GAIL?
Yes, yes.
Okay. Okay. And just similarly, like depreciation, the capitalization of interest, what is it that -- what level is it currently? And what will that be expensing increase that we see as some of these pipelines get capitalized and increase in interest...
Vikash, we immediately do not have that figure, but certainly, we communicated to you offline.
We have next question from the line of Yogesh Patil from Dolat Capital.
And congratulations for the good set of numbers, sir. I have 2 questions Sir, my question is related to recent LNG purchase contracts of close 2 MMTPA. Majority of them will start in January 2026. You wanted to understand the pricing part of the LNG. Is it a Brent link or any other index link? And if it is Brent link, is it cheaper than the Qatar LNG? And considering these new LNG suppliers, do you want to give us the EBITDA guidance for the FY '26, '27 period? That would be helpful.
So first, there is a correction. We now sourced 1.53 MMTPA from 2 sources, which we also informed for an public domain. One from Vitol and second from Adnoc, right? And second, these are [indiscernible] contracts. Third, certainly, you can -- this contract is cheaper than the current contracts, right? And regarding the EBITDA guidance for '26, '27, we come back, we have not worked out.
Okay And sir, last related to petrochemical, Sir, majority of these petrochemical expansions will be mechanically ready in the next one year. But on the practical terms, commissioning, stabilization and the actual profit from these incremental petrochemical capacity. When one can expect the profitability out of these new incremental capacities? And any in-house estimate if you have you can share about the profitability of these new petrochemical plants?
So PDH-PP is the only big project. Let us not talk of PP, which is very small. PDH-PP is expected to be commissioned in '25. That is FY '26. The profitability from this project will start from '26, '27. We do not expect any profit in the year-1, right? And the level of profitability will come back.
Okay. And on the JBF side, sir, which we acquired and now innovating the projects on that side?
JBF side, as I said, that it is likely to be commissioned in June '25. So again, first year, we should not expect much things to happen. Next year onwards, we will be having profit. And again, we'll come back because let us discuss about as we reach closure to the commissioning because certainly, the market situation at that point of time, it is better to give any guidance when we are having some kind of maturity about this.
So the major profitability can be expected post second half of FY '27 only. Is that a correct understanding?
Yes, because there will be a lot of things happening in '26, '27. Not only we will be commissioning our one of the biggest plant of 500 KTPA, that we one. The GMP is second. And third, already we have sourced 1.53 MMTPA, the marketing will increase. Fourth, we have already given guidance that our transmission volume will increase from 10 million almost, this will happen. And fifth, we are in the midst of looking for additional sourcing, which our -- we already said in various communications that we have targeted to source 7 MMTPA of LNG at least by 2030. And already, we have sourced 1.53 MMTPA. And in phases, we'll continue to add up to our existing volume. All these will certainly help us or add to our bottom line.
We have next question from the line of Kirtan Mehta from BOB Capital Markets.
One clarification on the Petrochemical business, what was our gas sourcing cost for the petrochemical during Q1 and Q2?
So in Q1 and Q2, Q1, around 8.5, approximately 8.5 and Q2 around 9.
Right, sir. And one more question was on the Marketing division. Over the past 6 months, if we look at the global market, we have seen spot LNG prices tightening, whereas we have seen the oil price expectation coming down for FY '26. So what sort of impact would it have on our marketing business for FY '26, the change in this external environment?
Actually, our marketing margins as we are moving forward are getting stabilized because whatever long-term sourcing we have done, we have marketed now, all same index back to back mostly. So the marketing margin is going to get stabilized. So therefore, any change in spot price does not impact or not likely to impact our marketing margins. The marketing margin actually will go up for 2 reasons. One, our actual portfolio will increase. The demand in countries are increasing. Second, the spot prices at current level are not likely to remain. You can vouch for yourself.
Historically, the spot prices do not remain for a longer period at this level. And we almost market 10% of our portfolio on a spot, so that I will provide arbitrage or we'll be able to take care of the opportunities available in the spot market. So now to sum up, our marketing margin has stabilized. We move forward with more and more sourcing. The spot prices, which are currently not helping will help when the spot prices normalize.
Just one more follow-up on the same. So out of the INR 4,500 crore guidance for this year, how much percentage of the profit is attributable to the back-to-back contract?
So this detail we can share with you, but it's not right now available. But you can assume that now we almost have contracted back-to-back -- maybe I'm giving only a ballpark number, maybe 80%, 85% almost we have done back-to-back, 75%, 80%.
That is on the volume front. But out of the profit guidance of INR 4,500 crores, how much upside is attributable to the non back-to-back contracts, where we had the sort of lower HH versus the arbitrage profits that have come from the tighter crude oil prices or the way around, the way we explained earlier in Q1?
20%, I said, 75%, 80% is back-to-back. The remaining is actually giving us good arbitrage based on market situation.
We have next question from the line of S. Ramesh from Nirmal Bank Equities.
So drilling again on Gas Marketing segment. So is it fair to understand that now that you have placed all the gas you have sourced, how is the gas sourcing and the bidding balance for this quarter? Are you back to normal balance between what you're sourcing and able to place? And in terms of the volume, what is the kind of number we should assume for the second half compared to what you've done in the first half in terms of CMD? And when do you think we will see some growth? Because last year, you had mentioned that you expected about 5 million cubic meters per day of growth in Gas Marketing. So what is the kind of growth we could assume see in FY '26 and '27 in Gas Marketing?
Actually, marketing margin guidance, we have given on an annualized basis. And we have reached 73% of that. For 2 quarters, we expect it to continue to add a reasonably good margin. But if you want to have guidance, we will give in Q3, not right now, which I have been maintaining. But we expect that our guidance of INR 4,500 crores is likely to exceed. We do not want to give any number right now.
I'm not asking about the margin specifically. Since you mentioned that the reason for the lower margin in the second quarter was because there was an imbalance between what you could source and place. I'm trying to understand whether you are back to normal sourcing and placement on a back-to-back basis this quarter? And secondly, what is the kind of growth one can expect in marketing volumes in the second half and, say, over FY '26, '27?
Actually, this guidance also we are in, we expect that this year, we should get 5 million volume growth this year. And we continue to have similar growth in coming 1 to 2 years.
Okay. And second thing is, if you look at your...
I would request you to rejoin the queue as we have more participants on line.
This is one last one around the debt. If you look at the current debt, where do you see the debt getting finalized once all the projects are capitalized? And what is the average interest rate on the debt?
So debts are likely to remain around same range, maybe INR 1,000 crores to INR 2,000 crores more from current level. The interest rate, if you want to know, around 7.5% to 7.6%.
Next question we have is from the line of Tarang Agarwal from Old Bridge .
First, on the previous participant's question on your...
We are not able to hear you.
Can you hear me now?
No.
Your voice is a little muffled, sir.
Okay. Am I audible now?
A bit better.
Okay. Sir, just referring to your previous participant's question on your gas sourcing from Adnoc and Vitol. You said that your new contracts are crude linked and they're cheaper. But sir, would the cost be cheaper in terms of the slope? Or would there be any other factors which would be determining the better procurement of the gas? And number two, how cheaper would these contracts be in context of your current contracts?
Actually, I will not be able to answer you this specifically. I can only say these contracts are cheaper. And I can give you a rough number, maybe $0.50 to $1 or maybe more if we see both the contracts. But specific may not be desirable or I should not reveal.
Okay, sir. Just maybe not specific, but just wondered -- the cost differential predominantly emanates from the slope, right, the agreed upon slope? Or there could be other factors also which could drive the differential costs?
When you source crude-linked contracts, certainly, slopes comes into picture.
Okay. And the number when you speak about 0.5 or 1 or whatever that number is?
This is for your satisfaction because you're asking, it may be around $1 or $0.50. Let us not discuss because it goes up to formula, which we'll not be able to share.
The next question is from the line of Kishan Mundhra from DAM Capital.
Two questions from my end. So firstly, you were exploring setting up a 1.5 million tonne cracker in Madhya Pradesh. So is there any development on that front? Have you finalized anything?
Sorry, you come back again, please?
So there were news articles...
I got your point. So I have been answering this question in the last earnings call also that we, as a commercialization, evaluates all the possibility of investment, which commercially shoots to us. Currently, we are evaluating a lot of opportunities including the ethane cracker. Regarding this, we have not yet taken any decision.
Okay, understood. Sir, second question is on the Dabhol breakwater. What is the progress on that front? When do we expect it to be completed? And once completed, sir, what is the expected utilization that we can expect?
So Dabhol terminal will be full by the terminal next monsoon. The job is going on. There were some issues in between, now job has started, and we expect to be completed by February, right? And as far as utilization is concerned, we will be able to utilize fully because currently, we are sourcing cargo bringing to other terminals. So when we have our terminal, we'll certainly be able to utilize to its capacity.
Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to management for closing comments.
Thank you very much, and we -- thanks to participates from our investors and analysts community for their wholehearted support to GAIL and participating in such a number, asking a lot of questions. I know there was time constraint. Some of the participants could not have asked or did not get the opportunity to ask questions. But we at GAIL are always available to answer you all the pending questions or some of the queries we could not answer off-line. Thank you very much.
On behalf of PhillipCapital India Private Limited, that concludes this conference. Participants may disconnect your lines. Thank you for joining us.