• IGL to maintain spreads at Rs 6 per SCM if rupee does not depreciate much, says MD

    12% growth in CNG was mainly due to conversion of goods vehicles and also taxis because we added more than 59 stations in last one year, says ES Ranganathan, MD, IGL. Excerpts from an interview with ETNOW.

    Another quarter of a double digit volume growth for you. What were the key drivers beside the push from higher taxi and car conversions and the government thrust of public transport and clean fuel?
    Actually the 12% growth in CNG was mainly due to conversion of goods vehicles and also taxis because we added more than 59 stations in last one year. That has improved the availability and people have started converting. In the industrial sector, again the ban on petcoke and FO has resulted in lot of customers switching from the polluting fuel to gas.

    In the PNG segment, industrial as well as commercial volumes were up a good 17% on year on year basis. The recent ban on petcoke and furnace oil turned out to be the highlight for the earnings in the first quarter as well. What is the revenue mix between CNG and PNG now? What kind of growth is expected in both through the year after a strong start to the fiscal?
    The revenue mix is about the same. We have 75% revenue coming in from CNG and 7% in domestic PNG ; the rest is industrial commercial.

    Your Q1 spreads stood at about Rs 6 per SCM. Given the kind of benign gas prices, we are seeing a depreciating rupee. Where do you see spreads ranging over the next couple of quarters?
    If the rupee does not depreciate too much, we will be near about this for the next two quarters.

    Haryana City Gas hearings are still going on. Valuations have not been finalized. How are you preparing and when is the outcome expected?
    The valuation is with the Supreme Court. The hearing is expected on the 26th of August. We hope that it will be concluded this way or that way in another one or two months maximum and that will leave one with great growth potential for IGL. It will be positive for investors.

    Based on the recent geographical area that you have added to your network, what kind of material contribution are you pencilling in over the next couple of ? Any key additions that you are expecting in the coming quarters?
    Yes, we are putting up more than 59-60 stations this year also. It is in an existing area as well as in the new area and the CNG growth will mainly be driven from our existing area but Rewari and Muzaffarnagar hold some hope for more increase than compared to Karnal and Kaithal.

    Help us understand what the capex plans would be for FY20-21 and how would it be spread between the widening pipeline infrastructure and expanding the retail distribution network.
    We have a capex plan of more than Rs 1,000 crore for this year. Out of which, we will be putting up around Rs 600 crore in the existing area and Rs 50-100 crore in new areas of Ajmer, Kanpur, Kaithal and Gurgaon.

    A total of more than 60 CNG stations and around 100 kilometres of steel pipeline and 1200 kilometres of MDPE pipeline will be added.

    Recently a concept paper was released by the PNGRB to allow new players in existing geographies given high entry barriers and concerns of course on allocations of subsidised APM gas. Any areas that you feel are lacking clarity and are a potential threat to IGL’s earnings growth if this is implemented despite your strong moat.
    Yes, we have conveyed our comments to PNGRB. Our considered opinion is that the market is not yet mature enough to bring in such type of competition because most of the ground rules are not yet finalised. There is no clarity on whether they will also get APM price for CNG or they will be only marketing the freely traded. So, the time is not right for opening up such market and that is what we have told them. We expect that it will not be implemented immediately.

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