Indraprastha Gas Cuts FY25 Volume Guidance As Electric Vehicles Gain Popularity
The FY25 volume guidance now stands at 9.5 million metric standard cubic metres per day, Managing Director Kamal Kishore Chatiwal told NDTV Profit.
Indraprastha Gas Ltd. has revised its fiscal 2025 volume guidance lower, mainly due to the shift towards electric vehicles. However, the management maintains a positive segment-wise outlook in terms of growth.
The natural gas distribution company has revised its FY25 volume guidance after failing to meet its last fiscal guidance of 9 million metric standard cubic metres per day by 3% to 8.73 million metric standard cubic metres per day.
The FY25 volume guidance now stands at 9.5 million metric standard cubic metres per day, Managing Director Kamal Kishore Chatiwal told NDTV Profit. That compares with the earlier guidance of 10 million metric standard cubic metres per day.
Volume Expectations
Indraprastha Gas expects a 14–15% volume uptick in the industrial and commercial petroleum natural gas segments going forward.
The industrial petroleum natural gas segment saw encouraging growth in Q4 FY24, Chatiwal said. He expects volumes to rise 8–10% for FY25.
For the compressed natural gas segment, which accounts for the majority of the gas distributor's sales volumes, Chatiwal stated that the company expects a 7-8% volume uptick.
He also stated that out of the guided 9.5 million metric standard cubic metres per day volume of gas, 71–72% will come from the compressed natural gas segment.
Price Cuts
Chatiwal explained that the company implemented the Rs 2.5 per kg price cut in its compressed natural gas segment in March 2024 to maintain parity with the at-the-pump fuel rates of petrol and diesel, which also experienced a Rs 2 per litre price cut.
The price cuts have helped with the company's conversations with OEMs, he said. The company is also comfortable with the present prices and does not see any further price cuts for CNG.
APM Gas Allocation
The Administrative Price Mechanism, or APM, gas allocation system, controlled by the government, sets prices for natural gas produced under specific conditions, typically at lower rates than market prices. It mainly consists of gas from fields nominated by national oil companies such as ONGC and Oil India.
The selling price for nominated block gas is capped at $6 per million metric British thermal unit, providing gas distributors with a cost advantage and enabling them to maintain higher margins.
The APM gas allocation for Q4FY24 stood at 72%, lower than that of 78% last quarter, Chatiwal said. However, to offset the lower allocation, the company has entered into medium- to long-term contracts for its gas sourcing.
Furthermore, the softening of global gas prices has been beneficial, he said. Thereby, the gap between global and domestic prices has narrowed. Current global prices stand at around $9 per million metric British thermal unit, said Chatiwal. Previously, the price difference was more than twice as large, but it has now significantly decreased. Thus, the lower allocation has a limited impact.
Indraprastha Gas expects to maintain company-wide margins in the range of 7.5%–8.5% in FY25.
EV Risk
Delhi government EV adoption policy for cab aggregators and delivery providers has put a volume risk for Indraprastha Gas, since Delhi NCR is a big GA for the company. According to Chatiwal, FY24 saw around 40% loss in volumes in the region.
However the company has seen growth in the passenger vehicle and plans to concentrate on the inter state bus segment as well for growth
