GAIL (India) Ltd
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Ladies and gentlemen, good day, and welcome to GAIL India Limited 3Q FY '18 Post-Results Analyst Conference Call, hosted by AMBIT Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Ritesh Gupta from AMBIT Capital. Thank you, and over to you, sir.
Well, dear friends, good evening. I welcome you all on behalf of AMBIT Capital. I would like to welcome GAIL management represented by Mr. Subir Purkayastha, Director of Finance; Mr. Manoj Jain, Executive Director, Marketing; Mr. A. K. Tiwari, Executive Director, Finance and Accounts; and other senior executives at GAIL.I would like to hand over the call to the GAIL management for their opening comments.
Thank you so much. And first of all, good afternoon to all of you, and welcome to this conf call. I hope that the physical and financial performance of the quarter, which has been uploaded, has been with you now for not very long, but for some time now. With that, I would like to start the opening remarks stating that the physical performance has been on the higher side as compared to the previous quarter. For -- on the financial side, on the bottom line side, the profits are slightly lower as compared to Q2. And as we move forward, we will give you the reasons why it is slightly lower than what we have achieved in the last quarter, that is ending September 2017.So I would very quickly, therefore, now proceed to question-and-answer session. And as we move on, we will be responding to all the queries.
[Operator Instructions] First question is from the line of Bhavin Gandhi from B&K Securities.
Sir, just one. Sir, you have made -- in the notes to accounts, you have made a reference to 2 provisions being made, 1 in [indiscernible] and secondly, in an execution of deal with a customer. So just to double check, is this the impact that we are seeing on a sequential basis on the natural gas transmission segment?
No. This is of one of kind of a minimum provision, which we have made. We have certain ship up to '18 against a particular customer, which have been under settlement for quite some time. We have been able to reach a settlement in the month of November. And against that -- against the total amount, which was due from the customer, the settlement has been short of INR 80 crores. And therefore, we have made a provision, which is close to that amount. So this is not a recurring kind of issue, Bhavin, here. This is just one of those -- one-off item, a long pending settlement which was there and which has been completed in this quarter.
Sir, any other adjustments which have been made in the transmission segment because of which, on a sequential basis, if I look at the gross margin number as well, you have fallen from INR 1,040 crores to INR 853 crores on a sequential basis despite volume build now. So any particular other provisions or something that you can make?
No. So far as the transmission segment is concerned, this is the only provision which has been made. There are no other provisions for this particular segment.
So any particular reason why a drop in the profitability despite higher volumes?
On a...
If you just -- 2Q FY '18 to 3Q FY '18?
Okay.
For transmission, you are asking?
Yes.
For transmission, it's I think 1 year probably.
It is mainly on account of -- the main [indiscernible], of course, is the factor of the provision, and the others are on account of increased operating cost both on the impaired maintenance and employee cost.
Okay. Sir, would it be possible to quantify that number?
Yes, the -- both these together, the elements [indiscernible] cost and employee cost add up to about INR 57 crores. So there are some other major...
The next question is from the line of Maulik Patel from Equirus Securities.
Sir, any progress we have on the unification of the tariff?
Progress on the unification of tariff? Yes, there has been good progress on this front. As you would be aware, the PNGRB we had called for the comments from the various stakeholders. And those have been received by PNGRB, and it has also been recently posted in their website. Now what we understand from PNGRB is that, shortly enough, perhaps they would be game for a public consultation on this. And only thereafter, some decision would be taken. So we are aware on the -- to the extent so far as the information of unified tariff is concerned. But we are hopeful that [indiscernible], this issue would be deliberated in the board. What it -- the information that we have gathered is that PNGRB board is currently more occupied with the award of new executives and, therefore, they have not been able to raise up this matter immediately. But I think it's only matter of time that this, I think, would come to the board for deliberation.
And your understanding is that once the unification, let's say, now what you have suggested to your aggregator in terms of the document, which is available on the regulatory website, the overall revenue pie should go up, right, from the current level of -- if you look at the annualized run rate of around close to [ INR 5,000 ] crore rupees, there could be a significant increase in overall revenue from the transmission, right? Is this your understanding?
Yes, yes.
Sir, the next question is -- was basically on the LNG agreements. Recently, this Gazprom news has come out, which you have given in the press release, and the Shell volume will also start. Can you just give us -- is it all volume going to come down to country? Or -- and in case of Shell, you probably have certain set agreement. But do you think that demand is rising so fast that can absorb the entire volume -- additional sourcing volume?
Which volume are you talking about?
The Gazprom and the -- this Shell volume.
Okay. No, you're right. I mean, as of current situation, the total volume for us would not be able to absorbed within the country. And therefore, we have been looking for quite some time export of those LNG cargoes outside India. So we have been mentioning in the past that we have made with quite a good amount of success, and quite a good number of cargoes have been sold outside India as well. And we are also bringing in some cargoes to this country. And first of all, our assessment of the demand, which is currently there and which may likely to go up in the near future. So this is how we are planning. Obviously, to the extent we don't find market share, we would be then looking at the market outside India.
And in that case, there will be a significant impact on the profitability? Or it will be more like a nonevent from the profitability perspective when you try to sell outside India?
Couple of months back if you had asked me this question, I would have definitely said that, yes, there could be an adverse impact. But today, looking at where the prices are, particularly the crude prices, we are quite comfortably placed in the sense that we feel that the kind of loss in March is no longer there. But as you know, the prices are comparatively volatile and with very great difficultly one would be able to give a precise forecast on this. But if you were to ask me as of today, we are not anticipating any losses as such. On the contrary, we may end up on the gain side.
The next question is from the line of Akshay Mane from Bank of Baroda Capital Markets.
This is Rohit Ahuja. Sir, on the petrochemical side, what we are seeing is your realization of PE seems to be at a discount to the market -- prevailing market rates on the international exchanges. So is there a particular reason you are selling it at a discount?
Rohit, before I answer that, I'll let Sandeep from the petrochemicals side to respond on this. Sandeep, give me a sense how much discount are we selling as compared to the market. Hello?
Hello?
Yes, what is your sense of discount to the market?
I think it's coming at about 6% to 7% discount.
6% to 7% discount. Okay. I'll request my colleague, Mr. [indiscernible], to respond on this. Or, Mr. Tandon, some of this question is close to you. He says that what is the reason that your prices are at a discount to the market, 6% to 7%? And first of all, do you agree with that statement or you don't agree with that statement? So if you don't agree, just explain. So I'm requesting my colleague, Kamal Tandon, who is the Head of Marketing for the petrochemical segment to respond to this question.
[Indiscernible]
Sir, what's available on the Bloomberg, the exchange prices, it's coming to around $1,200 per ton. And what you seem to have realized is, if I exclude the GST component, it comes to around $1,100 per ton.
You have taken today's prices?
No, I'm taking the average realization based on the numbers that you have given on the sales volume and on the revenue side.
So realization [indiscernible] is the last 9 months leverage.
No. This is the December quarter average.
Yes, yes. But...
Rohit, a more relevant question for us would have been, if you are at a discount to our competitors or it is a discount to the Singapore benchmark.
Okay. Yes, to the competitors if you can throw some light. Would it be at a discount to your competitors?
No. I have no idea about the competitors. I thought that it was with respect to our other competitors that we are selling at a discount. We [indiscernible] it or not. So maybe I'll request Kamal to continue with his explanation. Yes.
Yes. One is that if we take the prices that are today, what are the prices? The prices have dropped but the crude oil has gone up, the prices have also moved up. But you say today, it is at $1,200, $1,180, it will come in that way. And accordingly, if you see our present prices, I think last 1 month itself, our prices have been increased by close to INR 6,000. Yes, so if you're taking the average of quarter, so that would be something different, but if you're comparing with today's price, then you have to compare with today's domestic price.
No, I'm talking about the average of the quarter. So your gross margin at INR 200 crores is lower despite your overall volumes increasing? So is it also to do with increasing costs, LNG costs?
Yes, certainly, there is an impact of the input cost of the gas as well. As compared to the previous quarter, it was -- the average price increase -- price increase, I'm saying, that impact of which was about INR 32 crores. And there were some small [indiscernible] chemicals expenditure, which increased by about INR 8 crores. About INR 40 crores has been the incremental cost on account of price of input gas as well as [indiscernible] gas.
And sir, when do we expect to touch the production of 200,000 per quarter, which is -- again, the production came in at around 188,000. So I believe, you had mentioned that you will be close to 100% utilization. So how do we see that...
On a rate -- on a per-day rate basis, we have, per quarter, few number of days achieved the 100% production capacity. A couple of days back, we were producing more than 2,500 tons a day, which is slightly more, I would say, than we did in capacity. But yes, on an overall basis, the total production does not add up to those kind of numbers. It is quite low than what we had for the best part in this particular quarter. Going forward, Q4, also we hope that similar kind of number could be achieved.
Sir, can we...
So far as production rate is concerned, [indiscernible] that we have been able to achieve the 100% capacity rate versus [indiscernible] into a sustainable production rate, which has not happened as yet. Hopefully, going forward, in the month of March, I think we would have complete full rate production for all the 31 days in the month. This is where we are now. Unfortunately, yes '17/'18 has not been that bright year so far as petrochemical is concerned as we had anticipated. But during this period, we had been subjected to a lot of unforeseen kind of situation in the plant, some -- which we could not have anticipated and so [indiscernible] control as such. So as a result of that, the production, capacity utilization would be somewhere around 90% on an overall basis. But the point is that the way things look at this point of time, we are confident that 100% capacity utilization is something that can be easily achievable in the next financial year, starting from March itself.
Right, right. Sir, secondly, on gas trading, do we see U.S. volumes being captured there from this quarter, Q4?
U.S. selling hasn't started as yet. It will be starting in this quarter. And I think the first cargo that we expect to receive is from end of March.
End of March.
March. So given the current spreads between Henry Hub and Asian LNG, would this be -- can you tell there will be good in-the-money -- I mean, you'll be making profits on that contract?
It depends on the prices prevailing in the month -- -- next quarter. This quarter, there were some positives. But now since the number -- the cargoes will start coming only by end of March, and April, May, June is the period when the results will be lower. But [indiscernible] between how the -- both the indices will behave. So it is very difficult to say which way it will happen. But to the extent we have raised the volumes, that will differ.
So you think the precise impact would be known from next quarter onwards, right, for the next financial year.
What he's trying to say is that if I was to take a view today. But the situation is, we are on the plus. But yes, nobody knows about how the indices would behave in the future, particularly as we move into summer months. In that kind of a situation, how things would be is something that we have to wait and see. But so far as the hedged volumes are concerned, the cargo, which has been already hedged, we would be by and large on the positive side or hedged [indiscernible].
Any more progress, sir, on the incremental contracts for selling LNG volumes?
Yes, for the current financial year, we are almost -- the entire volume has been tied up except for a few cargoes kept for operational reasons.
We have been looking at opportunities -- as I mentioned, we'll be looking at the opportunities, both within the country and outside the country. Yes, there has been some more tie-ups, particularly outside India. There have been few tie-ups outside India as well. So this is a continuous process, and we are trying to reduce the number of cargoes which at present do not have a fixed home.
The next question is from the line of Amit Shah from BNP Paribas.
Sir, 3 questions from my side. First one on the transmission volume.
[indiscernible].
Can you hear me?
Yes, please.
Yes. On the transmission, I just wanted to confirm. You said that the reason why the transmission profit, obviously, was down was because there was higher cost to the tune of INR 53 crores as well as the INR 80 crore onetime. So there was almost INR 130 crore lower realization for this quarter, is that correct?
Yes.
Yes.
That's correct, right. Okay. And the second one is on the petchem. Is there any shutdown which is right now going on in Pata? Or it's fully operational?
No. Yes. Both yes and no. Pata-1 and 2 were both operating at nearly 100% capacity rate, as I mentioned earlier. That is something more than 2,500 pounds a day. But some time back -- couple of days back, there was a thought that -- in a sense that the transmission line, which is coming from the nearby NTPC station, got snapped, and as a result of which there was disruption in the power supply. As a result of which, although Pata-1 continued to run in its full capacity, I would say, at more than 100% capacity, the Pata-2 came to a standstill because it was not islanded. So that is getting over in the next -- by today or tomorrow, I think that should be over. And again, gradually, we would see Pata-2 coming back. So to answer your question, yes, Pata-1 has been fully running to its full capacity. It is more than full capacity. And Pata-2 for the last 1 week of February till today has been disrupted because of the nonavailability of power that's been coming in from the grid.
So effectively, you would say, Pata-2 for Q4 would lose around, say, 5 to 7 days?
[Audio Gap]
Okay. So 10 to 12 days of total shutdown at Pata?
Yes.
Pata-2.
Pata-2.
Pata-2, yes. And -- Okay. And just last question on the LPG business. Clearly, it did really well backed on higher crude prices. And sir, is there something that is continuing for this quarter as well for Q4 as you see because oil prices are continuing to remain on the higher side?
[indiscernible], what is the situation for the quarter?
Around these levels.
Okay. I'm told that it would be at current levels only. So we, hopefully, until and unless, in between the month of March, it should also, again, result into a good performance.
[Operator Instructions] The next question is from the line of Amit from UBS.
Sir, could you explain this item, which is below our PAT, which is net movement on cash flow hedges, gain/loss, which is INR 216 crore loss appearing. And then, we have taken some income tax effect on that. So what is this? And what is the purpose of making this provision?
Let me clarify, this is not the provision. [ Varun ], would you like to reply to this?
Yes. We have raised our volumes, and this is other comprehensive income like [indiscernible]. So the volume, which you have raised, and derivatives, which you have taken, these are as per the hedge accounting policy we have shown as other -- in the other comprehensive income. So it is over and above the profit and loss account, which is shown like other comprehensive income.
Sir, what are those items which led to this kind of hedging loss of the project?
Upper limit is like this -- let me further elaborate on this partnership that you have just said. We have adapted the hedge accounting, which is permitted under India [ 709 ] from 1st of October 2017. So we had hedging contracts that we had entered into in this particular quarter. So we have gone by hedge accounting. So as per the hedge accounting, the M2M gain or loss in the [indiscernible] these 3 are reflected in other comprehensive income. And unlike in the case of derivative accounting, this could not be reflected in the profit and loss accounts. So this is an item which has been reflected as other comprehensive income because all these hedged M2M losses are only notional losses or notional gains, and they get reversed over the period. So the management thought that the number of hedged transactions have been inclusive of tax. We have carried out nearly 30,000 transactions in the same quarter as compared to about 10 transactions in the last 1 year before 30th of September. So since we are now quite active in the derivative market and the number of such transactions are going to increase as we go forth. It was felt that time has come that we should have hedge accounting as our accounting principle and our accounting policy so far as the derivative targets are concerned. So as a result of that, [indiscernible] M2M gain or loss, it went up to about INR 216 crores of loss on an M2M basis, which has been reflected in the other transactions below the [indiscernible] line. So the 2...
And sir, just one question on the petchem. Also, you explained that there is some shutdown. So what was our MOU target for this year in petrochemicals? And what is our MOU target in terms of output for next year for both LPG...
So far as MOU target is concerned, [indiscernible] target for petrochemical production. But we had set an internal target for ourselves, which was about 730,000. And..
So how much we are likely to achieve this year out of 730,000?
So out of that...
650,000.
In the first 3 quarters...
We have 491,000.
We have achieved about 491,000. And we would, I think, end up close to 700,000 by the end of the year.
700,000 by the end of the year. And sir, what is the target for next year, FY '19?
It is 800,000.
800,000. Total 100%.
And LPG?
LPG...
Also more than 100%.
Yes, LPG target has been more than what has been accounted for. Again, LPG production is not an MOU target, but we certainly do have an internal target for that. On that front, we are maybe 30% more than our MOU target.
Okay. And sir, just last one question. Sir, what is the impact of GST on -- in our numbers now since things have stabilized?
In terms of GST?
Yes, in our P&L. Any negative...
I think there is no impact of GST in our account. It is very little. You can say, it is input tax credit and other things. In totality, whatever we have...
[indiscernible]
INR 43 crores for Pata, Vijaipur. Around INR 50 crores [indiscernible].
Okay. INR 43 crores plus INR 50 crores?
No. Total INR 43 crores.
[Operator Instructions] We have the next question from the line of Nitin Tiwari from Antique Limited.
My question is related to the transmission volume. So there was a very healthy growth that we saw on a sequential basis. Whereas, if I remember in the last call, the understanding was that the volume growth that we had seen in second quarter, that was coming from the power sector, which you had guided that would be waning off as you move into quarter 3. So -- whereas like we have grown in quarter 3. So I just want to understand that what has contributed to this growth? And what is your guidance going forward in the transmission segment in terms of volume?
Yes. This -- the power sector additional consumption continued in the month of October and -- sorry, till mid of November. So that was one of the contributing factor. And in the month of December also because of the some other -- some consumers which came into our fold on a spot basis, which are more than the anticipated ones. So that led to some of the numbers which increased, which included a number of fertilizer customers primarily.
Sorry, come again on the last part of your answer.
Yes. These new customers were largely fertilizer consumers who ran at higher than the normal capacity and they -- that is more as they consume more gas.
Right. So like, to sum it up, it was largely the power demand over October, November and then few fertilizer players coming in, in the month of December, which added to this growth in...
Both November and December.
Both November and December? Yes. And sir, how are the volumes looking now? What is your guidance for March and onwards?
Till date, it is similar way continuing. However, in March and late February, we anticipate some fertilizer plants shut down. So -- and then the power sector demand, it also depends on the hydro coming back to the grid, hydro power plant. So that will depend on the rains in the month of May and June.
Right. So sir, like, if I may ask, what is your internal target for the transmission segment for FY '19?
We are looking at around 83, 84 on a conservative basis.
Sir, this is the trading part you said...
The transmission, we expect that it will be more than 105.
More than 105. Okay.
The next question is from the line of Probal Sen from IDFC Securities.
Sir, just on the -- staying on the transmission segment, the -- thanks for explaining the slippage on the EBIT line. Just wanted to understand the INR 500 million, INR 550 million-odd cost increase that is there. Should we take that as a sustainable cost increase now? So in terms of the run rate for the costs, excluding the INR 800 million, which is a onetime -- hello?
Yes.
Yes. Am I audible, sir?
Yes, yes.
Yes. I just wanted to understand, sir, the increase in OpEx due to R&M and staff cost that has impacted our gas transmission profitability, this cost should be taken as a recurring item now on a quarterly basis in the sense that these costs are now there and will continue to be at these high levels?
Part of them can be. But so far as the price is there, that price has moved a lot. So input cost has increased. That is the main reason for that. But R&M is not...
Sorry, couldn't quite understand. So this costs, part of it is again onetime what you're saying?
The R&M is a recurring income. Provision is there on [indiscernible] is around INR 78 crores, that is onetime.
Yes. So the part other than the provision for ship or pay, whatever is the OpEx increase, that is something that is now there in the numbers that should continue at these levels, is that correct?
Yes.
You see, the employee cost around INR 22 crores what we have mentioned should continue by and large with a variation of INR 2 crores plus/minus. R&M cost INR 35 crores is slightly on the higher side because of -- some particular overhauling must have been done. So that would be slightly moderated as we move forward. So INR 35 crores would not be there in subsequent quarters and months.
Right, sir. Got it.
I mean, there was some increase in R&M cost, but perhaps it will not be to the extent it has been reflected in this quarter.
Got it, sir. Sir, the other question I had was with regard to the petrochemical segment. Now in the last few quarters, what we've seen is the sales volume number continues to actually lag what our production number is. Now is that a sort of a normal phenomenon in terms of having some inventory in our hand? What I just -- what I'm trying to get at is that, is there complete acceptance of the quality that both our units are producing right now in the market? Are we facing any problems on that front? Or that is just not a [indiscernible]
What he's saying is that [indiscernible].
[indiscernible]. See, as of today, the sales volume is higher than the production.
That is in Q4, sir, you're saying.
Yes, that is in Q4. I think, it was lagging not by higher volumes, but may be 5,000 tons, 6000 tons at the end of quarter 3. And these are certain fluctuations plus/minus 3 to 4 percentage [indiscernible]. And as of today, we are higher side of the 9,000 to 10,000 by over 600.
If you see the number, the number is not much difference is there in that production and sale in between the Q2 and Q3. So far as number is...
There is no issue as far as quality is concerned.
Yes. No, sir, why I asked is, sir, as rightly mentioned that between 2Q and 3Q, our sales volume is actually flat, while our production number has gone up by 6,000-odd tons. So that was the only reason I asked, sir, in terms of whether we should read anything or this is just a normal business variation which we've noted.
That's a normal...
Normal cycle in sale and production.
The next question is from the line of Vidyadhar Ginde from ICICI Securities.
Just some idea on this U.S. LNG volumes. Could you give us a rough idea about FY '18, what proportion of the volumes are being resold? How much swapped, how much hedged and how much of those volumes will come in India, rough idea?
The -- I mean, Manoj is interested.
Around -- out of the total cargoes, around 50% we expect to come in India and remaining 50% we have already done some time swapping, so that will be sold that way. And that will take care of the -- around 15 to 16 cargoes, we have kept with us for operational reasons and for sale at good times when the things become more favorable.
So between [indiscernible] 50% in India, some cargoes -- 15, 16 cargoes you have kept. Other than that, everything is time swapped or [indiscernible]?
Yes, that's it.
And anything you've done for '19 now? Any of the FY '19 volumes, I think, raises 0.5 million ton, which is for a 5-year time other than that. So is there anything FY '19 now which has happened since the last quarter?
Yes, more than half of the cargoes again will be coming to India because of increasing demand.
Okay. And so that's tied up, is it?
Yes, that's tied up, more than half.
Okay. But on these volumes which come to India, there is some element of risk. So you hedge and do your best. It can go either way, is that correct?
To the extent of part which is not hedged, yes. But whatever we hedged, we are seeing that potentially it is not going to have any risk.
So in a sense, the risk element, to -- does it depend on prevailing oil prices or if oil stays about $60 or $65, then the risk is not really there? Or if oil comes down, would the risk be there? Or how does it play out?
It depends on the both the...
The Henry Hub also, yes.
So both should -- if both move simultaneously in one direction, then the risk remains same.
So let's hypothetically say that Henry Hub is $372 the price, then roughly what kind of oil price are you comfortable?
Between $60 to $65.
So if Henry Hub is $3 or lower, then at $60 to $65 you are comfortable?
Yes.
Yes.
Okay. One last question on the petchem. So in terms of petchem, in Q4, what is likely to be versus Q3 in terms of your gas cost? Will anything -- if it remains similar, change for the better, change for the worse? And does this Gorgon renegotiation, which becomes applicable from 1st Jan, help in any way?
It may remain in the same range because of 2 factors. One is the negative factor that some of the spot prices are higher in the month of Jan and Feb. But at the same time, Gorgon prices have come down. So we expect that the overall -- in Q4, it should be largely in the same range.
Okay. So basically, you're saying that on spot LNG, there will be a hit, which will be made up by Gorgon?
Yes.
[Operator Instructions] The next question is from the line of Avadhoot Sabnis from CIMB.
Could you -- sir, could you provide some more color on the Kochi pipeline, the status? Are we still looking at December '18 for completion?
Yes, the construction on the Kochi pipeline, all the 6 or 7 sections work has been allotted. The progress is significantly good under the circumstances under which they work. And we expect that this should be completed much ahead of the schedule of December '18.
And coming back to the earlier point on the GST, negative impact will be INR 50 crores. So can I assume that if GST -- if gas does come under GST, let's say, from tomorrow, then the positive impact accordingly will be INR 50 crores?
Yes. It will be...
We have not worked out that it will be around that. There is no such working way...
It all depends on the rate of...
Rate of the gas.
And which rates for which company.
Can you give us some idea as to what rate, if it comes, is going to be neutral?
So that working we have not done so far because as we have not estimated that way. But if gas comes under GST, then possibly it will be not much of an impact on that.
It will come down.
It will be negative impact of INR 50 crores that we have seen in the 6 months post implementation of GST. One can take a safe assumption that at least INR 50 crores will be saved.
Sir, INR 50 crores you mentioned was for the 2 last quarters together, combined?
Yes, the start of the month of July.
July.
Okay. And I think in the budget, the government has provided around INR 400 crores only for the government grant for the pipeline, the East Coast pipeline. So is that the likely number now that you could receive in this year?
Yes, we've received INR 400 crores in the last quarter. In Q3, we have received INR 400 crores already.
That is, we have received INR 835 crores as of now.
INR 850 crores.
INR 835 crores -- INR 850 crores.
And lastly, sir, you have given a CapEx target of INR 3,329 crores on your own balance sheet plus an addition equity investment of INR 932 crores for the current year. Could you tell us what are the figures for the first 9 months?
This CapEx you are talking?
Yes, CapEx on your own balance sheet. Yes.
That is mostly related to the main pipeline, which is going on Jagdishpur-Haldia, Vijaipur-Auraiya and other pipelines. So mostly related with capitalization, ROU and other piece which we have taken, land we have taken. So that is around 16 [indiscernible] pipelines, mostly Jagdishpur-Haldia and Vijaipur-Auraiya pipeline.
Yes. So what's the total spending? What's the total spending for 9 months?
For 9 months, it's INR 892 crores.
Okay. And any additional equity investments in the first 9 months?
It's around INR 300 crores -- equity we've added up till now is INR 368 crores or INR 370 crores, like that.
The next question is from line of Maggie Sun from Hermes Investment.
May I just ask, first of all, why did you issue bonus or stock dividends in your recent announcement given that your interim dividend payout was already higher than that in last year?
See this is as per the government guidelines, which we have to comply with. And we have received communication from the government saying that and as per the guidelines of the government, we are a candidate for issue of bonus shares at this point of time. And therefore, the company decided to give out bonus shares. So...
Okay. Is it like a something regular that's going to happen like year-on-year?
It's very difficult to answer because it will depend upon the results the company issue, basically, at what level it stands. So that will be by and large deciding factor which will decide on the bonus issues.
Okay. So if we're looking at the oil price in the last quarter, the price has been rising steadily from September to December. However, if you look at the operating margin of your petrochemical business and the LPG business. The LPG prices are expanding, hence the margins are also expanding. However, petrochemical prices have been shrinking on Y-o-Y basis and margin is at a nearly historical trough. So why there are different price trends follow [ product ] as linked to the oil prices?
What -- can you please repeat your question. Why is the?
Yes. So if we look at oil price, it's been rising over the last quarter, but your oil prices, [ petrochemical ] price dropped Y-o-Y while your LPG price increased very sharply. Why there are 2 different scenarios?
Yes, these are 2 different products. Polymers and liquid hydrocarbons are totally 2 different products catering to different customers and market. So while the liquid hydrocarbon prices reflect the rise in crude prices and the physical demand that we have. On the other hand, also as far as the polymer prices are concerned, besides the international prices that we have, those can at best be a benchmark, but we have also to recognize that there is also intense competition within the country amongst many industry players and the competition is coming from import. But frankly, OPal has [ functioned ] its plant and its product are also available in the market, so they have been following a very aggressive pricing policy. So with additional supplies coming into the market in this very financial year, therefore, there has been a bigger pressure. And therefore, these results that you see -- the financial results that you see in this petrochemical unit has not been something which we had been aiming for. [indiscernible] as we move forward with increase in demand [first] in balances -- I mean, the balance would move in favor of supply, in that case, we expect that prices could see some movement in the next few quarters.
Okay. So the price of LPG is [ contracted ] at a 3-year peak, whereas, the price of petrochemicals are at a 3-year drop. What is the outlook for the next quarter? Shall we see a reverse of price for both products?
[ She is saying that as it is step to realize, that we -- the other way around you see that volumes in petrochemicals have been higher than their liquid hydrocarbon. Am I right in my understanding of your question ]?
Yes. So I'm just wondering, because the -- it is like a 3-year drop for petrochemical price and a 3-year peak for the LPG price. So it's a reverse for the next quarter? Or what is your outlook for the price of both products?
Okay, okay. In Q4, we have already seen some reversal [indiscernible] of our petrochemical prices are concerned, which has moved up. And on the liquid hydrocarbon side, the prices so far have been strong, the kind of prices that we saw in the last quarter. But there is still more 1.5 months to go. Overall, all in all, we feel that the performance of the liquid hydrocarbon segment in this very quarter also will be having a good performance.
So how about LPG?
I'm talking about liquid hydrocarbon, which is -- which also includes LPG. And on the petrochemical side, as I've said, there has been an improvement in the prices, right close to about 7% to 8% including taxes [indiscernible] with what we have foreseen and what we have forecast. So hopefully, there should be, probably similarity in the performance of the petrochemical segment as well in the current quarter.
Okay, sure. And for our gas transmission business. Apart from the provision, is there any other OpEx increase that's due to the margin drop for this quarter?
So [indiscernible]
In transmission -- in petrochemical, you're talking?
No, transmission.
No, natural gas.
In transmission, there is an increase in both input cost as well as provision is there, INR 78 crores. And the care and maintenance.
May I request Mr. [indiscernible] to join the question queue for any follow-ups as we have several participants waiting for their turn. Thank you. The next question is from the line of Sabri Hazarika from Emkay Global.
Sir, just wanted to confirm, you had this INR 86 crore of E&P provision also, is that frontal part of our [indiscernible] commission. Right sir?
Yes.
Yes. Not commission. It is basically [indiscernible]...
Investment, these are interconnected...
Okay. And second question is on your unified tariff. Until the comments have come the detail comment that came [indiscernible] . So many of the stakeholders have actually voiced concerns about the assumptions being taken by GAIL. One of them being our CapEx being steadily risen over the next, say 10, 15 years that the volumes have flatly been kept fixed. So if the possibility that the assumptions maybe too aggressive and there could be significant cut in the actual tariff once in India to determine [indiscernible] ?
Actually, the issue is not on the numbers. The issue is with respect to the policy, whether you'd like to -- tariff on unified tariff basis. What are volume -- the volume which has been considered, OpEx which has been considered, what is the OpEx. It is -- so it is -- it will be on actual basis. It is only for the sake of some calculation, some numbers should have been taken. But at the end of the day, what matters more importantly is the [ issues ] under which tariff is calculated. So once the principles are set the other things could be as per the actual per, as per the norms, which is available as per the PNGRB regulations.
Okay, fine. And just one last question. The interest cost has fallen significantly, sir, any particular reason for that?
Because we have paid and it's paid and retained substantial amount of loans over the last 5 months. As a result of which, the interest burden has also come down.
The next question is from the line of Maulik Patel from Equirus Securities.
Sir, my question has been asked.
The next question is from the line of [indiscernible] from [indiscernible].
Yes, sir, just one clarification. So in your financial information statement, the INR 853 crore gross margin for the natural gas, the after reducing that INR 80 crores provision, is that understanding right?
Yes, that is the after adjustment.
Okay. Sir, and any specific reason why the employee cost has increased on a sequential basis?
[indiscernible] has been affected in the month of November. So although, we had been making some provisions in the past, but the actual numbers have coming only in this quarter, when in November the government approval was nearly restrict to the [indiscernible] which is effect on 1st of Jan 2017. So as a result of this, additional employee cost has been accounted for in this quarter.
So this INR 22 crore or the additional cost we also have in that for the whole January to November kind of trend?
Yes, yes.
So on a continuing basis, maybe the employee cost will not be higher by INR 22-odd crore including...
It is as I said. It may not be INR 22 crores, it might be INR 2 crores, INR 3 crores. We're in the...
The next question is from the line of Saurabh Handa from Citigroup.
Sir, could you just tell us for fiscal '19, what is the total amount of revenue contracted R&D that you're expect to increase? So you kind of conclude the Qatar volumes, but basically from the U.S., Gazprom and Gorgon, or the supported contracted agencies?
Total contracted quantity depends. Its 5.3 from U.S and 2.5 from Gazprom plus 0.3 from Gorgon, this is same as we have...
How much -- I wanted to know how much of this we expect to receive in 2018?
How much company receive?
Yes. Because as per my understanding has ramp up [indiscernible], so the entire 2.5 will not be coming through in fiscal '18. So I wanted to know how much of these volumes do you have to off take in FY '19?
Total amount, cargoes will be around 100, so about 3 million ton of volume would be coming to India, which contains the Gazprom volume as well as about 32 cargoes coming from [indiscernible]...
No, he's asking about the total contracted volumes. 3 out of [indiscernible] will be coming to India.
0.75.
[indiscernible] 19.75.
[Foreign Language]
'18, '19, sir?
In '18, '19, Gazprom will be giving us 11 cargoes and finally from USA, we'll get about 32, 35 cargoes. 32 to 35.
Okay. And from Gorgon?
The Gorgon supply is at about 0.4 million tons for GAIL, and that's about 5 to 6 cargoes. Actually, the supply is divided into 3 off takers, but for GAIL, it is 4.4 million tons. It's already coming to last 1 year.
Yes, but the new Gorgon volumes are not coming in fiscal '19, right? [indiscernible] I think contract [indiscernible] it's gone as part of the renegotiation and none of those cargoes come in, in this financial year?
The new contract of EXXON will start in the year 2026 or around about that or near about that '25 or '27, something like that.
Okay, great. And these are the Gazprom volumes from 11 cargoes in the next financial year that in financial year '20 will go up to how much sir?
Financial year '20 would be about 15 cargoes.
Okay. And the U.S. volumes?
U.S. volume continues to be same for all years. The total liability or the volume available would be 85 to 90 cargoes for a year.
Okay. So 85 to 90 per year. So you're saying of this, the 32 to 35 is what comes to India and the balance...
That's the last year, we told.
Okay. Sir, this -- what was the total in the first year, 65-odd, of which you're saying 32 will come to India, is that the way to look at it?
First year about 14 cargoes have been sold on time swap. So for remaining, 50% of the volume is coming to India, which is about 32 to 35 cargoes that will come to India. In the next year also, the ratio will remain same just that we don't have any time swaps fails.
Okay. And the volumes which have come to India and another question, which was asked, you said that $60 to $65 is something you'd be comfortable with. But do we understand that [indiscernible] $33 Henry Hub that [indiscernible] to around 12%, 12.5% slope to oil price...
Actually, you can start getting profitable at about $54, $55. At $60, we are ensured to feel comfortable. So even at $55, most of our downstream sales make money, lot of money in fact.
Okay. And these are all tied up back-to-back on long-term basis that the 35 cargoes that come to India, are these on a long-term back-to-back or how does it work? Or is that -- is it linked to where the [indiscernible] sightings are, or is it like a fixed slope, I mean, that's what I'm trying to understand.
Saurabh, can you repeat please?
So you said these cargoes, which are coming to India, which is 30 to 35 cargoes, you're comfortable at $57 or $55. Are these based on a particular slope to oil prices or they are just you sell it at the prevailing spot LNG prices in the market at that point of time? What I'm just trying to understand is that are these sold on a back-to-back basis already on a longer-term basis to the downstream and consumer?
See those are your [indiscernible] customer is a mix, all contracts are mix acquisitions. It cannot be from specified that clearly as to -- some of the sales are on brand, some of the sales are on some other indices.
Okay. So we can take $55 -- okay. So it's 55 and Henry Hub of 3 yields for the breakeven for you?
Yes, you can say $55 to $60. We start getting comfortable at $55, we are very comfortable at $60.
[Operator Instructions] The next question from the line of Sanjay Mookim from Bank of America.
Can I ask about the problems with the Brahmaputra cracker, it's been up and running for a while. Do you mind and update, please?
Brahmaputra cracker has been many years, it is just because -- nearly 200% capacity utilization. Yes, of course, sometimes there are challenges, which we expect to see in continue probability of [indiscernible], but the plant has been running at 100% absolute capacity. In short, they are already on the verge of making cash profits. They are -- by the year end, I think they would end with a cash profit. So far performance has been on expected lines looking at the various sectors that it is still -- by and large its performance has been [indiscernible]...
Should we still build an accounting loss on consolidation of [ VCPL ] for FY '18 or FY '19?
I don't think so we are anticipating any [indiscernible] or consolidated account or in loss on account of [ VCPL ].
All right. Sir, and going back to the cargoes that you just talked about coming in from U.S. you said 30 to 35 cargoes, Gorgon 0.4 million tons and so on for FY '19. In total, they add up to more than its stock volumes that you are doing this year in FY '18. Will you have to find more demand? I'm assuming that you'll replace your current spot sales with the new gas, but do you still have to look for new buyers to dispose of all this cargoes?
We have already tied up some of the new buyers, it will be gradually starting, from say, as early as March and to maybe by November, there will be few more consumers, which will by that time we need to know, maybe they will add up to around 1 million ton of demand.
Right, sir. As a logical follow-on question is that the import turning at the rate we're running 100% capacity, where are you going to import these volumes from?
IWe have got Dahej and Dabhol. And sometimes if required, we can take the help of Shell [indiscernible].
We'll take the next question from the line of Tarun Lakhotia from Kotak Securities.
Couple of them. First is, how much is the amount of state that you'd be paying on gas purchases for your internal consumptions and the LPG [indiscernible] schedules?
Yes. Please note down [ Ashish ]. [indiscernible] [Foreign Language]Gujarat we're at 15%? [Foreign Language]
Yes.
Gujarat was 15%. [Foreign Language]
Sir, state purchasing vary from state to state. Like -- but in case of [indiscernible] mainly from Gujarat, the [indiscernible] rate is 15% there. So whatever 15% Gujarat spending and Gujarat has become the cost savings or internal [indiscernible].
Then correction sir, can I say the raw material cost, which you have, you're buying most of your gas as well as LNG including RasGas from Petronet in Gujarat, so you are paying 15% VAT on that?
Yes, 15% VAT, whatever, [indiscernible] in terms of cost [indiscernible] that's right.
Now that gas as and when it comes under GST, this -- the GST input -- GST whatever you pay on gas will be actually [indiscernible] in both the segments?
Yes.
Okay. So just to confirm, 15% of your say raw material cost. I mean, on a [indiscernible] basis, would actually become recoverable in some sense after in the gas [indiscernible] ?
Yes, provided it -- provided the government does not put any other immediate notice for [indiscernible] condition [indiscernible].
Okay. At least if everything comes under GST then at least that will become recoverable. Sir, my second question -- that is useful. My second question is related to some of the pipelines where we have not received any final tariff orders from PNGRB. So now that the board is up and running, can we expect any pipeline tariff -- final tariff order on pipeline [indiscernible] growth and all of these? Or do you think we will move through the litigation -- the [ side ] tariff skipping the final tariff order for these pipelines meanwhile?
It will entirely depend upon how PNGRB -- though it's very difficult for me to comment on any of the efforts to comment how PNGRB will be [indiscernible] tariffs. But we expect that some pipeline tariffs would be declared [indiscernible] declared .
That is also -- at least for some of the older pipelines where utilization is below 75%, and given that the changes [indiscernible] has already been effective by PNGRB couple of years ago. So now at least, we should see some final tariff orders for those pipelines before we move [indiscernible] tariff framework. So are you in discussion with PNGRB on any of these pipelines? I mean, because you need get your inputs too?
Not at this point of time.
Ladies and gentlemen, that was the last question. I now hand the conference over to management for their closing comments. Thank you, and over to you.
So thank you very much for the patient [ training ]. And I think it was informative. And I don't have been able to satisfy the queries, which have been asked, but [indiscernible] on one-to-one basis and all those things [indiscernible] we clarified as and when these are [indiscernible] investor meet. So thank you once again for being patient and listen to us for replies. And once again, thank you so much for your time. Thank you.
Thank you very much. Ladies and gentlemen, on behalf of AMBIT Capital Private Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.