Indraprastha Gas reported strong topline growth of 34 per cent for the September quarter, though its operating and net profits grew at a slower pace due. Rajesh Vedvyas, managing director tells Sheetal Agarwal he believes the company will achieve healthy growth rates, despite price rises. Edited excerpts:
The company has raised prices recently. Given the higher cost of imported gas, should we expect more price hikes?
The recent price hike was margin-neutral. It was taken to pass on the increased input cost at our end price. Increased input costs are the costs of sourcing of gas. In the source mix, the proportion of market-priced regassified liquid natural gas (RLNG) is going up. This is the only gas available to meet incremental demand, as we have exhausted our options of gas under the administered pricing mechanism, as well as that sourced from KG-D6. From KG-D6, the supply has declined and that has to some extent, aggravated the problem. Our reliance on imported RLNG has been the main cause for the rising cost of sourcing gas and has also been compounded by the depreciation in the rupee in September.
Going forward, a marginal price increase at regular intervals is inevitable. Incremental demand shall be met through RLNG and higher proportion of RLNG in gas pool will increase average cost.
How is demand shaping up in the wake of the recent price rise?
The price hike has not affected Compressed Natural Gas (CNG) sales. CNG still has economic advantage over petrol and diesel and there is a healthy growth of 10-12 per cent in annual CNG demand.
What is your guidance on top line and bottomline growth and outlook for volumes for the financial year?
The top line is expected to rise to around Rs 2,600 crore, while the bottom line is expected to grow by 15-20 per cent vis-a-vis last year’s value of Rs 259 crore. For financial year 2011-12, we expect to clock 27.7 per cent volume growth to 3.45 million standard cubic metres per day.
How do you expect CNG and piped natural gas (PNG) segments to fare individually?
In the CNG sector, the growth should be between 10 to 12 per cent year-over-year. However, in the PNG sector on the back of around 60,000 connections every year, growth should be around 30 per cent in the domestic front and about 100 per cent in the industrial/commercial front. We are confident of being able to maintain a compounded annual growth rate in volume growth of around 20 per cent over the next three years.
How do you plan to face competition after your company's exclusivity period ends in January 2012?
We have already secured our business in CNG segment by signing a 10-year contract with the Delhi Transport Corporation. Also, a five-year contract with oil marketing companies shall be shortly signed. In domestic PNG, there may not be any competition because of the nature of business and thin margins. In the industrial and commercial segments, we have geared ourselves against competition by signing long-term contracts with customers. The market in Delhi in this segment is relatively smaller than that in NCR cities and, therefore, any competition in this segment in Delhi would not impact our business significantly.
