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Edited Transcript of GAIL.NSE earnings conference call or presentation 8-Nov-19 11:00am GMT

Q2 2020 GAIL (India) Ltd Earnings Call

New Delhi Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of GAIL (India) Ltd earnings conference call or presentation Friday, November 8, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anjani Kumar Tiwari

GAIL (India) Limited - Director of Finance, CFO & Director

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Conference Call Participants

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* Amit Rustagi

UBS Investment Bank, Research Division - Analyst

* Manikantha Garre

Axis Capital Limited, Research Division - Assistant VP of Energy

* Mayank Maheshwari

Morgan Stanley, Research Division - Research Analyst

* Miten Lathia

HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager

* Nitin Tiwari

Antique Stockbroking Ltd., Research Division - Research Analyst

* Pinakin M. Parekh

JP Morgan Chase & Co, Research Division - Associate

* Probal Sen

Centrum Broking Limited, Research Division - Analyst of Oil and Gas

* Rakesh Sethia

HSBC, Research Division - Analyst of Indian Oil & Gas Sector

* Rohit Ahuja

BOB Capital Markets Limited, Research Division - Analyst

* S Ramesh

* Vidyadhar Ginde

ICICI Securities Limited, Research Division - Oil and Gas Analyst

* Vikash Kumar Jain

CLSA Limited, Research Division - Research Analyst

* Vinit Joshi

Goldman Sachs Group Inc., Research Division - Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the GAIL (India) Limited Q2 and H1 FY '20 Earnings Conference Call hosted by Antique Stockbroking Ltd. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Nitin Tiwari from Antique Stockbroking Ltd. Thank you, and over to you, sir.

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Nitin Tiwari, Antique Stockbroking Ltd., Research Division - Research Analyst [2]

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Thank you, Neil. Good day. On behalf of Antique Stockbroking Ltd., I welcome everyone to GAIL India's second quarter earnings call. We have the pleasure of having with us today the senior management team from GAIL, led by Mr. A.K. Tiwari, Director of Finance.

Without much ado, I hand over the floor to GAIL's management. Over to you, sir.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [3]

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Thank you. Thank you, Nitin. A very good evening to everybody and belated Deepavali and Chaturdashi to all of you.

The physical and financial performance for the quarter ended September 2019 are already with you, and the same has also been made available on the GAIL website. I presume that all of you have gone through the same. I would like to state that the management is concerned to maintain the profitability at its best and working regularly to address and recognize to improve the operational efficiency. Various cost-cutting and efficiency measures, timely completion of projects, retain and increase the customer base has been a continuous focus area, and GAIL is also following highest standard for safety and upkeep of its assets. Further, I would like to emphasize that the company has taken various risk mitigation measures against challenges existing internal and external environment. Besides this, the GAIL management ensures the transparent corporate government principles to their stakeholders and shareholders.

Now let me give some insight for the quarter. There have been robust physical performance during Q2 in almost all segments as compared with the previous quarter Q1. Polymer production increased by 93,000 metric tonnes from 135,000 metric tonnes to 228,000 metric tonnes. Polymer sales increased by 81,000 metric tonnes from 136,000 metric tonnes to 217,000 metric tonnes. LHC production increased by 31,000 metric tonnes from 298,000 to 329,000 metric tonnes. LHC sale increased by 33,000 metric tonnes from 296,000 metric tonnes 329,000 metric tonnes. Gas transmission has increased by 3.29 MMSCMD from 105.41 MMSCMD 108.7 MMSCMD. LPG transmission by 172,000 metric tonnes from 827,000 metric tonnes to 999,000 metric tonnes. However

(technical difficulty)

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Operator [4]

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Ladies and gentlemen, please stay connected. The line for the management got disconnected.

Ladies and gentlemen, thank you for your patience. We have the management back to the main call. Go ahead, sir.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [5]

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Hello? Hello?

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Operator [6]

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Yes, sir. Go ahead.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [7]

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Nitin? Hello?

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Nitin Tiwari, Antique Stockbroking Ltd., Research Division - Research Analyst [8]

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Yes, sir. Please go ahead. You're connected.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [9]

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So should I again start from the beginning?

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Nitin Tiwari, Antique Stockbroking Ltd., Research Division - Research Analyst [10]

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No. I think we have the data around the transmission on for gas, so we can start on items beyond that data. We have data on gas. So...

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [11]

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Gas transmission, I have told, I think so.

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Nitin Tiwari, Antique Stockbroking Ltd., Research Division - Research Analyst [12]

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Yes.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [13]

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And then LPG transmission by 172,000 metric tonnes from 827,000 to 999,000 metric tonnes. However, there is a reduction in gas sales by 1.83 MMSCMD, mainly due to scheduling of cargo, which will be improved in coming quarters and (inaudible).

I feel proud to state that GAIL Pata got first position in 16th National Award for Excellence in Cost Management 2018 organized by the Institute of Cost Accountants of India under category Mega on account of various measures taken, efficiencies and costs. Further, I'm pleased to inform that overall capacity utilization in petrochemicals for the second quarter is 112%, with capacity utilization of Pata 2 at 109% and the Pata 2 has achieved 100% capacity for the first time.

The operational efficiency is ratified from the point that after attaining the highest ever polymer production of 79,982 metric tonnes in the month of August 2019, GAIL has surpassed this highest and made new record of 30,488 metric tonnes in the month of October 2019. The improved physical performance has given positive contribution of INR 278 crores in petrochemicals, INR 36 crores in LHC, INR 39 crores in gas transmission and INR 27 crores in LPG transmission. Total LNG cargoes sold outside India is 9 in Q2 '20 -- FY '20 as against 30 cargoes in FY -- Q1 FY '20, mainly due to fewer cargo from Dominion Cove due to seasonal shutdowns.

The profitability depends upon both external and internal factors. Although company has improved upon internal factors, but there were various external factors that is price, oversupply, economic slowdown, which were not in favor of GAIL and has adversely impacted overall profitability of the company. The average price realization of polymer has decreased by INR 6,300 per metric tonnes to INR 70,370 per metric tonne during Q2 in comparison to INR 76,676 per metric tonne in Q1. Similarly, the average price realization of LHC has also decreased significantly by 25%. That is INR 10,100 per metric tonne to INR 30,220 per metric tonne in Q2 as against INR 40,329 per metric tonne in Q1. Such negative trend of price has reduced the profit of petrochemical and LHC. The main reason for reduction in petrochemical prices are capacity additions in global markets and consistent lower crude price, less demand due to economic slowdown, global economic conditions and environment, U.S.-China trade war and weak market sentiment on news of ban on single-use plastics.

As we are aware that the movement of gas price depends upon the demand and supply factors, the amount of natural gas production and its availability in the global market, geopolitical situation, availability of other fuels and economic growth besides the demand and supply prices of natural gas. During the quarter ended September 2019, the price of spot gases are continuously on the lower side due to its oversupply. DES West India prices during the quarter were lower than the prices in previous quarters. In order to retain the market, some of the volumes were sold at lower price in domestic and international markets. These reasons resulted in lower profitability in the gas marketing segment.

Gas transmission volume has increased by 3.29 MMSCMD from 105.41 MMSCMD to 108.7 MMSCMD during quarter 2. However, there were onetime impact in the profitability on account of the provision refund towards fixed monthly transmission charges of INR 186 crores to various customers. All fixed charges and spur line charges have been subdued in the final tariff of integrated LPG natural gas pipeline notified by PNGRB in June '19.

In pursuant to Section 115 BBDA of Income Tax Act announced by the Government of India to its taxation laws, the company has irrecoverable option of shifting to lower tax at 25.17% from 34.94%, along with the consequent reduction in certain tax incentives including lapses of accumulated net credit. The company is able to retain their option of new tax option and has not exercised this option for current period. The option will -- are under evaluation. We will be exercising in the subsequent figures.

Considering the above, during the quarter ended September 30, 2019, GAIL has achieved gross sales of INR 18,010 crores in Q2 FY '20 versus INR 13,276 crores in Q1 FY '20. That is decreased by 1%. PBT of -- PBT is INR 1,536 crores in Q2 FY '20 versus INR 1,981 crores in Q1 FY '20, decrease of 22%. The PAT of -- is INR 1,064 crores in Q2 FY '20 in comparison to Q1 INR 1,288 crores, decrease of 17%.

During half year ended September 2019, CapEx achieved is INR 2,400 crores including equity contribution, mainly in pipeline. Equity contribution is around INR 150 crores. The expected CapEx of FY '19, '20 is INR 7,000 crores, and for 2021 is also around INR 7,000 crores, mainly on pipelines.

The total CapEx in JHBDPL projects, including BDPL up to H1 FY '20 is over INR 8,000 crores, and total commitment has been to the extent of around INR 13,000 crores.

We have received the capital grant of INR 3,221 crores due up to debt. The project of Dobhi-Durgapur section of JHBDPL is going on and likely to be completed in FY '20, 345 kilometers and sale to Matix will start for up to 2.5 MMSCMD.

With the inauguration gas supply in Ranchi on 23rd August 2019 and recently at Jamshedpur on 1st November 2019, the gas supply of all CGDs awarded to GAIL, that is Varanasi, Patna, Cuttack, Bhubaneswar, Ranchi and Jamshedpur, has started. The commissioning of KKBMPL section 1 is commissioned and balanced pipeline up to Mangaluru are under advanced stage of completion and targeted to be completed and commissioned by December 2019. Further that to Ramagundam Fertilizer and Chemical Plant has already started by GAIL and pre-commissioning activity at plant is going on. The plant is likely to be commissioned in FY '19, '20. And it is the gas supply to the extent of 2 MMSCMD will start.

The tender for breakwater facility of KLPL is under process. What we received are enterprise (technical difficulty) in this month.

Now I would like to furnish -- I have finished my briefing here and would request to the question-answer from the investors. Thank you very much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of S Ramesh from Nirmal Bang.

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S Ramesh, [2]

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In terms of your gas transmission business, can you give us some sense in terms of which are the pipelines where you have some overexpanding volume, say, in the second half and which are the new expenditures we can expect to start in, say, in FY '21 and '22?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [3]

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Most of the pipeline, which was in FY '21 -- FY -- in Q1 '20, the same pipeline were there. We are going to add the -- in the Jagdishpur-Haldia pipeline, which are getting commissioned and we are adding to the Matix. And the pipelines which are there, almost the same, which were there in the Q1.

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S Ramesh, [4]

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Okay. So in terms of volume growth in the transmission business, what is the kind of volumes we can expect in the second half and, say, the next 2, 3 years?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [5]

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The volume growth will be slightly more with the commissioning of the fertilizer plants as well as other CGDs which are there. And the growth will be there. We can't give you a fixed number for that, but it will be a growth.

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S Ramesh, [6]

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Okay. And the second part is, in terms of the overall gas market, do you see any potential for the underutilized gas-based power plant [rising]? And would that be a segment where you see some additional growth coming in?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [7]

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You are talking about the standard power plant?

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S Ramesh, [8]

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Yes, yes.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [9]

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So we are talking -- taking up the matter with the Power Ministry, and we are trying to find out some solutions whether they can use more gas in the standard power plant. So some mechanism is being worked out. And we have also -- with our own have started giving gas to some of the standard power plant. They are using it -- they are taking it in the field.

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S Ramesh, [10]

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But can you give us a sense in terms of how much is the growth (inaudible). But traditionally, the revenue is operating at about 23%. But in the June data, we saw some increase in the gas-based power plant. So is that a trend we can expect? What is the volume in MMSCMD you've seen this year in terms of growth in the power sector?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [11]

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We are ready with the pipeline and we are ready with the gas. It is up to the power plant consumers, they have to take. So we are also trying to find out how best we can do it. We have everything. We have gas. We have pipeline. Ultimately, they have to take their economics.

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S Ramesh, [12]

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Yes. So I'm just trying to understand what -- can you just give us the number in terms of the incremental potential there? Is there an improvement?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [13]

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Up to date, I think we are giving around 2 to 3 MMSCMD of gas to this standard power plant, additional, I think, that we have given. But going forward, there are good potential we can keep. And it depends upon the power plants they want to utilize.

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Unidentified Company Representative, [14]

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(inaudible) in the demand.

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Operator [15]

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(Operator Instructions) Next question is from the line of Amit Rustagi from UBS Securities.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [16]

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Sir, could you explain us this provision of INR 180 crores in the transmission segment? What is the recurring impact of this and why it has occurred?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [17]

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Okay. This INR 186 crores is fixed monthly transmission charges, which was earlier subdued in the final tariff of HBJ. This is one-time only when we have to refund to the customers, various customers, this INR 186 crores. And this is one-time. And this has come after we got the tariff order of HBJ and DVPL. So that is one-time only, not recurring.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [18]

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So there is no recurring impact of this because when you're refunding, this means that there has to be some recurring impact.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [19]

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No, there's no recurring. This is one-time from the past. We have to refund to it because tariff order, which is there, this fixed monthly charges, fixed monthly transmission charges, we have not to charge further, and we have to refund. So that is there.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [20]

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Okay, okay. And sir, on your gas marketing business. So we have sold around 94 MMSCMD gas. So could you give us a breakup, like how much gas is sold in India? And what is the source of that, like U.S. gas and RasGas and maybe Gazprom?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [21]

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See, total sale is...

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Unidentified Company Representative, [22]

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94.65.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [23]

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Is 94 -- 94 this time and up to H1 is 95.63. So APM is around, you can say, is 44 MMSCMD. PMT is around 3.8. RLNG, which is there, is around 23 MMSCMD -- 22 MMSCMD. And in between, we have taken the spot also, let's see, 7.12 MMSCMD. This is -- taken together is -- and we have overseas sale is 10.52 MMSCMD. So up to H1, I'm talking about the H1. So 95.6 MMSCMD there. So overseas sale is 10.52 MMSCMD.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [24]

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Overseas is also included in this 95?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [25]

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Yes. Naturally, this is our sales.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [26]

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Yes. So then, APM, you mentioned 44; PMT, 3.8; RLNG is 23.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [27]

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22. 22, you'll get there.

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Unidentified Company Representative, [28]

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[25.5]...

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [29]

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Yes, okay...

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [30]

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And then there are ONGC and others also, too. And midterm is there around 6.42. Spot is 7, that way (inaudible)

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [31]

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3.42, midterm.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [32]

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Midterm.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [33]

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And so, how much is ONGC?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [34]

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ONGC is, again I've told you, about 43.99. And it includes others also.

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Operator [35]

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Next question is from the line of Pinakin Parekh from JPMorgan.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [36]

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Just continuing on the marketing segment. I think that you mentioned in the -- during your opening comments that some cargoes had to be sold at a lower price. So I'm just trying to understand how have the U.S. cargoes being placed in this quarter and how do we understand the very, very sharp decline in segment profitability from INR 860 crores to INR 250 crores in the marketing segment. Was it related to purely the U.S. cargoes? And were there any issues in terms of prices over there?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [37]

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So far as the U.S. volume is concerned, around 90 cargoes we have to take during the year is -- and we have taken around 42 cargoes this time up to this -- up to September. There are the cyclical things are there where it's some shutdown was there, so some cargoes we have not taken. So we are going to complete the total volume, whether we are selling to -- in the international market or we are bringing to -- in India. So that way, the volumes which are there -- committed volume are there, we are taking up.

Now, as you know, that India price, which is there, spot prices is ranging around $4 to $5, which are there. And sometimes, in order to retain the customers, you have to beat. So sometimes, what happens, some of the volumes we have to sell at a low price in comparison with the spot price which are available. So that has given negative things, but it doesn't mean that cargo to cargo wise, we are going to make some cut. Overall, there is a marketing segment improvement is there. And though it may not be in comparison with the Q1, but it is there. And overall, we are going to have plus in this year.

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Amit Rustagi, UBS Investment Bank, Research Division - Analyst [38]

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Sure. So just trying to understand this point better. So how many cargoes in this quarter were sold at prices below the Henry Hub prices? I mean, essentially, I would assume that these are the unhedged cargoes. And to that extent, the realizations in order to retain the customer was below the Henry Hub price. So going forward, so can we get a sense of broadly the number of cargoes you think will be sold at market prices or spot prices?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [39]

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See, it is a very dynamic situation. It is very difficult to give cargo to cargo wise number, because we are doing destinations there, we are doing times there, then we are doing hedging also, and then depending up on the volume, which is there, we are pricing spot also. So in totality, the kitty, which is there is on the plus side. And depending upon the spot prices, which are there, sometimes you have to bid with the customers because -- to get the volume. So some of the hits are there. So it is very difficult to say what -- which cargo was retailed because we have around 200 cargoes in total. We are selling in separate -- in totality transactions, which are from the coming period also, '20, when they are lined up. So it is -- it depends upon the price volume, as I've already told that many factors, internal and external are there. So that is there. But ultimately, we are derisking anything. Sometimes we have to sell the cargoes on losses also. That is there. This is a business cycle, which is there.

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Operator [40]

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Next question is from the line of Rohit Ahuja from BOB Capital Markets.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [41]

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Just a follow-up to the last question. I think, again, you mentioned you have obligation to take 90 cargoes from U.S.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [42]

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Yes.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [43]

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Until September, you've taken [40].

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [44]

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September, we have taken...

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [45]

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(inaudible) how will you cover 50 in the next 3 months, 3 to 4 months?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [46]

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42, we have taken, right? And we have till September only. But team building and planning has already been done. So there is no -- that we are going to miss any cargo. Either we will sell in the international market or we will bring it. That is all we need to do.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [47]

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So you're not going to, like, defer some cargoes or nothing like it?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [48]

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Sometimes at the U.S. facility, Dominion Cove, shutdown is there. So team building is always done. I'm just giving you the figure. We are committed to take all the cargoes, and we'll take it.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [49]

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Just to add it. See, we are short by 3 cargoes only for 6 months, it should have been 45. Now it is 42. That's all. 20 days shutdown was there in the plant. Is this -- are we talking about fiscal year? Fiscal year target or this is calendar year target?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [50]

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It's fiscal year, I'm talking about, not calendar year.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [51]

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Until April you have to -- okay, okay. So...

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [52]

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Up to April -- up to March...

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [53]

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To March. So sir, then coming back to the question on your marketing gas trading EBIT declining so much. So you've been maintaining or commenting over the last 4, 5 quarters that most of your cargoes are hedged from U.S. But now, apparently, you are mentioning that you have to bear losses on some of the cargoes. So do we see that your hedges which were there earlier or some have been completed? Or how is the situation currently?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [54]

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Adding times or destinations, these are the continuous process. It is not that it is done now only. We have committed up to -- we have done up to FY '20. December '21 also, we have done some of the cargoes. And up to FY '20, we have almost done everything. So we have to do all of this. But sometimes, what happens, we have to -- looking into the market conditions, we have to do it. It doesn't mean that our spread is going to be negative, we will be positive. We will be positive. And we are positive.

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Rohit Ahuja, BOB Capital Markets Limited, Research Division - Analyst [55]

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So from that, just a last question on this, particularly. So if we see this quarter LNG prices right now around $5 versus your delivered price should be, let's say, around $8.5 for U.S. So is that the reason why you had to sell it at a negative rate?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [56]

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No, no, no, please try to understand. I have given one of the reasons. It is not that we are selling all the cargoes linked to the spot prices or like that. It is one of the things. I have given the reasons for that. But going forward, we have back-to-back also. We have also tied up. We have hedged also. So there is no going to have -- in the second and the third and fourth quarter, it will be plus also.

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Operator [57]

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Next question is from the line of [Raja Kandi] from [SBM Mutual Fund].

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Unidentified Analyst, [58]

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Sir, just on marketing U.S. volumes itself. So you mentioned you are fully hedged. But then you said despite that, you had to kind of accommodate the customer sort of. So can you just explain this because you again repeated that you are fully hedged for FY '20? So if you are fully hedged for FY '20 then what does it mean when you say you're fully hedged for FY '20?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [59]

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No, Mr. Raja, see, we were -- we said that we are either fully hedged or we are fully sold. Okay? So now suppose I'm selling and we have cargo based on crude and crude has fallen, total revenue was down, right?

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Unidentified Analyst, [60]

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But in those cases, you had said that you already sold crude through that exchange, so you only have...

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Unidentified Company Representative, [61]

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(inaudible) That's also what we have done. But it really depends. Some cargoes were crude to crude also. And Henry Hub to crude also. And then another thing, what happens we have sold Henry Hub to Henry Hub also. And then July, August, September. This is called shoulder month quarter, shoulder month. So where in the demand for heating for natural gas in western world is very low. So spot in this quarter has kept it in $3.50, $3.60. So a few cargoes, which we have left for balancing, okay? We have to show that is (inaudible) comparative with spot prices, but the spot prices for next quarter, which is winter months, will be $5 plus always. And U.S. volume does not cost us $8.5 in India. This is wrong. It is even below $7. It is below $7.

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Unidentified Analyst, [62]

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Okay, okay. If you could just explain this. What are the charge? Because I believe also 1 component is if you pass that canal there are some additional lever -- over and above the shipping costs, there are some additional levies and all of that to pass certain routes. So if you could explain this, what will be the landed cost in India with the breakup of the component? It will be great, helpful.

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Unidentified Company Representative, [63]

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See it is, again, very dynamic. But, it is very dynamic. We have been able to get a cargo in India, you can pay that at $0.50 also from U.S. to India, and sometimes at $1.50 and $1.75 also.

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Unidentified Analyst, [64]

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Assuming you don't get a swap, assuming you don't get a swap or something, you have to physically get the same cargo in such a scenario?

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Unidentified Company Representative, [65]

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If that is the scenario then shipping costs is around $1.70. Yes.

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Unidentified Analyst, [66]

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There are any additional levies and all of that to pass, let's say, you pass through the Suez canal. Are there any additional levies?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [67]

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No, all inclusive. These are all-inclusive.

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Unidentified Analyst, [68]

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Okay, okay. And just 1 last question. A ruling on that -- Supreme Court ruling on the telecom license thing. Do you foresee any -- it will be very -- even if it is just a small part of the [revenue head] license, any fallout of that ruling you see?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [69]

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Whatever news you have seen in that, is we have given our reply to that. And there is no charges leviable to us.

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Unidentified Analyst, [70]

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What is our stand? What is our stand on it? Because -- if you could explain.

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Unidentified Company Representative, [71]

--------------------------------------------------------------------------------

The license itself has expired in 2017.

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [72]

--------------------------------------------------------------------------------

And we have done -- we have not done any business...

--------------------------------------------------------------------------------

Unidentified Company Representative, [73]

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We have done no business whatsoever. So there's nothing that's leviable to us.

--------------------------------------------------------------------------------

Operator [74]

--------------------------------------------------------------------------------

(Operator Instructions) Next question is from the line of Vidyadhar Ginde from ICICI Securities.

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Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [75]

--------------------------------------------------------------------------------

I just wanted a little more clarification on the discussion we had on this gas marketing. So what I'm trying to understand is that you people keep some cargoes untied up. And so was this less low EBITDA from this business in this quarter because of all these untied up cargoes, you're not doing well? Or is it because of some cargoes where the hedging part of the story didn't go well? Or is it a combination of both?

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Unidentified Company Representative, [76]

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See, it's a combination of 2, 3 things. Fewer this, and that, and also some of the plants, which we were expecting to get commissioned in June, July, 2019 itself, they are delayed. So the volume, which was -- which we suppose -- we thought that we will bring to India, but those plants -- but because those plants were delayed, we could not bring it to India, and we had to sell it at the spot market.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [77]

--------------------------------------------------------------------------------

So have those plants started now?

--------------------------------------------------------------------------------

Unidentified Company Representative, [78]

--------------------------------------------------------------------------------

One was delayed. So 1 has started. Two are still not.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [79]

--------------------------------------------------------------------------------

And so basic then, there is no take-or-pay with those clients?

--------------------------------------------------------------------------------

Unidentified Company Representative, [80]

--------------------------------------------------------------------------------

No, if they don't start, there is no take-or-pay.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [81]

--------------------------------------------------------------------------------

So is it -- so let's hypothetical -- let's assume that this problem had not occurred, and these plants had started on time. Then would revenues have been much better?

--------------------------------------------------------------------------------

Unidentified Company Representative, [82]

--------------------------------------------------------------------------------

Yes, definitely.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [83]

--------------------------------------------------------------------------------

So are you saying that the hit from that part is much more than that from selling some cargoes at spot prices? A rough idea, if you could give us?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [84]

--------------------------------------------------------------------------------

That is there, because some of the plants have now restarted, so...

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [85]

--------------------------------------------------------------------------------

Can you give us some idea as to the volumes with these plants, which were delayed, what was the volume in MMSCMD if you can?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [86]

--------------------------------------------------------------------------------

Ramagundam was around 2...

--------------------------------------------------------------------------------

Unidentified Company Representative, [87]

--------------------------------------------------------------------------------

At least 2 plants -- out of 3, 2 were delayed and not yet commissioned and 1 was delayed for about 4, 5 months, rather 6 months, so...

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [88]

--------------------------------------------------------------------------------

Around 6...

--------------------------------------------------------------------------------

Unidentified Company Representative, [89]

--------------------------------------------------------------------------------

So 3 plants will take up around 6 MMSCMD. So out of that, you can say that 2 has come up, but 4 has not yet.

--------------------------------------------------------------------------------

Unidentified Company Representative, [90]

--------------------------------------------------------------------------------

Still delayed.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [91]

--------------------------------------------------------------------------------

So you are saying out of -- so last quarter, you were hit to the extent of 6 MMSCMD in the volume you lost, which otherwise, you were expecting?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [92]

--------------------------------------------------------------------------------

4 MMSCMD.

--------------------------------------------------------------------------------

Unidentified Company Representative, [93]

--------------------------------------------------------------------------------

4 MMSCMD.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [94]

--------------------------------------------------------------------------------

And what is the situation for Q3?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [95]

--------------------------------------------------------------------------------

We are going to improve that (inaudible) Ramagundam is going to restart...

--------------------------------------------------------------------------------

Unidentified Company Representative, [96]

--------------------------------------------------------------------------------

That will not be started and they are expecting now...

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [97]

--------------------------------------------------------------------------------

So 1 leg of the transaction, which does not happen is this expected volume did not happen? And does this get compounded by the fact, then that it needs to be sold at spot?

--------------------------------------------------------------------------------

Unidentified Company Representative, [98]

--------------------------------------------------------------------------------

To some extent...

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [99]

--------------------------------------------------------------------------------

To some extent.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [100]

--------------------------------------------------------------------------------

Not all of it may have been sold at spot?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [101]

--------------------------------------------------------------------------------

It depends again upon the prices. It depends upon the international demand. So...

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [102]

--------------------------------------------------------------------------------

No, I'm talking on the current situation only. I'm not talking in general. So I just want -- basically, we probably have had a very, very weird situation where we had this such low spot LNG prices and hopefully may not have it for too long in the future again. So there is probably a one-off. So what I'm trying to understand that was this situation of some of these demand not coming up together with the low spot price. So let's say these plants have not come up, but let's say spot prices were at $8. Would you still have had this hit?

--------------------------------------------------------------------------------

Unidentified Company Representative, [103]

--------------------------------------------------------------------------------

No, we would have made profits, a huge profit.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [104]

--------------------------------------------------------------------------------

So basically you had to sell because these consumers didn't come through, you had to basically ... I mean do you expect these guys -- when do you expect all this 6 MMSCMD demand to come up?

--------------------------------------------------------------------------------

Unidentified Company Representative, [105]

--------------------------------------------------------------------------------

(inaudible)

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [106]

--------------------------------------------------------------------------------

So right now you have 2 out of 6, which you could have in the last quarter and another 4 MMSCMD, those plants have to start.

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Unidentified Company Representative, [107]

--------------------------------------------------------------------------------

Next 6 months.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [108]

--------------------------------------------------------------------------------

So all these 6 MMSCMD demand is expected to start from April?

--------------------------------------------------------------------------------

Unidentified Company Representative, [109]

--------------------------------------------------------------------------------

It may happen a little early also. One of the plants can happen a little early also. And 1 can take even 6-7 months.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [110]

--------------------------------------------------------------------------------

Okay. So 1 means this quarter or next quarter?

--------------------------------------------------------------------------------

Operator [111]

--------------------------------------------------------------------------------

Sorry, Mr. Vidyadhar, I'll have to ask you to come back in the question queue.

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Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [112]

--------------------------------------------------------------------------------

This is the same question, boss.

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Unidentified Company Representative, [113]

--------------------------------------------------------------------------------

It should come up in 6-7 months.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [114]

--------------------------------------------------------------------------------

So that's it for me. Just 1 last thing in this context. So if the hedging then not hurt you in any way, so it was mainly these 2 things which you hurt, it was spot and the delay in this consumption. Hedging was roughly fine.

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Unidentified Company Representative, [115]

--------------------------------------------------------------------------------

Yes, hedging was fine.

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [116]

--------------------------------------------------------------------------------

Hedging was fine. And there mix of the things are there. It is very difficult to give you the number 1 by 1. I request you come down, we'll give you the details for that.

--------------------------------------------------------------------------------

Vidyadhar Ginde, ICICI Securities Limited, Research Division - Oil and Gas Analyst [117]

--------------------------------------------------------------------------------

Sure. Sure. So sir, how do things now look for...

--------------------------------------------------------------------------------

Operator [118]

--------------------------------------------------------------------------------

Sorry, to cut you off. I'll have to ask you to come back in the question queue.

The next question is from the line of Probal S. from Centrum Broking.

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Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [119]

--------------------------------------------------------------------------------

In terms of this gas trading business. We obviously have spoken a lot about it. But what I wanted to get a sense of was that in the next 6 months, assuming that all these plants are up and running. In the fourth quarter, can we expect a return to the normalized run rate? Obviously, I'm assuming that spot LNG prices came back to their normal levels of somewhere around 10%, 11% in cash to crude, which amounts to be about $7-odd. And that kind of a price will be transmitting commissions. Can we then expect that the run rate will get back to the sort of $6, $7 in prices, which we have been doing in the third quarter?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [120]

--------------------------------------------------------------------------------

Yes, yes. They're going to improve.

--------------------------------------------------------------------------------

Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [121]

--------------------------------------------------------------------------------

Okay. And second, you said the 2 kind of -- any guidance you can give of, let's say, for transport transmission volumes or overall gas demand in the country? What type of exit rate should we be looking at for the gas transmission business for FY '20? Because you had earlier mentioned that it will be not too much of growth, but we have seen almost a 3 MMSCMD growth in this quarter. And indications is for end of the third quarter indicate the volumes can continue to grow a little bit. So is it correct to assume that we can actually touch 110 plus by the end of the year or even earlier?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [122]

--------------------------------------------------------------------------------

This year, we may touch, but coming forward, we are going to improve that. More than 100.

--------------------------------------------------------------------------------

Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [123]

--------------------------------------------------------------------------------

That is for FY '21, you are saying right?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [124]

--------------------------------------------------------------------------------

Yes. Okay.

--------------------------------------------------------------------------------

Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [125]

--------------------------------------------------------------------------------

Last question. In the petrochemical segment, despite, of course, the production running ahead of estimates. Obviously, EBITDA has continued to remain muted. So is that impacting in some of the newer grades that you had spoken about. It was expected to get us some more of a premium pricing, about 10%, [20%] of our overall production, which is expected to be the premium base of plastics. Is that still not getting the kind of price that you want or expected? And what's the outlook that you have in terms of demand scenario of pricing for petrochemicals?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [126]

--------------------------------------------------------------------------------

(inaudible) you want to take it?

--------------------------------------------------------------------------------

Unidentified Company Representative, [127]

--------------------------------------------------------------------------------

Actually, what has happened is overall the prices have fallen quite steeply and to compare it with Q1, already $100, $120 plus drop has been driven all these prices. (inaudible) there is oversupply as well as the fall in prices, that is what is creating pressure on the prices, even on the grade (inaudible) what we call them. Overall, there is too much of a fall in the prices, which has actually given (inaudible).

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [128]

--------------------------------------------------------------------------------

As I have already explained that the prices sharply had come down in comparison to the Q1. If you compare with the H1 prices of the polymer, there is a hit of around [INR 18,000] per metric tonne. So -- but we are expecting from the December onwards, the prices are going to increase. And we have sold above the IPP prices also always -- so that is there. International prices which are there, so that way, we are trying to mitigate these peaks, which are there. That way we expect better in the petrochemical segment in the days to come.

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Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [129]

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Last question, related to mix. Can we have a sense of the gas mix that will be used by the (inaudible)? I believe that you have mentioned, it's sort of 50-50 between long and then short term. Is that roughly the mix there? Do you think?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [130]

--------------------------------------------------------------------------------

I can't give you the exact, but it is mixed. RLNG is there. Total RLNG...

--------------------------------------------------------------------------------

Probal Sen, Centrum Broking Limited, Research Division - Analyst of Oil and Gas [131]

--------------------------------------------------------------------------------

It's not possible to give in terms of what price -- I mean how much of short term, how much of long-term is in the mix there?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [132]

--------------------------------------------------------------------------------

[If it's best available levels] which are there, we are doing it. It is not go on changing. We can't give you any mix that -- month-to-month. RLNG is there. There is no escalated prices that is there.

--------------------------------------------------------------------------------

Operator [133]

--------------------------------------------------------------------------------

Next question is from the line of Vikash Jain from CLSA.

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Vikash Kumar Jain, CLSA Limited, Research Division - Research Analyst [134]

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I have 2 of them. #1 is this one-off that you mentioned of about INR 186 crores. So this is something which would have been adjusted with the revenues of the segment? I mean that your revenue would be lower? Or how -- or would this be some kind of provision that you would have created, what -- this is earlier revenue, which will now be written off? Is that how it will be?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [135]

--------------------------------------------------------------------------------

With the revenue which we have taken earlier. Now we have to return.

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Vikash Kumar Jain, CLSA Limited, Research Division - Research Analyst [136]

--------------------------------------------------------------------------------

Now the revenue has been reduced because of it?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [137]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Vikash Kumar Jain, CLSA Limited, Research Division - Research Analyst [138]

--------------------------------------------------------------------------------

And this is linked to earlier years? Or is it linked to the last quarter?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [139]

--------------------------------------------------------------------------------

This is linked to the earlier year.

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Vikash Kumar Jain, CLSA Limited, Research Division - Research Analyst [140]

--------------------------------------------------------------------------------

And so this is INR 186 crores, all adjusted in this quarter. Is that correct?

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [141]

--------------------------------------------------------------------------------

Yes, yes. Because the tariff order came in the month of July or something like that. So we have calculated and then we have seen -- yes, we have seen.

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Vikash Kumar Jain, CLSA Limited, Research Division - Research Analyst [142]

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And sir, a lot of discussion now on marketing. I mean just to kind of -- because as you had even earlier said that your hedging policy is a little complicated and all of that. So given that this first half has been made up of a very good quarter in the fourth quarter, which is this one. The current EBIT that you have for this particular -- for first half is about INR 11 billion or INR 1,100 crores or so. So this -- do you think that this can be improved in the second half based on all the available information that you have, perhaps, these new capacities may still not come up by the time -- not all of them will come up by the end of the year. So you think, because the -- if you were to look at last year and last year, of course, we were in the range of closer to INR 2,800 crores plus for the full year. So this year, at least, will we be able to -- in the second half, will it be better than first half? I mean will we have a growth on a half-to-half basis?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [143]

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It -- a little bit better than this quarter. And overall, there will be further improvement, but it will not touch the last year.

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Operator [144]

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Next question is from the line of Rakesh Sethia from HSBC.

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Rakesh Sethia, HSBC, Research Division - Analyst of Indian Oil & Gas Sector [145]

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2 questions from my side. First one, on the petrochemical outlook. Is it fair to say that if the (inaudible) prices fall further and we've already seen some evidence, the month -- November month has been sort of trending lower. Would you look to sort of rationalize your production from the petrochemical plant? Does it make sense to operate this plant if it makes EBITDA losses?

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Unidentified Company Representative, [146]

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Actually, we -- I mean that's not the case till now. And we are able to recover our operating costs and we are way above the variable costs. So that's not the case as of now and all this, the reports are suggesting prices to go up from December. If you see the latest report from ICIS or any other, they suggesting a little bit of increase from December through the next quarter, the quarter 1 of 2020. So we see a better outlook comparatively. But we're keeping a close watch on that.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [147]

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Adding further, the demand is also increasing, though, there is oversupply. Overall demand is also increasing. And whatever we are producing, we are able to sell it. Though, there is a distressed sales across all the petrochemical grids are there. But it is cyclical only, I think it will improve further.

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Rakesh Sethia, HSBC, Research Division - Analyst of Indian Oil & Gas Sector [148]

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Understood, sir. If I could ask about the status of the Kochi Mangalore pipeline. And (inaudible), obviously heard the news about of breaking up the company into 2 parts, doing something about unwinding the transmission market, indications coming in the media. So anything you can highlight to us? Has there been any progress? Is there -- has the government -- has reached out to you? Or is there any sort of discussion, which the management is aware of and that's on the cards?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [149]

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So far as the Kochi Bangalore pipeline is concerned -- Mangalore pipeline, the first section has already been commissioned. And the rest 6 sections are under its advanced stage of completion. And it is -- these are targeted to be completed by December 2019. So this will be operational this year. And second question about to your -- second question is your -- about the news. I think whatever news you are hearing, we are also hearing. There is no such further things, we have heard through the papers, but we are intact at present. And anything comes up, we will definitely inform.

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Rakesh Sethia, HSBC, Research Division - Analyst of Indian Oil & Gas Sector [150]

--------------------------------------------------------------------------------

So the government has not reached out to the management of GAIL (India) in any form? Is this a fair conclusion to take it away from this call?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [151]

--------------------------------------------------------------------------------

If there is anything, we'll inform you -- something through our -- because this will be an important event, we will inform you if something is there.

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Operator [152]

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The next question is from the line of Miten Lathia from HDFC.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [153]

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I missed this point on the fertilizer plant. 1 was Ramagundam, the second is Matix and which is the third one, sir?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [154]

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Chambal. Chambal Fertilizers.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [155]

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Chambal is already commissioned, right? It is taking gas. Ramagundam, you are saying, which will happen before this fiscal year-end and Matix will be next year, is it?

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Unidentified Company Representative, [156]

--------------------------------------------------------------------------------

Something like that, yes. Besides this -- actually, there were 2 more units, which were down in this quarter. 2 more fertilizer units were down, (inaudible) and 1 (inaudible) fertilizer. So that volume also, we are forced to sell -- dispose of in spot market. So we will raise take-or-pay as per contract, but that take-or-pay thing is raised by the end of the calendar year, after the end of the calendar year.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [157]

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And by then, they may actually compensate the volume also.

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Unidentified Company Representative, [158]

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Yes, yes. That is the reason of all in the volume at -- our performance at that volume because it otherwise tied up, crude linked, back to back, but we have to sell it in the spot market.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [159]

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Also simply the reversal that we've taken in the transmission segment. Now the tariff order is actually applicable on a prospective basis, right? You don't have to compensate customers for the past tariff, correct?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [160]

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Yes. But this is calculated 6 monthly transmission charges which are additional charge from the customers. Now in this tariff, it has been subdued. So we will not be charging further, so we had to refund this amount.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [161]

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And I guess it is multiple years that you have been doing this separate charging, which you are actually doing a composite charging now, and that is why this reversal has happened.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [162]

--------------------------------------------------------------------------------

This was as far (inaudible) order only.

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Miten Lathia, HDFC Asset Management Company Limited - Former Senior Equity Analyst, Portfolio Manager and Fund Manager [163]

--------------------------------------------------------------------------------

And the impact as pertains to Q1 of this year would be how much then?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [164]

--------------------------------------------------------------------------------

No, there is no further impact. This is a onetime settlement only, onetime payment, onetime adjustment.

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Operator [165]

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Next question is from the line of Vinit Joshi from Goldman Sachs.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [166]

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I just wanted to check on LPG realization. This quarter, it has come down a lot in the current quarter, but can you just give us some color? I mean how did it progress in the quarter? And what is it looking like in October? Has it gone up or has remained there? Or has it further come down?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [167]

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The LHC prices, this LPG?

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [168]

--------------------------------------------------------------------------------

Yes, LPG, yes.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [169]

--------------------------------------------------------------------------------

Prices of LPG, including LHC, which are there, has come down by 25%. And in the month of October, this has increased by INR 4,000 per metric tonne, so we are seeing increasing trends. But if we compare with the quarter 1 and quarter 2, there is a sharp decrease.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [170]

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Okay. So while it has gone up, it is still lower than first quarter is what you saying?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [171]

--------------------------------------------------------------------------------

Yes, lower than first quarter.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [172]

--------------------------------------------------------------------------------

Okay. So okay. All right, sir. And sir, this change in the tax rate, right? So will that impact our tariffs in any way in terms of like the post-tax IRR, which is fixed for our pipelines. Does it mean that other tariffs could be revised in the future because the tax rates have been cut down? Or is that tax rate separate?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [173]

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There are multiple issues in that. Whether this will impact or not. The PNGRB is taking a look for that. And there are multiple different prospects in there, they are tariff and charge which have already been announced, and so many other factors are there. So PNGRB has not taken any call at present. If something is there, I think, we'll inform you.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [174]

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Okay. It will not be like a cash negative for you, right? Even if it is whatever call the PNGRB will take, it shouldn't be a cash negative for you?

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Unidentified Company Representative, [175]

--------------------------------------------------------------------------------

Yes, it should not be.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [176]

--------------------------------------------------------------------------------

All right. And 1 last...

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Unidentified Company Representative, [177]

--------------------------------------------------------------------------------

Getting those returns. We are way below those returns now.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [178]

--------------------------------------------------------------------------------

Our return is not at par with (inaudible). So they will also consider whatever the tax is there, adjustment is there. So they are taking -- evaluating whatever the rate is there.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [179]

--------------------------------------------------------------------------------

Okay. And sir, I think I heard you say that you basically take gas for your petchem plant on a best case basis. So does it -- is it fair to say then everything that you have taken would be spot because spot prices have been way below long-term LNG prices for quite some time now. So if you are doing this kind of a best case price for your petrochemical segment, are you taking on spot LNG?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [180]

--------------------------------------------------------------------------------

No, no, no, not take it. Because plant cannot run on the spot LNG and we have to tie up further.

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Unidentified Company Representative, [181]

--------------------------------------------------------------------------------

See we already have gas in the portfolio. So we will not procure spot price gas further for this plant. Okay?

--------------------------------------------------------------------------------

Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [182]

--------------------------------------------------------------------------------

So what is the gas, which is always -- which you are using for this? That's what I think the question was on the other part of the spend. So if you know that it's tied up, then you can tell us what that gas is, right?

--------------------------------------------------------------------------------

Unidentified Company Representative, [183]

--------------------------------------------------------------------------------

That keeps varying. For example, now that the plants are closed, our fertilizer plants are closed. So I have 2 options, either to buy -- to consume this in my plants or sell it in market and then again buy spot gas for the petrochemical plant, which is ridiculous, as we are unnecessarily getting double taxation on transactions on both the sides. So it keeps varying. If I have gas, sufficient gas, a lot of (inaudible) gas and other customers are not taking them, I have to divert that gas to petrochemicals. But if other customers are up and running, then I can turn this plant on up to 80%, 90% on spot also.

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Vinit Joshi, Goldman Sachs Group Inc., Research Division - Equity Analyst [184]

--------------------------------------------------------------------------------

Okay, okay. And for LPG and -- LPG segment, I mean that is all domestic gas? Or does it also have some LNG in it?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [185]

--------------------------------------------------------------------------------

Only domestic.

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Operator [186]

--------------------------------------------------------------------------------

Next question is from the line of Mayank Maheshwari from Morgan Stanley.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [187]

--------------------------------------------------------------------------------

2 questions from my side. One was regarding the petrochemical division. Can you just help us understand of how sustainable do you think now the run rates on Pata-2 will be? Do you think that this is now a steady state kind of a run rate that we can assume going ahead?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [188]

--------------------------------------------------------------------------------

Yes, yes, the Pata plant is stable, and it will be stable. So it will be running at this pace.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [189]

--------------------------------------------------------------------------------

There are no further shutdowns that you're expecting for...

--------------------------------------------------------------------------------

Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [190]

--------------------------------------------------------------------------------

Could be annual shutdown or something like that, it could be maintenance shutdown. These are the planned shutdowns, which we always (inaudible).

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Unidentified Company Representative, [191]

--------------------------------------------------------------------------------

But nothing in this financial year.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [192]

--------------------------------------------------------------------------------

But this financial year, there is no shutdown expected.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [193]

--------------------------------------------------------------------------------

Okay, okay. And the second question was more related to the cost for this quarter. Even though you have seen good run rate, the per unit cost has not really come off materially. It's still relatively high similar to fourth quarter. Is there a reason why that's happening? Or is there a onetime cost that's associated still with the plant?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [194]

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There is no such onetime cost. It's basically the (inaudible) other costs, which are there. So I don't know which figure you were telling.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [195]

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Okay. So it may partly because of the gas cost itself, it's not come off, I suppose?

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Unidentified Company Representative, [196]

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(inaudible) improved per tonne of polymer production, has actually improved over this quarter.

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Mayank Maheshwari, Morgan Stanley, Research Division - Research Analyst [197]

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Okay. So it should normalize if...

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Unidentified Company Representative, [198]

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Right, staying at the level it is now.

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Operator [199]

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Next question is from the line of Manikantha Garre from Axis Capital Limited.

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Manikantha Garre, Axis Capital Limited, Research Division - Assistant VP of Energy [200]

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With respect to the Gas Marketing division, again. Can you please explain us, in those take-or-pay contracts, which were not obliged, how do you go about claiming them? Can you explain that procedure?

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [201]

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If a plant is closed, any plant is closed and if the plant has committed to take some volume, but they are not taking, then take-or-pay is liable or the claim is raised only at the end of the calendar year. So we say January to December, how much was contracted, how much you have taken. And then the claim is raised in the next quarter. First quarter of the next calendar year.

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Unidentified Company Representative, [202]

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There's no question of not raising the amount or not getting paid for it.

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Manikantha Garre, Axis Capital Limited, Research Division - Assistant VP of Energy [203]

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So the losses that we have incurred because they were sold on spot. Can those also be claimed? By that...

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Unidentified Company Representative, [204]

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(inaudible)

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Operator [205]

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As there are no further questions, I'll now hand the conference over to the management for closing comments.

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Anjani Kumar Tiwari, GAIL (India) Limited - Director of Finance, CFO & Director [206]

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Thank you, Nitin, for this answer and I think we have been able to tell the perspective of the management and details which are there. Thank you very much, and I thank once again to you. And the entire team of GAIL that is present here. Thank you very much.

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Operator [207]

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Thank you very much. On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.