Torrent Gas plans IPO by FY24; eyes acquisitions in CGD business
Ahmedabad headquartered-Torrent Group aims to hit the capital market with the initial public offer of its gas utility business, Torrent Gas, by 2023-24, a top executive told ET. Torrent Gas, which could be the third listed company of the group, is investing Rs 8,000 crore on expansion of its city gas distribution (CGD) business. It is scaling up its compressed natural gas (CNG), and piped natural gas (PNG) businesses and is also looking for acquisitions in the sector, over and above this investment. “Our aim is to go for value unlocking after we have reached a certain critical scale. We are fairly well capitalised and there is no urgency, so we want to time it to unlock better value. We would look at raising capital by FY23-24,” said Jinal Mehta, director, Torrent Gas. Mehta said that the company has set a target of annual revenue of Rs 2,000 crore- Rs 3,000 crore, which will be the “critical scale” for an IPO. Currently, the company clocks revenue of around Rs 25 crore a month but expects it to double to Rs 50 crore by end of the year as it has recently added 42 compressed natural gas (CNG) stations, making the total number of stations it runs 100. Torrent Gas is in the process of completing a Rs 8,000 crore investment in the next five years in CGD infrastructure; of this Rs 1,050 has already been invested. “Despite the constraints presented by the Covid-19 pandemic, Torrent Gas has been able to set up 100 CNG stations within a relatively short span of time. We are now working towards our near-term goal of setting up 200 CNG stations by March 2021 and medium-term goal of setting up 500 CNG stations by March 2023, apart from making PNG widely available to industries and residences in our authorised areas,” Mehta said. The Indian government has been undertaking policy reforms to lure investors into the sector to achieve its goal to be a gas-based economy. Currently, gas accounts for a little over 6 per cent of India’s energy mix, and the government aims to scale it up to 15 per cent by 2030, closer to the global average of 24 per cent.
IEA says oil producers may struggle to gauge demand amid second wave
Global oil stocks which rose during the height of the pandemic are being steadily reduced, the International Energy Agency (IEA) said on Wednesday, but a second wave is slowing demand and will complicate efforts by producers to balance the market. OPEC+ producers – OPEC members and others including Russia – plan to boost supply by 2 million barrels per day (bpd) from January and the IEA predicts a ceasefire in Libya will raise output there to 700,000 bpd in December from 300,000 bpd currently. “There is only limited headroom for the market to absorb extra supply in the next few months,” the IEA said in its monthly report. “Those wishing to bring about a tighter oil market are looking at a moving target.” OPEC+ producers are currently cutting output by 7.7 million bpd. The IEA said “the efforts of the producers have shown some success”, noting relatively stable oil prices and a strong draw on storage, with implied global stocks falling by 2.3 million bpd in the third quarter and by a predicted 4.1 million bpd in the fourth. However, the agency added that a demand rebound over the summer was now slowing due to a second wave of coronavirus cases and new movement restrictions. “This surely raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth,” the IEA said.
Refiners crank up runs ahead of India’s festive boost to demand
Indian oil refiners that have cranked up processing rates in response to a rebound in fuel demand have a seasonal boost to look forward to that not even a rapidly spreading virus is expected to derail. The nation’s two main festivals — Navratri and Diwali — start mid-October and extend for more than a month, typically increasing demand for consumer goods with more diesel-guzzling trucks hitting the road to deliver everything from clothes to refrigerators. This may lead to refiners boosting already elevated crude processing rates further to meet rising fuel consumption. Indian Oil Corp., the nation’s top processor, is currently operating its refineries at an average rate of 86 per cent of capacity, compared with 66.7 per cent in August, said a company official who asked not to be identified as the information isn’t public. Bharat Petroleum Corp. is at more than 85 per cent, while Hindustan Petroleum Corp. is already at full capacity, according to company officials. While China has made strides in containing the pandemic and led the global recovery in fuel demand after lockdowns, India has had far less success in containing the virus with infection rates surging above seven million. However, despite rising cases, people are resuming their daily activities and are even preparing to celebrate the festivities in a big way. “I doubt there is any fear of the virus,” said K. Ravichandran, senior vice-president at credit assessor ICRA Ltd., the local unit of Moody’s Investors Service. “Crowds are thronging beaches and malls. It may not be back to normal, but people are really loosening the purse strings and you can see the pick up in consumption across sectors.” Seasonal Surge Across India, overall crude-processing rates at oil refineries are currently above 85 per cent of capacity and inching toward 90 per cent, up from about 76 per cent in August. Gasoline has so far led an uneven fuel rebound as more people opt for their own cars or scooters over public transport to avoid being infected. Diesel consumption is poised for a much needed boost from the festivities, crop-harvesting activities, as well as stimulus that includes a special interest-free festival advance of up to 10,000 rupees ($136) for each federal government employee.
Price deregulation of natural gas key for success of unified tariff regime
Price deregulation for the complete domestic natural gas sector would be key towards making a unified tariff regime successful and increasing the share of natural gas in the overall energy mix of the country, rating agency ICRA has said. The rating agency said while moving towards a Unified Tariff Regime is a positive step towards increasing the share of natural gas in the overall energy mix of the country, several other steps will have to be implemented till we see a meaningful uptick in natural gas consumption in the country. Some of the reforms that have been long pending include the pricing deregulation of natural gas in the country, inclusion of natural gas under the Goods and Services Tax (GST), development of integrated pipeline network and development of an integrated gas trading hub/exchange are some of the reforms government will have to undertake to make any meaningful impact on natural gas offtake in the country, it said. Some of the other steps that have also remained under consideration include unbundling of the marketing and transmission business of GAIL (India) Limited and an independent system operator for pipelines, the agency added. The downstream regulator, Petroleum and Natural Gas Regulatory Board (PNGRB) has released draft regulations pertaining to implementation of Unified Tariff Regime (UTR) for the natural gas pipelines on September 29, 2020. The draft regulations essentially propose pooling of the existing approved tariffs of the pipelines comprising the National Gas Grid to arrive at one single tariff to be charged across and will be called the Unified Pipeline Tariff. The new regime also does away with the additive nature of the tariff to a large extent wherein earlier a consumer receiving natural gas flowing through multiple pipelines had to pay tariff for all the pipelines leading to the additivity of the tariffs. The draft regulations will remain revenue neutral for the gas pipeline operators although there will be redistribution of the transmission tariffs being paid by the consumers post the implementation of these regulations. The board has sought comments/views from various stakeholders by October 20 and will be holding an open house on October 29 for discussing the same.