Petronet LNG Ltd:Annual Report 2023-24 Analysis

Petronet LNG Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Petronet LNG Limited (PLL) was established on April 2, 1998, as a joint venture between four leading Public Sector Undertakings (PSUs): GAIL (India) Limited, Oil and Natural Gas Corporation Limited (ONGC), Indian Oil Corporation Limited (IOCL), and Bharat Petroleum Corporation Limited (BPCL). The company was formed with the objective of importing Liquefied Natural Gas (LNG) and setting up LNG terminals in India.

Headquarters Location and Global Presence:

PLL’s headquarters are located in New Delhi, India. While their operations are primarily focused within India, they are involved in sourcing LNG from various international suppliers.

Company Vision and Mission:

• Vision: To be a world class energy provider contributing towards India’s energy security and to be a respected corporate citizen.
• Mission: To build and operate world class LNG terminals; To procure, store, and regasify LNG; To ensure reliable and safe supply of LNG to customers; To create value for all stakeholders through innovation, efficiency, and sustainability.

Key Milestones in Their Growth Journey:

• 2004: Commissioning of India’s first LNG receiving and regasification terminal at Dahej, Gujarat.
• 2009: Commissioning of the second LNG terminal at Kochi, Kerala.
• Continuous Expansion: Ongoing efforts to expand the capacity of the Dahej terminal and explore opportunities for new LNG terminals in India.
• Strategic Investments: Strategic alliances and investments in other energy-related projects.

Stock Exchange Listing Details and Market Capitalization:

Petronet LNG Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The ticker symbol is PETRONET.

Recent Financial Performance Highlights:

(To provide this, you’ll need to reference recent financial statements and press releases from Petronet LNG. Include information like revenue, net profit, EBITDA, and key performance indicators).

Management Team and Leadership Structure:

(To provide this, you’ll need to reference Petronet LNG’s website.) Typical roles include:

• Managing Director & CEO
• Director (Finance)
• Director (Technical)

Notable Awards or Recognitions:

(To provide this, you’ll need to reference Petronet LNG’s website and any relevant industry publications.) Examples could include:

• Awards for operational excellence
• Recognition for CSR initiatives
• Awards for environmental performance

Their Products #

Complete Product Portfolio with Categories:

PLL’s core business revolves around LNG. Their product offerings include:

• Liquefied Natural Gas (LNG): Importing, storing, and regasifying LNG.
• Regasified Liquefied Natural Gas (RLNG): Supplying regasified LNG to customers.

Manufacturing Facilities and Production Capacity:

• Dahej LNG Terminal (Gujarat): India’s largest LNG terminal with a current capacity of 17.5 Million Metric Tonnes Per Annum (MMTPA).
• Kochi LNG Terminal (Kerala): 5 MMTPA capacity LNG terminal.

Quality Certifications and Standards:

(To provide this, you’ll need to reference Petronet LNG’s website.)

• ISO certifications (e.g., ISO 9001, ISO 14001, ISO 45001) are common in the LNG industry.

Primary Customers #

Target Industries and Sectors:

• Power: Power plants utilizing natural gas for electricity generation.
• Fertilizer: Fertilizer manufacturers using natural gas as feedstock.
• Industrial: Various industrial consumers including steel, petrochemicals, and refineries.
• City Gas Distribution (CGD): Companies distributing natural gas to households, commercial establishments, and vehicles.

Geographic Markets (Domestic vs. International):

Primarily domestic, serving the Indian market.

Major Client Segments:

• Industrial consumers
• Power Plants
• Fertilizer plants
• City Gas Distribution companies

Distribution Network and Sales Channels:

• Pipelines: Supplying RLNG through an extensive pipeline network.
• Direct Supply: Direct supply to major industrial customers.

Major Competitors #

Direct Competitors in India and Globally:

• In India:
  • Other LNG importers and terminal operators such as Adani Total Gas, Shell Energy India.
• Globally:
  • Major global LNG suppliers and terminal operators.

Competitive Advantages and Disadvantages:

• Advantages:
  • First-mover advantage: Early entrant in the Indian LNG market.
  • Large Capacity: Dahej terminal has the largest capacity in India.
  • Established Infrastructure: Well-developed infrastructure for LNG receiving, storage, and regasification.
  • Strong Relationships: Strong relationships with international LNG suppliers and domestic customers.
• Disadvantages:
  • Geographic Concentration: Heavy reliance on the Dahej terminal.
  • Price Volatility: Exposure to LNG price fluctuations in the global market.
  • Regulatory Environment: Subject to regulatory changes in the energy sector.

How they differentiate from competitors:

• Scale of Operations: Larger capacity terminals compared to some competitors.
• Established Track Record: Long history of reliable LNG supply in India.

Industry Challenges and Opportunities:

• Challenges:
  • Price Volatility: Fluctuations in global LNG prices.
  • Infrastructure Constraints: Limited pipeline infrastructure in some regions.
  • Regulatory Risks: Changes in government policies and regulations.
• Opportunities:
  • Growing Demand: Increasing demand for natural gas in India due to economic growth and environmental concerns.
  • Expansion of CGD Network: Expansion of city gas distribution networks.
  • Government Support: Government initiatives to promote the use of natural gas.

Future Outlook #

Expansion Plans or Growth Strategy:

• Capacity Expansion: Plans to further expand the capacity of the Dahej terminal.
• New Terminals: Exploring opportunities to develop new LNG terminals in India.
• Strategic Alliances: Forming strategic alliances with other companies in the energy sector.

Sustainability Initiatives or ESG Commitments:

(To provide this, you’ll need to reference Petronet LNG’s website and sustainability reports.) Look for information on:

• Reducing carbon emissions
• Promoting energy efficiency
• Investing in renewable energy
• Community development initiatives

Industry Trends Affecting Their Business:

• Increasing Adoption of Natural Gas: Shift towards cleaner energy sources.
• LNG Price Trends: Fluctuations in global LNG prices.
• Geopolitical Factors: Geopolitical events impacting LNG supply.

Long-Term Vision and Strategic Goals:

• To remain the dominant LNG player in India.
• To contribute to India’s energy security.
• To expand its business operations.
• To promote sustainable development.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Decreased from ₹59,899.36 crore in FY 2022-23 to ₹52,729.33 crore in FY 2023-24, with FY 2021-22 at ₹43,169 crore, indicating initial growth followed by a recent decline.
• Profit Before Tax (PBT): Stood at ₹4,757.03 crore in FY 2023-24, up from ₹4,335 crore in FY 2022-23, and ₹4,474 crore in FY 2021-22, showing variable trend in the recent year.
• Profit After Tax (PAT): Increased to ₹3,536.20 crore in FY 2023-24 from ₹3,240 crore in FY 2022-23, with FY 2021-22 being ₹3,352 crore, indicative of resilience and ability to improve.
• Net Worth: Grew consistently, from ₹13,425 crore in FY 2021-22 to ₹14,935 crore in FY 2022-23, reaching ₹16,963 crore in FY 2023-24.
• Capital Employed: Increase in the amount for the three years, from ₹17,696 cr in FY2021-22, to ₹18,983 cr in FY2022-23 and 20,586 in FY2023-24

Business Segment Performance #

• PLL operates in a single reportable segment: Natural Gas Business. Therefore, segment-wise financial performance breakdown is not applicable.
• Dahej Terminal operated at 95.5% capacity utilization in FY 2023-24, up from 77.8% in FY 2022-23.
• Kochi Terminal operated at 20.8% capacity utilization in FY 2023-24, up from 18.6% in FY 2022-23.
• Total send-out increased from 751.66 TBTU in FY 2022-23 to 918.95 TBTU in FY 2023-24, showing increased volume throughput.

Major Strategic Initiatives and Their Progress #

• Petrochemicals Complex at Dahej: Approved, with a cost of ₹20,685 crore. Foundation stone laid in March 2024. Major statutory clearances obtained.
• LNG Storage and Regasification Project at Gopalpur, Odisha: Pre-project activities completed. Binding agreements executed with Gopalpur Ports Limited.
• LNG Sale & Purchase Agreement (LNG SPA): PLL executed an LNG SPA with QatarEnergy on long-term basis for approximately 7.5 MMTPA, ensuring supply from 2028 till 2048.
• Dahej Terminal storage tanks: Mechanical Completion, of the two LNG tanks at Dahej, has been achieved.
• Dahej Terminal regasification capacity: Capacity is in full swing.

Risk Landscape Changes #

• The report mentions geopolitical risks, including the Russia-Ukraine conflict and instability in the Middle East, contributing to global energy market volatility.
• PLL does not take open position in regard to foreign currency loans, and hedges against forex fluctuations, according to the financial analysis document.

ESG Initiatives and Metrics #

Environmental #

• PLL is focusing on reducing carbon footprint through fuel optimization in LNG vessels and energy efficiency measures.
• PLL’s Dahej LNG Terminal has been awarded “Maritime Excellence Achievers Award 2023” in the category for “Terminal Operational Excellence”
• PLL had adopted measures towards energy conservation: shifting to shore power in Dahej, optimizing fuel consumption in LNG vessels, utilization of cold energy.
• Renewable energy capacity at Kochi terminal increased to 400 kWp.
• Rainwater harvesting and zero liquid effluent discharge were implemented.

Social #

• CSR commitment of INR 76.11 crore in FY 2023-24 for various initiatives.
• Projects focus on healthcare, education, skill development, and community infrastructure.

Governance #

• The company maintains a Code of Conduct for Board Members and Senior Management.
• No complaints were received under the Vigil Mechanism/Whistle Blower Policy during FY 2023-24.

Management Outlook #

• PLL expects a steady increase in India’s natural gas demand, driven by government policies promoting cleaner energy sources.
• The company is focused on long-term LNG contracts for stability.
• New LNG import infrastructure is being developed.
• PLL sees opportunities in the expanding city gas distribution network.

Detailed Analysis #

Financial Analysis of Petronet LNG Limited: Key Performance Indicators #

Profitability Ratios (3-Year Trend) #

Return on Equity (ROE) #

• FY 2023-24: 22.17%
• FY 2022-23: 22.85%
• FY 2021-22: Not directly available.
• Analysis: ROE remained relatively stable but with minor decrease.

Return on Capital Employed (ROCE) #

• FY 2023-24: 24.51%
• FY 2022-23: 24.58%
• FY 2021-22: Not provided.
• Analysis: ROCE also remained relatively stable, with minor changes, showing continued efficient use of capital.

Operating Profit Margin #

• FY 2023-24: 9.57%
• FY 2022-23: 7.79%
• FY 2021-22: Not provided.
• Analysis: Operating margin improved significantly, indicating better operational efficiency or cost management.

Net Profit Margin #

• FY 2023-24: 6.71%
• FY 2022-23: 5.41%
• FY 2021-22: 7.76%
• Analysis: Net profit margin also increased, reflecting the increased profitability.

Liquidity Metrics #

Current Ratio #

• FY 2023-24: 3.10
• FY 2022-23: 4.04
• Analysis: There is a drop, although above 1, showing strong short-term financial health.

Efficiency Ratios #

Inventory Turnover Ratio #

• FY 2023-24: 40.27
• FY 2022-23: 69.26
• Analysis: Significant decrease in inventory turnover, indicating a slower conversion of inventory to sales.

Trade Receivables Turnover Ratio #

• FY 2023-24: 14.12
• FY 2022-23: 18.36
• Analysis: Decrease, meaning slightly longer collection periods.

Leverage Metrics #

Debt/Equity Ratio #

• FY 2023-24: Not available as the Company do not have any long term debt.
• FY 2022-23: Not available as the Company do not have any long term debt.
• Analysis: The absence of long-term debt indicates a very conservative, low-leverage financial structure.

Working Capital #

• FY 2023-24: There is increase in working capital as compared to previous year.

Petronet LNG Limited: Segment Performance Analysis (FY 2023-24) #

Revenue and Profitability Metrics #

• Total Revenue: Rs. 53,345.17 crore (FY 2023-24), a decrease of 11.78% from Rs. 60,472.98 crore (FY 2022-23).
• Revenue from Operations: Rs. 52,728.43 crore (FY 2023-24), a decrease of 11.96% from Rs. 59,899.36 crore (FY 2022-23).
• Sale of RLNG decreased by 14%.
• Regasification services saw an increase of 68%.
• Profit Before Tax (PBT): Rs. 4,757.03 crore (FY 2023-24), an increase of 9.72% from Rs. 4,334.53 crore (FY 2022-23).
• Profit After Tax (PAT): Rs. 3,536.20 crore (FY 2023-24), an increase of 9.14% from Rs. 3,239.93 crore (FY 2022-23).
• Operating profit margin Ratio: Increased from 7.79% (FY 2022-23) to 9.57% (FY 2023-24)
• Net profit margin ratio: Increased from 5.41% (FY2022-23) to 6.71% (FY 2023-24).
• Consolidated Profit after tax for the Group: 3,652.44, an Increase by 9.82% from 3,325.82 in FY 2022-23.

Market Share and Competitive Position #

• Petronet LNG Limited accounts for approximately 34% of gas supplies in India.
• The company handles approximately 74% of LNG imports in India.

Key Products/Services Performance #

• Dahej Terminal: Operated at 95.5% capacity utilization in FY 2023-24, up from 77.8% in FY 2022-23. Throughput increased from 13.61 MMTPA to 16.71 MMTPA.
• Kochi Terminal: Operated at 20.8% capacity utilization in FY 2023-24, up from 18.6% in FY 2022-23. Sendout increased from 0.93 MMTPA to 1.04 MMTPA.
• LNG Truck loading at Dahej terminal saw 33% Increased and at Kochi Terminal saw about 49% increased.

Geographic Distribution and Market Penetration #

• The Company is Present in 19 states.
• Dahej LNG Terminal: Located in Gujarat, serves the western and northern regions of India.
• Kochi LNG Terminal: Located in Kerala, primarily caters to the southern region.
• There is binding Sub Concession Agreement, Sub Lease deed, and Port Service agreement with Gopalpur ports Limited to setting up and operate LNG terminal at Gopalpur Port.

CAPEX and ROIC #

• Total Capex: Rs. 797 crore (FY 2023-24).
• Return on Capital Employed (ROCE) has largely remained at the same level as previous year (FY 2023-24 : 24.51%, FY 2022-23 : 24.58%)
• Ongoing projects worth around Rs. 27,000 crore are in various phases of execution.

Operational Efficiency Metrics #

• Dahej Terminal achieved a total energy send-out of 864.9 TBTUs during FY 2023-24 against 703.41 in FY 2022-23
• Kochi Terminal achieved a total energy send-out of 54.05 TBTUs during FY 2023-24 against 48.25 TBTUs in previous year
• Dahej Terminal: Achieved the best-ever specific power consumption of 0.249 kWh/MMBtu in FY 2023-24, improved from 0.255 kWh/MMBtu in FY 2022-23.
• Dahej and Kochi terminals: Both received a 5-star rating in occupational health & safety audits by the British Safety Council.
• Optimization efforts at both terminals resulted in power consumption savings: over 2% at Dahej and over 10% at Kochi.
• Inventory turnover ratio decreased from 69.26 times in FY 2022-23 to 40.27 times in FY 2023-24.

Growth Initiatives and Challenges #

Growth Initiatives #

• Expansion of Dahej terminal’s regasification capacity from 17.5 MMTPA to 22.5 MMTPA.
• Construction of a third jetty at Dahej for handling LNG, ethane, and propane.
• Planned LNG terminal at Gopalpur, Odisha (4 MMTPA capacity).
• Approved Petrochemicals Complex at Dahej (750 KTA PDH unit and 500 KTA PP unit).
• Augmentation of LNG truck loading facilities at Dahej and Kochi.
• Enhancement of Gassing Up and Cooling Down (GUCD) facility at Kochi.
• Construction of an Affordable Rental Housing Complex (ARHC) and an office complex in Dwarka, New Delhi.
• Setting up of Compressed Biogas (CBG) plants across India.
• Exploring the Green Hydrogen Value Chain.
• Supply of LNG for Kerawalapitiya Power plant, Sri Lanka.

Challenges #

• Identified risks include delays in LNG projects, increases in domestic gas production, delays in pipeline connectivity, adverse regulations, geopolitical risks, and fluctuations in international LNG prices.

Risk Framework #

Strategic Risks #

• Severity: High. Reliance on long-term LNG contracts presents a high severity risk due to potential shifts in global energy markets and geopolitical issues.
• Likelihood: Medium. Geopolitical events and global energy market volatility are ongoing.
• Trend: Stable but increasing. Increasing global competition and energy transition could present challenges. The Petrochemical project brings about new risks with respect to price and competition.
• Mitigation Strategies: Diversification of supply, focus on the domestic market, expansion of regasification facilities, and entry into petrochemicals.
• Control Effectiveness: Partially Effective. Long-term contracts provide secured business, while infrastructure expansion increases capacity. The Petrochemical complex mitigates reliance.
• Potential Financial Impact: Substantial. Volatility in LNG prices or disruptions in supply could significantly impact revenue and profitability.

Operational Risks #

• Severity: Medium. Issues at Dahej or Kochi terminals (e.g., accidents, operational disruptions) could be severe.
• Likelihood: Low. Both terminals have high HSE standards and 5-star ratings from the British Safety Council.
• Trend: Stable. Consistent high capacity utilization and safety records indicate a stable trend.
• Mitigation Strategies: Strict adherence to HSE protocols, regular safety audits, emergency preparedness drills, proactive maintenance, and employee training. Implementation of the online HSE management portal ‘Suraksha Setu’.
• Control Effectiveness: High. The 5-star safety ratings and achievement of significant accident-free man-hours suggest strong operational controls.
• Potential Financial Impact: Medium. Operational disruptions could lead to reduced throughput and revenue, along with potential repair costs and penalties.

Financial Risks #

• Severity: Medium to high.
• Likelihood: Medium.
• Trend: Volatile.
• Mitigation Strategies: Hedging as per Board approved policy.
• Control Effectiveness: Partially Effective. Hedging and pass-through mechanisms provide some protection, but volatility remains a factor.
• Potential Financial Impact: Revenue from operations decreased by 12% for the FY, highlighting sensitivity. The company saw higher capacity utilisation, that contributed to the higher profitability.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Low. The Company maintains a track of Compliance.
• Trend: Stable.
• Mitigation Strategies: Comprehensive legal and regulatory compliance programs, internal audits, and engagement with regulatory bodies.
• Control Effectiveness: High.
• Potential Financial Impact: Medium. Non-compliance could lead to fines, penalties, and reputational damage.

Emerging Risks #

• Severity: Medium. Transition to a gas-based economy, and global LNG pricing volatility, pose both risks and opportunities. Petrochemical risks are not yet evaluated.
• Likelihood: Medium. The global focus on renewable energy and the transition to net-zero goals.
• Trend: Increasing.
• Mitigation Strategies: Diversification efforts into petrochemicals, investment in renewable energy sources (solar power at Kochi), and exploration of green hydrogen initiatives.
• Control Effectiveness: Developing stage. The effectiveness will depend on the successful execution of diversification strategies.
• Potential Financial Impact: The ability to adapt to the energy transition will significantly impact long-term financial performance and sustainability.

Strategic Analysis of Petronet LNG Limited #

Long-Term Strategic Goals and Progress #

• Petronet LNG aims for significant growth and diversification, targeting an annual turnover of Rs 1 lakh crore and a profit after tax of Rs 10,000 crore within five years, supported by a Rs 40,000 crore investment. Projects worth approximately Rs 27,000 crore are currently in various phases of execution, indicating substantial progress toward these goals.
• A key strategic move includes the renewal of a long-term LNG Sale & Purchase Agreement with QatarEnergy for 7.5 MMTPA, securing energy supply from 2028 to 2048.
• The company has set up Compressed Biogas (CBG) projects as a new diversified business.
• The company is making efforts to enter into the green hydrogen sector.

Competitive Advantages and Market Positioning #

• Petronet LNG handles around 74% of India’s LNG imports and accounts for approximately 34% of the nation’s gas supplies. This dominant market share provides a strong competitive advantage.
• The Dahej and Kochi terminals receiving the British Safety Council’s 5-star rating and Sword of Honour reinforces operational excellence and a strong HSE focus, surpassing industry peers.
• The Company maintains long-term supply agreements that increase the predictability of operations.

Innovation Initiatives and R&D Effectiveness #

• Petronet LNG is exploring a unique concept of integrating the cold energy from the LNG terminal with the upcoming Petrochemicals complex at Dahej, potentially achieving substantial energy savings and showcasing a commitment to operational innovation.
• Collaboration with NITK Surathkal on Renewable Hydrogen Research and hydrogen fuel cell development demonstrates a proactive approach to exploring emerging energy technologies.
• Enhancements of Gassing Up and Cooling Down facilities at the Kochi are being made.

Management’s Track Record in Execution #

• The mechanical completion of two LNG tanks at Dahej was achieved three months ahead of the contractual schedule.
• The Company is working to expand operations at Dahej and Kochi, including the creation of a unique third jetty, and an LNG terminal at Gopalpur.

Capital Allocation Strategy #

• Petronet LNG has a robust capital expenditure plan, with around Rs. 27,000 crore worth of projects underway.
• A major investment of Rs. 20,685 crore has been approved for a Petrochemicals Complex at Dahej, indicating a strategic shift towards diversification.
• Consistent dividend payouts (18th consecutive year) including a proposed final dividend of Rs. 3 per share and an interim dividend of Rs. 7 per share in FY 2023-24, show a balance between growth investments and shareholder returns.

ESG Framework #

Environmental Metrics and Targets #

• Dahej and Kochi LNG terminals received a 5-star rating from the British Safety Council for occupational health and safety.
• The Company achieved Zero Liquid Effluent discharge at both terminals.
• Kochi terminal commissioned a 200 kWp solar plant, increasing the total solar power generating capacity to 400 kWp.
• Dahej terminal clocked highest ever total daily sendout of 75.65 MMSCM on 11th October 2023
• Dahej Terminal achieved best ever specific power consumption of 0.249 Kwh/MMbtu for the FY 2023-24
• The company planted over 100,000 trees, and developed greenbelts in and around terminals.
• Company has existing solar power capacity of 560kWp with plans to increase over 1300 KWp in FY 2024-25.
• Company has collected over 73,000 m3 of rainwater during FY 2023-24.

Social Responsibility Programs #

• PLL committed INR 76.11 crore to CSR activities in FY 2023-24, focusing on healthcare, sanitation, education, skill development, art, culture, heritage development, environment & sustainability, and rural infrastructure.
• A significant portion of CSR spending (31.68%) was directed towards disaster management and environment & sustainability.
• The Company is constructing 1,500 dwelling units under the Affordable Rental Housing Complex (ARHC) scheme.
• CSR projects are implemented across the nation and covers education, healthcare, gender equality & infrastructure development.

Governance Structure and Effectiveness #

• The Board of Directors comprises a mix of executive, non-executive, and independent directors, fulfilling SEBI LODR and Companies Act, 2013 requirements.
• The board has constituted Audit, Nomination and Remuneration, Stakeholder’s Relationship, and Risk Management Committees.
• The Company has a Code of Conduct for Board Members and Senior Management Personnel, with annual compliance affirmations.
• A Vigil Mechanism/Whistle Blower Policy is in place for reporting unethical behavior or fraud.
• The recommendations made by the Audit Committee during the year were accepted by the Board.

Sustainability Investments and ROI #

• Ongoing projects to enhance operational flexibility and reduce environmental impact include the construction of two additional LNG tanks at Dahej, costing Rs 1,245 crore.
• The Regas capacity expansion project at Dahej, from 17.5 MMTPA to 22.5 MMTPA, is a brownfield expansion costing around Rs. 580 crore.
• Construction of a third jetty at Dahej, at a cost of Rs. 1,700 crore, is planned for handling LNG, ethane, and propane.
• The company is exploring feasibility for producing hydrogen from Agri-waste/Bio-Mass
• Installation of additional truck loading bays at Dahej and Kochi terminals is in progress, costing Rs 76 crore.

ESG Ratings and Peer Comparison #

• PLL’s Dahej LNG Terminal has been honoured with the distinguished ‘Maritime Excellence Achievers 2023’ in the category for ‘Terminal Operational Excellence’
• PLL’s Kochi LNG Terminal has been honoured with the prestigious Arogya World Healthy Workplace Award 2023.
• Kochi terminal received the ‘Kerala Industrial Safety Awards - 2023’
• PLL received the ‘AWARD FOR EXCELLENCE’ in the category ‘HR EXCELLENCE (Overall)’ in the 9th PSU awards & conference
• PLL’s ranking improved in Fortune India 500, Business World Real 500, ET 500, FE 1000 and BS 1000 lists.
• PLL received awards for CSR including skill development and education improvement.
• PLL has been recognized by Institutional Investor under Asia Pacific Small & Mid Cap and Asia Pacific Rest of Asia (Ex-China).
• PLL bagged top rankings in the domain of ‘Energy, Oil and Gas’ for the year 2022, in the All Asia (Ex-Japan) survey conducted by ‘Institutional Investor’

Regulatory Compliance and Future Preparations #

• The Company is compliant with the provisions of the Companies Act, 2013, SEBI LODR Regulations, 2015, and applicable Accounting Standards.
• The Company complies with environmental laws, including the Water (Prevention and Control of Pollution) Act, Air (Prevention and Control of Pollution) Act, and the Environment Protection Act.
• Company is venturing in to Compressed Biogas(CBG) project under Government of India’s initiatives SATAT / GOBARDHAN.
• The Company paid all statutory dues, including GST, provident fund, and income tax, regularly.
• There were no instances of non-compliance related to capital markets during the last three years that resulted in penalties or strictures.
• The Company adheres to a Vigil Mechanism/Whistle Blower Policy and has an Internal Complaints Committee for addressing sexual harassment complaints.

Forward Outlook: Petronet LNG Financial Analysis #

Management Guidance and Assumptions #

• Management aims for an annual turnover of Rs 1 lakh crore in five years, with a profit after tax of Rs 10,000 crore, and an investment of Rs 40,000 crore.
• Management assumes stable LNG prices and operational efficiency improvements will contribute to robust financial results.
• Management assumes that long-term LNG contracts provide stability to the growing Natural Gas/LNG market in India.
• The assumptions included using an INR/USD exchange rate of 85.4456, Brent Oil at USD 95.23/bbl, and Asian Spot LNG price at USD 13.76/MMBtu, all with a 20% markup.
• Management guidance indicates continuous focus on identifying opportunities to minimize the operational impact on the Environment.

Market Growth Forecasts #

• World real GDP growth is expected to remain steady at 2.6% for 2024, revised upward to 2.7% in 2025.
• India’s GDP is expected to achieve 6.1% growth in 2024 and 6.6% in 2025.
• Global LNG trade reached 412 million MT in CY 2023, a 2.23% year-on-year growth.
• India’s natural gas consumption increased by more than 17%(27 MMSCMD) ,averaging 188 MMSCMD in FY 2023-24 compared to 161 MMSCMD in FY 2022-23.
• India’s LNG imports increased from 20.3 MMT in 2022 to 22.6 MMT in 2023.
• The share of LNG in India’s gas consumption was around 47.64% in FY 2023-24.
• India’s regasification capacity is projected to increase from 47.7 MMTPA to 66.7 MMTPA with the completion of ongoing projects.
• To achieve a 15% share of Natural Gas in India’s energy basket by 2030, the country needs around 150 MMTPA of LNG re-gas infrastructure.
• India is adding another 10,404 kms natural gas pipeline network.

Planned Strategic Initiatives #

• Renewal of LNG Sale & Purchase Agreement (SPA) with QatarEnergy for 7.5 MMTPA from 2028 to 2048 on a delivered (DES) basis.
• Expansion of Dahej terminal regasification capacity from 17.5 MMTPA to 22.5 MMTPA.
• Construction of a third jetty at Dahej for handling LNG, liquified ethane, and propane.
• Setting up a 4 MMTPA LNG terminal at Gopalpur, Odisha.
• Setting up a Petrochemicals Complex at Dahej (750 KTA PDH unit and 500 KTA PP unit).
• Installation of additional truck loading bays at Dahej and Kochi.
• Augmentation of the Gassing Up and Cooling Down (GUCD) facility at the Kochi LNG terminal.
• Construction of an Affordable Rental Housing Complex (ARHC) with 1500 dwelling units.
• Construction of an Office Complex at Dwarka, New Delhi.
• Foray into Compressed Biogas (CBG) projects, with plans to set up 25 CBG plants.
• Green initiatives with setting up LNG infrastructure in and around major ports under ‘Harit Sagar’
• Exploring venture into green hydrogen value chain.

Capital Expenditure Plans #

• Projects worth around Rs 27,000 crore are under various phases of execution.
• Rs 1,245 crore for two additional LNG storage tanks at Dahej.
• Rs 580 crore for Dahej terminal regasification capacity expansion.
• Rs 1,700 crore for the third jetty project at Dahej.
• Rs 20,685 crore for the Petrochemicals Complex at Dahej.
• Rs 76 crore for additional truck loading bay installations at Dahej and Kochi.
• Rs 100 crore for the Affordable Rental Housing Complex (ARHC).
• Rs 160 crore for the office complex at Dwarka, New Delhi.

Efficiency Improvement Targets #

• Dahej terminal achieved best-ever specific power consumption of 0.249 kWh/MMBtu for 2023-24.
• Optimization of send-out header pressure at Kochi to reduce carbon footprint.
• Optimum running of equipment at both terminals, aiming for power consumption savings.
  • Dahej: Over 2% power consumption saving.
  • Kochi: over 10% power consumption saving.
• Utilization of cold energy from the LNG terminal in the upcoming Petrochemicals complex.
• Plans to increase solar power capacity to over 1300 kWp in FY 2024-25.
• Energy Efficiency Existing Ship Index (EEXI) and the annual operational Carbon Intensity Indicator (CII) & ratings compliances for long term-chartered vessels

Potential Challenges and Opportunities #

• Opportunities:

  • Growing natural gas demand in India, driven by government policies.
  • Expansion of gas infrastructure, including pipelines and CGD networks.
  • Potential for LNG as a transition fuel and in transportation.
  • Diversification into petrochemicals.
  • New business initiatives like CBG plants and green hydrogen.
  • Overseas Project-Supply of LNG for Kerawalapitiya Power Plant, Sri Lanka

• Challenges:

  • Geopolitical risks affecting global LNG prices and supply.
  • Delay in start-up of new LNG projects.
  • Increase in domestic gas production impacting LNG import demand.
  • Delay in connectivity of pipelines with LNG Terminals.
  • Adverse regulations or policies impacting the LNG sector.

Scenario Analysis and Sensitivity #

• LNG Pricing: Volatility in global LNG spot prices, as seen in the past, poses a significant risk. The company’s long-term contracts provide some stability, but spot purchases are exposed to price fluctuations. Sensitivity analysis shows significant impact on revenue based on price and INR/USD assumptions.
• Foreign Exchange Risk: The company is exposed to fluctuations in INR/USD exchange rates. A 10% movement in the exchange rate could significantly impact profit or loss, highlighting a need for robust hedging strategies.
• Energy Efficiency: The efficiency is being improved.
• Capacity Utilization: The Report indicates focus on increased capacity utilization to achieve targets.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The auditor issued an unqualified opinion on the standalone and consolidated financial statements, indicating compliance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India.
• An emphasis of matter was included regarding the recoverability of trade receivables related to “Use or Pay” (UoP) dues, with the opinion remaining unmodified.
• The auditors did not audit the financial statements of 2 subsidiaries.
• Auditors were unable to comment on qualifications for one joint venture, since unaudited statements were used.

Key Accounting Policies and Changes #

• The financial statements are prepared on a historical cost basis, with exceptions for certain financial assets and defined benefit liabilities.
• The Company consistently applied accounting policies.
• No significant changes in accounting policies were noted, but there were changes in estimates of actuarial assumptions.

Internal Control Effectiveness #

• The auditor’s report states that the Company has, in all material respects, an adequate internal financial controls system with reference to standalone financial statements, and such controls were operating effectively.
• Management asserts responsibility for establishing and maintaining internal controls.

Regulatory Compliance Status #

• The Company complied with applicable laws and regulations.
• There were no penalties or strictures imposed by statutory authorities for non-compliance related to capital markets in the last three years, except for previously reported penalties related to the composition of the Board.
• The Company has complied with the provisions related to CSR expenditure.
• Complied with applicable secretarial standards.
• The Company’s quarterly returns to banks, secured by current assets, are aligned with its account books.

Legal Proceedings and Their Potential Impact #

• There are various pending litigations, mainly demands from tax authorities, which the Company is contesting.
• The Company disclosed the impact of pending litigations on its financial position in Note 37 to the Standalone Financial Statements and Consolidated Note 37.
• No material adverse effect on the Company’s financial condition, results of operations, or cash flows is expected from these contingencies.
• Ongoing arbitration with a contractor, with an award in favour of the contractor and currently challenged by the Company.

Related Party Transactions #

• The Company has a comprehensive Related Party Transactions Policy.
• Material transactions with related parties (GAIL, IOCL, BPCL, ONGC, and their affiliates) for the supply of goods/services were conducted in the ordinary course of business and on an arm’s length basis.
• Disclosure regarding material transactions with related parties is provided quarterly.
• Transactions with related parties were according to policy.

Analysis of Accounting Quality and Regulatory Risk Assessment #

• Accounting Quality: The unqualified audit opinion, consistent application of accounting policies, and the presence of a robust internal control system suggest good accounting quality. However, the emphasis of matter regarding the “Use or Pay” dues indicates a potential area of concern, although the auditor’s opinion is not modified. The lack of balance confirmation from customers regarding these dues increases the risk, but the provision made by the company is a mitigating factor.
• Regulatory Risk: The Company appears to be generally compliant with regulations, with past issues related to board composition. No penalties related to the capital market were noted. The legal proceedings, while ongoing, are disclosed, and the Company is actively contesting them.