GSPL to increase pipeline in Gujarat by 200 kms: Joint MD

Speaking to CNBC-TV18 T Natarajan, Joint Managing Director of GSPL, said that margins are linked to the tariffs. “We do expect a reasonable increase in margins when the tariff is implemented.”

In the short-term, he sees growth in sectors like steel, and city gas distribution. Talking about business from power, he said GSPL has seen roughly 20 percent of its business from the power sector.

GSPL, a Gujarat-dominant company, has 2500 km of pipeline in the state. “We are going to increase it the coming year by 200 kms,” he said, adding that this will connect to some of the market areas in Saurashtra and north Gujarat.Below is the verbatim transcript of T Natarajan's interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18.Anuj: The first thing that investors want to know is on tariffs. Going forward what kind of tariff hike can be expected over the next four-six months?A: As far as GSPL is concerned, we have submitted the various details over the regulatory authority. We are just waiting -- as soon as possible we are getting a reasonable increase in the tariffs.Anuj: The market is expecting a tariff hike of about 15 percent over next six months, would that be a reasonable number?A: We are expecting a reasonable increase in the tariff. I will not give any numbers to that now, let us just wait for some more time.Latha: What is the kind of volume increase we should expect? You all will get this bonanza of lower gas prices plus what can we expect in terms of -- your expectation of volumes and margins more importantly?A: Yes, margin is linked to the tariff. So we do expect reasonable increase in the margin as and when the tariff is implemented.As far as the volume -- we have reasonably good increase in the volume in the last year and particularly the last quarter of around 8 percent. In the current market situation, we do expect to continue this growth and also expect moderating improvement over that. In the short-term, we see sectors like steel, city gas distribution (CGD) business giving us improvement and volume.In CGD, we are providing gas through domestic consumers.Latha: What about power? Power will not show more demand?A: Over the years, in our overall portfolio percentage of power has decreased that is because of larger other factors especially the power tariff itself. We have roughly 20 percent of our business coming from the power sector.Going forward, certainly when the gas prices eases further, we do expect a moderate improvement. We have to see it in the context of various other sources of power. So we will maintain it and hope to improve on that.Latha: You are increasing capacity, isn’t it?A: We are predominantly in Gujarat. So we are increasing capacity to connect to new markets within the state.Latha: What is that volume, how much is it and when does it come on stream?A: We have around 2,500 kilometres of pipeline in the state. We are going to increase in the coming year by around another 200 kilometres. So this will connect us to some of the new market areas in the Saurashtra region as well as in north Gujarat region. With this, we will be able to cater to the industries there as well as domestic consumers.Latha: What should we expect in terms of EBITDA growth? Rs 233 crore was your Q1, so should we expect -- it was a modest increase, it was only 3 percent -- it now becoming a double digit, a 10 percent increase?A:  There are two factors, one because of the tariff we do expect a reasonably growth and also along with that, within the existing network we are able to improve our volume. So we will improve upon the current rate of growth and I would say in a year or so, we should be able to reach much higher percentages including double digit growth.