adani gas ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

GLOBAL ECONOMIC OVERVIEW

As the global economy was recovering from the recessionary effects of COVID-19 and starting to accelerate, it faced another unexpected shock due to Russian invasion of Ukraine, that caused an adverse impact on the economies across the globe. Fueled by pent-up demand, supply chain disruptions and high commodity prices, inflation reached it multidecade high in various countries, leading to stringent measures by central banks to keep it anchored, inadvertently causing another global slowdown. As per World Economic Outlook published by the IMF International Monetarv Fund in April 2023. The global growth rate stood at 3.2% in calendar year 2022 and is projected to slow down further in 2023 to 2.8%. The bleak outlook is on the account of stringent measures to bring down inflation. The fallout from deteriorating financial conditions. The ongoing war in Ukraine, and growing geoeconomic fragmentation, as noted by the IMF.

growth	2023 (P)	2022	2021
World output	2.8%	3.4%	6.0%
Advanced economies	1.3%	2.7%	5.2%
Emerging and developing economies	3.9%	4.0%	6.6%
India	5.9%	6.8%	8.7%
China	5.2%	3.0%	8.1%

Source: World Economic Outlook by IMF, published in April 2023 and October 2022. 2023 (P): projected

PERFORMANCE OF MAJOR ECONOMIES

United States: As a result of sharp policy tightening in response to rising inflation. The US 3-month Treasury bond and 10-year Treasury bonds yields peaked at 4.7% and 4.23% respectively, in FY 2022, resulting in significant losses on fixed-income assets and causing collapse of two major regional bank in US in the month of March 2023. While finally able to rein in the inflation. The US economy grew at 2.1% in the year 2022.

China: At 3.0% growth rate. The Chinese economy slowed down to its lowest since many decades, barring COVID-19. This was partly due to strict curbs imposed by the Chinese government under its zero-COVID policy to deal with regional outbreaks during the year, coupled with worsening residential property market and weak global demand for its export during the year.

United Kingdom: Even as the UK growth rate stood at 4.0%, which was highest among the Advanced Economies, it barely avoided the recession triggered by high energy prices and inflation. The change in leadership kept the country on its toes, as it negotiated the challenges of post-BREXIT era.

Japan: The Japanese economy grew at 1.1%, which was lowest among the Advanced Economies, as rising fuel cost and depreciating Yen remained a major concern for the country.

Germany: The German economy grew at 1.8%, as it bore the biggest brunt of high fuel prices as a direct result of war in Ukraine, causing high inflation and weak exports.

INDIAN ECONOMIC OVERVIEW

The year 2022 marked the 75th year of Indias independence, as it became 5th largest economy in the world. The Indian economy remained a bright spot and grew at 6.8% despite global headwinds. Even as the country saw lower growth compared to 2021, it navigated commendably through high energy prices, weak global demand, and a tight monetary policy globally. The growth of Indian economy was led by private consumption and capital formation.

YoY Growth of Indian Economy

	FY 23	FY 22	FY 21	FY 20
Real GDP Growth (%)	6.8%	8.7%	(6.6%)	3.7%

Growth of Indian Economy in FY 2022-23

	Q1	Q2	Q3	Q4
Real GDP Growth (%)	13.5%	6.2%	4.4%	6.1%

This was fourth consecutive year of receiving normal or above normal monsoon, with only around 17% of the area receiving deficient season rainfall, mostly around Gangetic plains, causing around 1% decline in overall acreage of kharif crops.

To curb the inflation. The RBI Reserve Bank of India tightened its policy rates, which were previously held steadily at 4.0% since May 2020, to 6.5% by the end of FY 2022-23. As a result of these measures. The inflation (CPI) which had touched 7.8% in April 2022, came down to 5.7% in March 2023, with wholesale inflation (WPI) staying below 5% in Q4 of FY 2022-23.

Even with higher inflation. The private consumption stayed at 58.4% of GDP in Q2. The highest among second quarters of all years since FY 2013-14, as a result of strong growth in contact intensive services such as trade, hotel and transportation.

The CAPEX of the Central Government increased by more than 63% in the first three quarters of the FY, even as it managed to keep fiscal deficit at 6.4% of GDP, compared to 6.7% in the previous year. The credit growth to MSME Micro, SmalL and Medium Enterpnses segment stayed over 30%, highlighting strong recovery post pandemic. The gross GST collection in FY stood at Rs.18.1 lakh Crore, 22% higher than the previous year.

The Indian Rupee depreciated against US Dollar by around 7.3% during the FY, making imported goods dearer. As country met significant portion of its energy demand through imported fuels, high energy prices compounded by depreciating Rupee remained a major concern throughout the better part of the FY. The foreign exchange reserves dropped to USD 563 billion in December 2022, compared to USD 607 billion in the previous year. The gross foreign direct investment (FDI) also fell to USD 71 billion in the FY, amid corrections in global equity market and global slowdown.

The growth in Gross Value Added (GVA) over basic prices (est. at 2011-12 prices level) stayed at 6.6%, led by segments such as Trade, Hotels, Transport, Communications (14.2%), Utilities (electricity, gas, water supply) 9.2%, and Construction (9.1%). The total goods export grew by 6% to USD 447 billion, while the imports increased by 16.5% to USD 714 billion.

The 2022-23 Union Budget laid emphasis on building infrastructure, through PM GatiShakti, focusing on Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure. Programs on Skill development, Health and Housing for all were also highlighted in the budget. The government also allocated Rs.19,500 Crore for PLI for manufacturing of high efficiency solar modules to meet goal of 280 GW of installed Solar PV capacity by 2030. Data Centers and Energy Storage Systems to be given Infrastructure status. The budget announced Sovereign Green Bonds to be issued for mobilizing resources for green infrastructure. The government also announced tariff measure to encourage blending of fuel.

Outlook

The growth outlook is positive based upon multiple structural changes that have been implemented in recent past. The capital formation by the private sector, which was slow in previous decade on account of repairing balance sheet, is expected to take off again. The financial institutions that were stressed due to rising non-performing assets and low credit growth, are now witnessing signs of turnaround, with Public Sector Banks reporting a profit of over Rs.1 lakh Crore in FY 2022-23.

It is also important to highlight the threats posed by spillover effects of slowing economic activity in Advanced Economies, prolonged strains in global supply chain, and heightened uncertainty due to geopolitical conflicts.

In its World Economic Outlook 2023. The IMF projects

Indian growth to further slow down to 5.9% in 2023, before picking up again to 6.3% in 2024. However, India is still expected to contribute to 15% of global growth in 2023. The World Bank projects the growth rate of 6.3% in FY 2023-24. The lower projections are on the account of expected slower consumption growth and challenging external conditions. The Economic Survey, on the other hand, pegs the projected baseline GDP growth at 6.5% for FY 2023-24.

(Sources: Ministry of Finance - Economic Survey 2022-23, National Statistical Office, India Meteorological Department, IMF - World Economic Outlook. The World Bank - India Development Update Spring 2023, and news articles from The Hindu, Mint and Reuters,)

GLOBAL ENERGY INDUSTRY OVERVIEW

Oil and Natural Gas

In early part of the FY. The crude supply became tight due to losses and dislocations stemming from Ukraine crisis, requiring several oil producing countries to release emergency reserves (120 mmbbl million barrels) to provide some cushion to an already sky- high crude oil price which had crossed USD 120/bbl mark in June 2022. Global refinery margins also surged to extraordinarily high levels during the year due to depleted product inventories and constrained refinery activity, with the burnt of high fuel prices ultimately borne by the end consumers. High fuel prices started to dent oil consumption in the OECD Organization for Economic Co-operation and Development, but this was countered by a stronger-than-expected demand rebound in emerging and developing economies led by China as it starts to emerge from Covid lockdowns.

At the same time, natural gas and electricity prices started to soar to new records around July 2022 onwards, with US Henry Hub natural gas price staying between USD 6 to 9.5 per mmbtu for better part of the FY. The EU Dutch TTF natural gas price, which had breached EUR 100 /MWh previously, stayed well above this mark for better part of the FY, even reaching as high as EUR 340 /MWh. High gas prices incentivized gas-to-oil switching in some countries. Diesel prices and cracks (differential to crude oil price) surged to record levels in October 22, and were at 70% and 425% higher respectively, than year-ago levels while benchmark Brent prices increased just 11% during the same period.

While LNG Liquefied Natural Gas rose merely 5.5% in volumetric terms. The value of global LNG trade doubled in 2022 to an all-time high of USD 450 billion. The global energy and gas crisis triggered by war drove up spot gas prices and LNG import bills to record levels across key Asian and European markets. Gas and LNG producers record profits could support additional investment in reducing the emissions intensity of gas value chains, enhancing methane capture efforts, and diversifying economic structures to adapt to the new global energy economy that is emerging. LNG played a critical role in mitigating the impact of Russias deep cuts in piped gas supply to the European Union and was instrumental in avoiding gas supply shortages in 2022.

Battery Electric Vehicles

Electric Vehicles continued to increase its share of sales globally, with more than 10 million electric cars sold worldwide in 2022, capturing 14% of global car market. An estimate by IEA International Energy Agency concludes that globally, EV would be responsible to avoid need of 5 million barrels of oil per day by 2030.

The growth in EV, however, is skewed with only three regions making up for majority of new sales, namely, China, Europe, and the United States. China led the segment with up to 60% of new EV sales arising there. The growth in EV segment, however, remains dependent on battery manufacturing and supply chain, which at present are controlled by handful of countries. The US and EU governments have launched various incentives to bring battery manufacturing into domestic markets.

Hydrogen

Hydrogen continued to remain an area of interest, with FID Final Investment Decision of around USD 22 billion being made in year 2022 as reported by Hydrogen Council in September 2022. China leads on actual deployment of electrolyzers (around 200 MW), while Japan and South Korea are leading in fuel cells, with more than half of 11 GW of global manufacturing capacity. With high production cost of Green Hydrogen still posing a formidable challenge, a lot is yet to be done to make Hydrogen a viable source of clean energy for wider adoption. While the pipeline of low-emission hydrogen projects is expanding, only a small portion of these make it to FID stage. The outlook in mid to long term, however, is positive, with countries stepping up their efforts on policy, technology, and financing fronts.

Biogas and Biomethane

Biogas, and by extension Biomethane, has emerged as solution to two important problems faced by the world: need for reduction in greenhouse gas emissions and dealing with organic waste produced by modern societies. Various feedstocks, like crop residue, livestock manure, organic fraction of municipal solid waste, and wastewater sludge can be used to produce biogas and biomethane. Most biomethane is produced by upgrading biogas, by removing non-methane components. Europe leads the Biogas production, followed by China and the United States. While total production of biomethane stands at around 35 mtoe million ton of oil equivalent there is growing interest in this fuel segment due its impact on GHG reduction.

(Sources: International Energy Agency, Hydrogen Council, and news articles from Reuters)

INDIAN ENERGY INDUSTRY OVERVIEW

Oil and Natural Gas

In FY 2022-23. The crude oil production in India stood at 29.2 MMT Million Metric Ton, almost at the same level as previous year, while the Natural Gas production stood at 34.45 BCM Billion SCM in the same duration. To fulfil supply deficit, India imported 232.6 MMT of crude oil and 26.65 BCM of Natural Gas (as LNG) in FY 2022-23, generating a net import bill of USD 144.1 billion, which was around 27% higher than the previous FY. Petroleum imports stood at 25.8% of gross imports in the country. While the consumption of Petroleum Products increased by around 10.2% due to greater economic activity. The consumption of Natural Gas fell by 6% in the same period due to higher gas prices and availability of alternative fuels. The LPG sales to domestic consumers remained almost same as that in previous year at 25.38 MMT, however. The sale to nondomestic consumers and bulk grew by 16.4% and 4.6% respectively.

Consumption of Key Petroleum Products and Natural Gas - A Quick Comparison

Fuel	UOM	FY 2022-23	FY 2021-22	growth
LPG	MMT	28.5	28.3	0.7%
MS (Petrol)	MMT	35	30.8	13.6%
HSD (Diesel)	MMT	85.9	76.7	12.0%
FO/LSHS	MMT	6.9	6.3	9.5%
PET COKE	MMT	17.9	14.3	25.2%
Natural Gas	BCM	60.3	64.2	(6.0%)

Source: PPAC

Oil and Natural gas Infrastructure Total crude oil refining capacity stood at 251.2 MMTPA, with major crude oil and petroleum product pipeline network of 10,420 km and 22,488 km respectively. By the end of 2022. The length of common carrier natural gas pipeline stood at 21,129 km, with additional 12,002 km length under construction. There are 6 LNG import terminals being in operation, with a total installed capacity of 42.7 MMTPA and at capacity utilization levels lower than those in the previous FY due to higher LNG prices.

LNG import terminals and capacity utilization

Location	Capacity MMTPA	% Capacity utilization (Apr-Feb 23)	% Capacity utilization (apr-Feb 22)
Dahej	17.5	77.8	88.5
Hazira	5.2	36.2	50.0
Dabhol	5	36.5	79.9
Kochi	5	18.4	20.9
Ennore	5	13.0	13.0
Mundra	5	16.7	19.4

Source: PPAC

Piped Natural Gas (PNG) and Compressed Natural Gas (CNG)

	FY 23	FY 22	YoY growth
CNG Stations	5,665	4,433	27.8%
PNG - Domestic	11.0 million	9.3 million	18.3%
PNG - Commercial	37,772	34,854	8.4%
PNG - Industrial	16,563	13,215	25.3%

Natural gas Pricing and Consumption In early 2022, due to a sharp increase in global prices amid low inventory and energy crisis in Europe. The domestic price of Natural Gas from legacy field rose from USD 2.9/MMBtu to USD 6.1/MMBtu in April 2022, continuing their climb to USD 8.57/MMBtu in October 2022, Its registering almost 3X increase during FY 2022-23. This caused natural gas demand to shrink by 6%, as alternative fuels became economical in comparison to gas.

Owing to high demand, Spot LNG prices rose to USD 54/MMBTU due to high demand from Asia and Europe, and supply constraints. The contracted LNG prices followed, which are usually crude linked, also increased significantly, to USD 13 /MMBTU.

Previously, during FY 2022-23. The APM Administered Pricing Mechanism price was linked to global indices, namely Henry Hub (USA), Alberta (Canada), National Balancing Point (UK), and Russia, it was affected by volatility of these indices caused by war in Ukraine. The Kirit Parikh panel, which was formed to revise the APM gas pricing mechanism, suggested simplifying the gas pricing by linking it to monthly average Indian Crude basket (at 10% slope), subject to a floor and a ceiling. The committee recommendation was finally accepted by the Cabinet Committee on Economic Affairs (CCEA) in April 2023. The simplified mechanism and reduction in APM gas prices at prevailing price of Indian Crude basket, was welcomed by the Indian energy industry and will go a long way to increase the penetration of Natural Gas in the Indian energy mix. It is noteworthy, that the Indian Government has set a target of increasing the share of Natural Gas to 15% by year 2030.

Transport Segment

With overall growth in automobiles sales of 20% in FY 2022-23. The industry recorded highest passenger vehicle sales with an annual growth of 27%. Commercial Vehicles and Three-Wheelers posted growth of 34% and 87% respectively, driven by higher off-take of

Passenger Carriers. The Two-wheelers segment grew by a moderate 17%, after witnessing de-growth for previous three consecutive years.

In August 2022, MoRTH Ministry of Road Transport and Highways notified regarding retrofitting of CNG and LPG kit on BS (Bharat Stage)-VI gasoline vehicles and replacement of diesel engines with CNG/LPG engines in case of BS-VI vehicles, less than 3.5 tons.

The CNG fueled vehicles also saw a strong growth in sales, which stood at 6.6 lakh in FY 2022-23, almost 46.2% higher than previous FY, out of which nearly half was attributable to new CNG car sales in the country. Around 56 new LNG vehicles were registered in the country during the same period, which is expected to grow further, with government push to decarbonize long-haul heavy-duty transportation segment.

Electric Vehicles

The BEVs Battery Electric Vehicle dominated the alternative fuel vehicle sales, with over 12.43 lakh units registered during FY 2022-23, of which around 92% came from 2W and 3W sales.

The Phase II of FAME Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme, which began in April 2019, has been further extended till 31st March, 2024. Under Phase II, Rs.1,000 Crore is allocated for the development of charging infrastructure. The Ministry has sanctioned 2,877 electric vehicle charging stations in 68 cities across 25 states/UTs. Further, 1576 charging stations across 9 Expressways and 16 Highways under phase- II of FAME India Scheme were also sanctioned. As per data available with BEE, a total of 419 Public Charging Stations (PCS) are operational across national highway in the country

CGD Sector

CGD sector in FY 23 witnessed almost no change in terms of gas volumes. Its development is pivotal in providing clean energy to the nation and moving towards target of achieving net zero by 2070. At present, CGD sector consumes approximately 35 MMSCMD of natural gas, with around 40% sourced from imported regasified liquefied natural gas (RLNG) which is consumed by the commercial and industrial segments.

After completion of 11A CGD bidding round by Petroleum and Natural Gas Regulatory Board (PNGRB), 295 GAs will cover about 98 per cent of the population and about 88% of total geographical area of the country spread over nearly 630 districts in 28 states/ UTs. Further, India is set to expand Indias natural gas grid to 34,500 kms by adding another 17,000 kms gas pipeline and CNG stations are going to increase three times by 2025.

The city gas distribution (CGD) along with fertilizers sector will continue to helm demand for domestic natural gas in India and lift its consumption by 3.5-4.5% in fiscal year 2023. The CGD demand will grow 12-13% and that of fertilizers by 8-9%. Together. These two sectors account for 55% of the total gas consumption in the country.

The revised APM mechanism as per Kirit Parikh committee recommendation will lead to significant decrease in prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport.

Biogas and Biomethane

The SATAT Sustainable Alternative Towards Affordable

Transportation scheme by Ministry of Petroleum and Natural Gas, Government of India, has been launched to extract economic value from biomass in form of CBG Compressed Biogas and bio-manure. The scheme envisages setting up on CBG plants using feedstock such as crop residue, livestock manure, organic fraction of municipal solid waste, and wastewater sludge, with assured off-take of produced CBG to PSU OMCs Oil Marketing Companies for retail sale.

To promote CBG adoption, government has set a target to blend CBG into natural gas by 5% for city gas distribution companies by 2027. The Union Budget lays the roadmap for countrys sustainable green energy growth by emphasizing on the circular economy & kept Rs.10,000 Crore for setting up biogas plants, a move hailed by the industry. With this, 125 rural CBG plants, 75 urban areas CBG plants, and 300 cluster-based are planned to be set up.

The Government of India while reiterating its target of increasing the mix of natural gas in energy mix to 15% by 2030, has announced to set up 5,000 commercial

CBG plants by 2024- 25 and produce 15 MMT of CBG, which would replace other gaseous fuels being used in the country. By April 2023, around 46 CBG plants were already commissioned under SATAT scheme, with around 100 retail outlets dispensing CBG across the country.

COMPANY OVERVIEW

Adani Total Gas is engaged in the city gas distribution business, supplying PNG to industrial, commercial and residential segments and CNG to the automotive segment. Adani Total Gas enjoys a footprint in 33 geographical areas, including States like Madhya Pradesh, Gujarat, Haryana, Uttar Pradesh, Chhattisgarh, Karnataka, Tamil Nadu, Odisha and Rajasthan at the close of the year under review. Adani Total Gas enjoys a joint venture (50:50) with Indian Oil Corporation (Indian Oil-Adani Gas Private Limited) with a presence in 19 geographic areas comprising the Union Territory of Daman and States of Punjab, Haryana, Kerala, Karnataka, Uttarakhand, Goa, Bihar, West Bengal and Uttar Pradesh.

In its core business, ATGL is focusing on enhancing sales volume, advancing implementation plan for the 11th round GAs with pipeline connectivity, early monetization of CGDs infrastructure, and exploring LCNG and LPNG route in GAs where trunk pipeline is still not present. Further, expansion of CNG station network on an asset light model (DODO) is being explored with profitability improvement plans.

ATGL is in advanced stage of developing LNG retail solutions for transportation segment, levering its strength in gas sourcing and vast experience of its promoter company, TotalEnergies. Finally, as shortfall in supply of APM gas is anticipated with growing domestic demand, ATGL is working on diversified gas sourcing portfolio, through optimum mix of long-term and short-term contracts, including through IGX.

OUR DIVERSIFIED SOLUTIONS

E-Mobility

ATGL formed a SPV, Adani TotalEnergies E-Mobility Limited (ATEEL), which is a 100% owned subsidiary of ATGL. Aligned to countrys vision of EV30@30, ATEELs vision is to contribute towards creating EV charging ecosystem to support the fast growing EV penetration drive in the country. ATEEL has commenced building the E-mobility business by setting up EV charging infrastructure across the country catering to various segment; Bus, 4W cars, taxis, 3W and 2W commercial applications. The e-mobility is a strategic fit to our existing business of retailing fuel to the transport sector. ATGL can further leverage group synergies for sourcing green power from Adani Group and global experience of TE to develop a competitive edge and aspire for market leadership.

ATEEL has commissioned 104 Charging Points at 26 sites across the country deployed as Public Charging Stations & Captive Charging Stations based on association with location partner & nature of premises. This includes marquee locations like Ahmedabad Airport, Mumbai Airport, Jaipur Airport, Lucknow Airport, and Gift City Gandhinagar. All the charging stations are onboarded on ATEELs digital platform & can be accessed through our Mobile Application.

ATEEL has also entered into strategic partnerships various B2B players in the space of Electric bus, Taxi fleet operators and last mile delivery players

Biomass

ATGL has formed a SPV, Adani TotalEnergies Bio-Gas

Limited (ATEBL), which is a 100% owned subsidiary of ATGL to build the Biomass business by setting up CBG processing plants across the country based on multiple feedstocks like Agri waste as well as Municipal Sold Wastes.

In line with our aspirations to tap the huge potential of Compressed Biogas segment, ATEBL has initiated construction of Indias largest biogas plant in Barsana, near Mathura which will have capacity to process 600 TPD of feedstock and produce about 42.6 TPD of CBG and 217 TPD of Organic manure. Commissioning of the first CBG based CNG Station at Varanasi has been a key milestone in our quest for increasing footprint beyond allocated GAs.

OUR INNOVATIONS

CoE [ Centre of Excellence ]

Envisioned with the view to improve the operations of Company and improve the utilization of resources around 18 Centre of Excellence are formed by ATGL.

All the CoEs work independently in their respective domain and provide business improvement recommendation to enhance overall operations & output of ATGL.

Major business CoEs are as mentioned below:

ATGL believes the use of cutting-edge technology and automation will generate superior asset returns, consumer service, customer experience, operational integrity and graduate India into a new age in technology-driven utilities. ATGL has taken crucial steps towards becoming a Technology driven Company. The Company intends to automate processes and operation by increasing operational efficiency. ATGL has undertaken the below listed key innovations to bring about break through improvements in operational efficiencies:

• Digital platform-SOUL an Integrated Business Operations Platform centre for monitoring entire CGD network through SCADA. At ATGL. The robust operational foundation is being institutionalised through its Nerve Centre. The SOUL which, will operate via a governance of Hub and Spoke model where nerve center would be the hub and individual GAs will be spoke to bring the required operational efficiency. SOUL initiative will help in moderating operations & maintenance costs, enhance operational surveillance, excellence and service.

• AMR system for I&C customers: ATGL implemented Automated Meter Reading (AMR) system for all industrial and commercial customers to reinforce safety and offer improved service. Meters are deployed with SIM based modem along with AMR system for auto data update in SAP system for auto invoicing.

• Emergency Response Management System (ERMS): ATGL developed an app called ATGL-ERMS to manage emergencies such as gas escape, leak or fire effectively and moderate the response time with detailed information of all such incidents. This app is used by internal and external bodies comprising employees, public and partners.

• Touchless Revenue Management (TRM): ATGL introduced TRM to improve capabilities. eNACH for automatic clearing of payment against invoice generation and digitally signed invoices to the end consumers. This is part of the Companys Go-Green Go-Digital initiative.

• Data Lake created to enable seamless integration of all data, Real-time reporting and dashboards to all business functions to ensure data-driven decision making.

• ATGL has cloud-based IT infrastructure and MPLS based network connectivity which can be scaled up within hours based on the requirement & business needs. As a roadmap for embedding analytics in all business processes, all the customer databases are maintained in SAP HANA database and all assets managed though SAP EAM (Enterprise Asset Management) module. Basic analytics is already in place and we are further exploring enterprise level tool for advance analytics.

• Robotic process automation (RPA) implemented to automate invoice processing, which increased operational efficiency,

• Facial Recognition System (FRS) implemented FRS across 46 locations across the country and achieved 100% use for access control and attendance.

• Cyber Security Initiatives undertaken to secure the business operations including; Technology Transformations, Implementation Of Firewalls, Security Assessment & Vulnerability management, Cyber Security Training & Awareness, Risk Management & Governance Framework and setting up a Cyber Defense Center for Round-the-Clock monitoring of the entire infrastructure for pro-active incident detection and response.

• My Adani Gas: ATGLs mobile application, a digital platform that helps collaborate with partners and stakeholders like vendors, customers, employees and contractors. The App helps in onboarding PNG consumers using eKYC, track progress, upload gas meter readings, online Billing, digital Payments, drive loyalty programs, and provide customer care. My Adani Gas App will bring in the required end to end visibility to the end consumer and a paradigm shift in customer.

CRM

Customer Delight:

At ATGL, our goal is to provide exceptional digital experiences with a human touch to our customers. Therefore, we continuously strive to transform physical, manual processes into the ones that drive digitization. It is our constant endeavor to personalize the My AdaniGas mobile application and ATGL website experience for our customers, to their expectations and beyond. Key Customer Delight Initiatives include:

Cloud based SAP integrated IVRS: Customers can interact with the automated system of ATGL which can respond to customers queries and can generate new business leads.

Online Name transfer: Customer can apply name transfer for their connection through ATGL website and My AdaniGas mobile application - 100% penetration.

Mobile App in native Indian language: For the convenience and better customer experience and services, this application is accessible in native Indian dialects.

Gas consumption Bills in Indian local languages: For the convenience and better customer experience considering our existence in various regions of the country. Customer can select the language for the bills receipt.

Self-billing: By entering meter readings, customers can generate gas invoices and receive through WhatsApp.

Online refund: Customer can apply for any refund through mobile application and no need to visit customer delight offices.

Customer awareness videos: ATGL has published videos providing steps for usage of different digital platforms to increase digital transactions, improve safety aspects, to generate self-bill etc...

Customer Coach Program: Unique initiative by ATGL for enhancing its services and delivering delightful experiences to the customers. - 550 nos. of letters with gift vouchers are sent to DPNG customers.

Customer Journey: On the My AdaniGas Mobile app, customers will be able to monitor the stage wise progress of their connections from registration to connection completion.

Digital Transaction: Various digital initiatives resulted in receiving 97% ATGL revenue digitally which is highest in any utility / CGD industry in the country.

FINANCIAL OVERVIEW

Financial and Operational Performance

The annual sales volume stood at 753.00 MMSCM in FY 2022-23 as against 696.71 MMSCM in FY 2021-22 with 8% YoY volume growth. The Companys revenue stood at Rs.4683.23 Crore as on 31st March, 2023 as against Rs.3206.36 Crore in FY 2021-22. The EBITDA grew by 11.4% from Rs.814.50 Crore to Rs.907.38 Crore while the PAT grew by 5.0% from Rs.504.66 Crore in FY 2021-22 to Rs.529.82 Crore in FY 2022-23. Profitability improved mainly due to volume growth in the existing and new geographical areas.

Infrastructure and operations update

• Total CNG stations increased to 460 following the addition of 126 new CNG stations in FY 2022-23

• Cumulative steel pipeline network stood at 1,308 inch Km, with 236 kms laid in FY 2022-23

• Number of domestic customers crossed in Lakh 7.04 with 1,23,552 customers added in FY 2022-23

• Number of Industrial and Commercial Customers stood at 7,435, with 867 customers added in FY 2022-23

KEY FINANCIAL RATIOS AND RETURN ON NET WORTH

The key financial ratios compared to the last financial year are as under:

Particulars	Current FY ended 31st March, 2023	Previous FY ended 31st March, 2022	Changes between current FY and previous FY	Reason For change
Debtors Turnover	19.19	20.93	-8%
Inventory Turnover	328.51	297.56	10%
Interest Coverage Ratio	10.11	13.88	-27%	Higher Interest cost lead to decrease in Interest coverage ratio
Current Ratio	0.39	0.25	59%	Ratio shows improvement mainly due to increase in trade receivable and change in maturity period of Investment from Non-Current to Current.
Debt-Equity Ratio	0.47	0.41	14%
Operating Profit Margin (%)	18.6%	24.1%	-23%
Net Profit Margin (%) or sectorspecific equivalent ratios, as applicable	11.2%	15.5%	-28%	PAT increased by 5% during the year in absolute values. Since revenue increased significantly due to higher commodity prices, it resulted into lower margins in percentage terms.
Return on Net Worth (%)	19.7%	23.0%	-14%

Notes:

a. Above ratios were based on the Standalone Financial Statements of the Company.

b. Definitions of ratios:

1. Debtors turnover: Average trade receivable by revenue from operations (Excluding Excise Duty) for the year.

2. Inventory turnover: Average inventory (Excluding Stores and spares) by Cost of Goods Sold for the year.

3. Interest coverage ratio: Total EBIT by finance cost for the year.

4. Current ratio: all types of Financial and Non-Financial Current assets by all types of Financial and Non-Financial current liabilities.

5. Debt equity ratio: Current and Non current Borrowing by total equity at the end of the year.

6. Operating profit margin: Operating EBIDTA by revenue from operation for the year.

7. Net profit margin: Profit for the year by total income for the year.

8. Return on net worth: Profit for the year by average Total Equity

FINANCIAL AND OPERATIONAL PERFORMANCE HIGHLIGHTS OF THE JOINT VENTURE COMPANY INDIAN OIL ADANI GAS PRIVATE LIMITED (IOAGPL)

IOAGPL is a joint venture company of Indian Oil Corporation Limited (IOCL) and Adani Total Gas Ltd. (ATGL). IOAGPL was commissioned to develop City Gas Distribution projects across the country through a network of underground pipelines for the distribution of environment friendly fuel (natural gas). IOAGPL has authorisations for 19 GAs across India. The revenue from operations grew by 165% YoY to Rs.2298.86 Crore in FY 2022-23 from Rs.868.68 Crore in FY 2021-22.

The EBITDA grew 57% YoY to Rs.192.02 Crore in FY 2022-23 from Rs.122.60 Crore in FY 2021-22. The sales volume grew 87% to 385.69 MMSCM in FY 2022-23 from 205.91 MMSCM in FY 2021-22.

FINANCIAL AND OPERATIONAL PERFORMANCE HIGHLIGHTS OF THE JOINT VENTURE COMPANY SMARTMETERS TECHNOLOGIES PRIVATE LIMITED (SMTPL)

SMTPL is a joint venture company of Adani Total Gas Ltd. (ATGL) and GSEC Limited. ATGL infuse its first equity in SMTPL on 8th October, 2021.

SMTPL was incorporated in October, 2019 with the objective to manufacture smart meter and other gas meters. The revenue from operations is at Rs.7.85 Crore in FY 2022-23. EBITDA for FY 2022-23 is Rs.(0.64) Crore.

FINANCIAL AND OPERATIONAL PERFORMANCE HIGHLIGHTS OF THE SUBSIDIARIES

ATGL has formed two subsidiaries in FY 2022-23, Adani TotalEnergies Biomass Limited (ATEBL) and Adani TotalEnergies E-mobility Limited (ATEEL).

SWOT ANALYSIS Strengths

• Experienced player with eight years of marketing exclusivity and 25 years of network exclusivity

• Member and equity shareholder of the Indian Gas Exchange

• The Company possesses an experienced senior management and leadership team

• Robust support of dedicated promoters in Adani and TotelEnergies

• Robust customer orientation along with initiatives in digitisation

• The number of transactions and the portion of digital payments by value are high

• The Companys operations are marked by a safetyfirst culture

• The Companys growth has been validated through superior financials

weaknesses

• The Companys operations are limited to specific geographical locations

• Probable delays in project implementation due to the lack of a single window clearance or permission delays.

Opportunities

• India is expected to witness rapid growth in energy demand across the next decade.

• Open access permits to foray into metro cities with vast possibilities

• Indian Gas Exchange will facilitate market-driven natural gas pricing

• The government offers increased focus to develop a gas-based Indian economy

• The entire national coastline is expected to be covered by the construction of LNG terminals

• Increased opportunity to diversify into unregulated allied businesses

• The Company will derive advantages from the dealer owned-dealer operated and Company owned-dealer operated network for fuel retail after the revised fuel retail policy is implemented

• Chance of sectorial consolidation

• Positive momentum in sales growth

• Increased population and changes in consumption preference will augment natural gas demand

Threats

• Shift in the gas allocation policy by the Government for CNG and PNG (domestic) segment could affect margins

• The Companys existing geographic areas could have open access leading to the end of marketing exclusivity

• Volatility in RLNG prices could hamper prospects

• Changes in regulations which might be unfavorable

for natural gas import

• Increased competition from alternative fuel sources

SAFETY FIRST CULTURE AT ATGL

ATGL is engaged in providing energy solution to the nation with efficient, environment friendly, safe & cost-effective fuel. "Safety first in everything we do at ATGL" is an integral part of ATGL culture. Safety is not just a priority but is a pre-condition of employment at ATGL. ATGL firmly believes that all types of injuries, illness & HSE incidents are preventable. ATGL is committed to ensure continuity of natural gas supply & reliability of services to the customers and also committed to demonstrate continual improvement in our Quality, Occupational Health, Safety & Environmental (QHSE) management performance.

The Company undertook measures to prevent illnesses, injuries and incidents. The Company focused on its responsibility to organize operations with an increased emphasis on environment and health and safety of all those involved in its operations and the public at large.

ATGL installed its integrated management system (IMS) and was accredited for the ISO 9001:2015 Quality Management System, ISO 14001:2015 Environmental Management System and ISO 45001:2018 Occupational Health & Safety management system.

The Company conducted periodic internal and external audits to evaluate the effectiveness of system and processes. ATGL provided resources required for the execution, development and maintenance of the QHSE Management System through process charts, QHSE system procedure and the management program as required.

ATGL adopted 10 Life Saving Safety Rules on the basis of business related risks and track record of incidents.

Rules were formulated to target and strengthen critical behaviour and processes that ascertained safety performance. The Company provided awareness of life-saving rules through audio visual training to all employees and contractors.

ATGL conducted HAZOP & QRA studies through external experts/agencies for its CGD Business. The Company took proactive actions to identify and mitigate risks. The Company prepared a structured training programme for various stakeholders. The safety induction training and safety, technical and operation competency (STOC) training was provided to all employees and contractors. Training and competence development represent a key focus area for ATGL. The Company provided 57000 person hours of training during the year. Besides basic safety induction & Safety Technical & Operational competency (STOC) training, job-specific training like PETZL rope access system training to plumbers engaged in high-risk jobs at heights, lock out tagout training for maintenance team were provided during the year. Awakening - leadership in safety training was imparted to employees. Fire safety practical training, Emergency response training, Permit to work training etc. were also imparted during the year.

The ATGL set up, maintained and executed processes required to prepare and mitigate possible emergency situations comprising actions to address opportunities and risks. The Company set up an Emergency Response and Disaster Management Plan (ERDMP) for all geographical areas. Emerrgency mock drills are conducted to ensure that team is ready to handle any emergency scenario. Learnigns from drill are captured and shared to improve the system. Each GA is accrediated for ERDMP (Emergency Response & Disaster Management Plan) by PNGRB accrediated agencies as per PNGRB ERDMP Regulations.

ATGL set up procedures to ascertain that there was a suitable response to accidental and unexpected incidents. Area Emergency Offices worked round the click with the customer care team. The Emergency Response Management System app was launched to enhance digitisation and emergency preparedness.

ATGL launched Samarthan program to enhance safety performance of its Business Partners. Under this programme, efforts were made for continual improvement through a series of coaching and selfassessment mobile app.

ATGL encouraged stakeholders and employees through a mobile/ web based incident reporting system to register safety concerns, hazards, near-misses and other incidents. All accidents were reported with transparency. The Company ensured the preventionn of similar incidents by circulating the past lessons learnt with all contractors and employees.

ATGL delivered secured and reliable asset performance through risk-based inspections, surveillance, monitoring of the network 24x7 and compliance with respect to PNGRB IMS and T4S regulations.

Integrity Management System (IMS) was set up for all geographical locations. The Company established a comprehensive IMS manual aligned with PNGRB regulations.

The Company prepared an asset integrity blueprint to ensure that ATGL assets offered business consistency without compromising safety. ATGL celebrated National Safety Week, Road Safety Week, Environment Day, Fire Safety Week to increase safety awareness among employees, contractors and stakeholders. By rganizing industrial safety awareness programmes, ATGL increased the safety awareness of customers by organizing industrial safety awareness programme. Special awareness drives were conducted through the social media and radio.

DEVELOPMENT PLANS FOR NEW GEOGRAPHIC AREAS

ATGL initiated infrastructural networks in the 14 GAs awarded in the 11th bidding round. Despite the ambitious commitment, ATGL mitigated GA-wise project breakdown and prepared an overall strategy to accelerate roll-out. The Companys multi-pronged strategy for ensuring a successful implement action plan included the following:

Focus in advancing implementation plan: Although the Minimum Work Programme extends across eight years, ground work has been developed to prepare a launch pad in just three years, a foundation to establish the required infrastructure within the stipulated time. The Company aims to develop a steel pipeline infrastructure to serve the technically feasible demand centres in the initial years.

Focus on demand center: ATGL will enhance its penetration of the commercial, domestic, CNG and industrial markets following the groundwork to create the launch pad. To enable GA gasification, simultaneous pockets for domestic connection and potential industrial/commercial connections will be identified. The Company developed MDPE networks in these recognized pockets for realising and monetizing piped gas consumers.

LCNG/LPNG route: The GA dynamics changed from cities to clusters of multiple districts across a single state or multi states following the ninth and tenth bidding rounds. Several instances of long-distance tapoff availability of demand centres were witnessed in various GAs that were far from the entry point of GAs.

This led to a greater time and capex to reach demand centres and respective charge areas. ATGL prudently chose to develop a virtual pipeline network, which can be feasibly fed from the LNG terminals by establishing small LNG stations to serve CNG and PNG needs through faster and economical methods, overcoming obstacles due to a lack of connectivity.

CNG rollout: During the early CNG rollouts, ATGL initiated agreements with the respective OMCs for establishing COLO CNG stations coupled with the floating of EOIs for establishing a dealer station network across all GAs. The network supply capacity was reinforced by establishing mother stations at suitable CGS locations/ LCNG locations. This is expected to improve the operations of CNG stations till the time required for reaching the pipeline network.

Early monetization: Even though MWP has its inherent importance, it will be driven by financial prudence. This strategy will concentrate on early monetisation, optimising costs and nurturing the market environment. The project roll-out and related activities were strategized to achieve improved financials as soon as possible from the start of CGS and downstream operations. The early monetization strategy will concentrate on encashing monetary gains from the existing market and eco-system to produce early revenues.

Manpower hiring: Timely manpower requirement will be vital to our ambitious MWP roll out strategy. The Company started business around 16 years ago and is well placed as it possesses experienced manpower from a CGD background. An HR strategy was prepared for meeting requirements across multiple functions to address new resource requirements. ATGL placed experienced team members to capitalise on the new GAs, which resulted in timely roll-out in all GAs and organized pre-project work in a schedule manner.

Regional structures: ATGL covered all the Geographical Areas into Four regions and each Region having Cluster of GAs. The GA clusters were led by senior executives. To facilitate smooth project execution, an area-based structure with focused efforts was developed to accelerate decision making and reduce project risks.

SUSTAINABILITY

ATGL has aligned its business with UN Sustainability Development Goals and rolled out several ESG initiatives which include:

• Decarbonization of Fleets: All ATGL owned and contracted transports Vehicles have been converted from HSD to CNG.

• Methane Leak Detection & Repair: The Leak Detention and Repair (LDAR) program was implemented to comply with environmental regulations.

• Greenmosphere initiative: An unique green initiative has been launched by ATGL involving the community through mass plantation (i.e. Miyawaki technique) and educating students on climate change & sustainability. A Biodiversity park (ATGL Forest) is being developed at Gota, Ahmedabad covering 10 acres of land, which would accommodate around 2.2 Lakh trees.

• Aligned to the Net zero objectives, ATGL has diversified into CBG and E-mobility business.

• Installation of solar panels in CNG Stations, CGS and Offices summing up to 870 Kw in FY23.

• Water Resource Management & Stewardship: The Company is working to reduce its water consumption through Water management studies, Water meters and Rainwater Harvesting.

CORPORATE GOVERNANCE

Corporate Governance is about meeting our strategic goals responsibly and transparently, while being accountable to our stakeholders. The Company is equipped with a robust framework of corporate governance that considers the long-term interest of every stakeholder as we operate with a commitment to integrity, fairness, equity, transparency, accountability and commitment to values. The framework lays down procedures and mechanisms for enhancing leadership for smooth administration and productive collaboration among employees, value chain, community, investors and the Government. Courage, Trust and Commitment are the main tenants of our Corporate Governance Philosophy:

• Courage: We shall embrace new ideas and businesses.

• Trust: We shall believe in our employees and other stakeholders.

• Commitment: We shall standby our promises and adhere to high standards of business.

The Company believes that sustainable and long term growth of every stakeholder depends upon the judicious and effective use of available resources and consistent endeavor to achieve excellence in business along with active participation in the growth of society, building of environmental balances and significant contribution in economic growth.

The Company is in compliance with the conditions of corporate governance as required under the SEBI Regulations, 2015, as applicable.

HUMAN RESOURCE MANAGEMENT

ATGL is a growing organization which has become the largest CGD Company in India in terms of geographical footprint. The Company has created a culture driven by high performance and care for each other. The Company ensures sustainable development encompassing people and environment, aligned with ATGLs philosophy of courage, dedication and trust. ATGL creates a sense of ownership, inclusiveness, respect, and pride in employees to enhance their engagement and motivation. The comprehensive workforce of Adani Total Gas displays a one-team spirit and operates collectively to cater to organizational goals.

EXPANDING HORIZON

Expanding Horizon is an ATGL initiative aiming to provide opportunity to our valuable employees to explore career options available within ATGL. We try our best to fulfill the aspirations, meet personal exigencies and help them realize their full potential by aligning their interests and strengths with their roles.

RISKS

• Regulatory regime: The CGD business is administered by the regulatory control set up by the Petroleum and Natural Gas Regulatory Board (PNGRB). PNGRB has drafted various regulations related with the technical, business aspects and safety, that the Company is required to follow at all times. The regulatory regime keeps changing on the basis of changes in regulations and market dynamics. When changes in these regulations are effected, it can impact the Company.

• Volume and Price risk: Our natural gas supply requirements for CNG and Domestic are met by the allocation of domestic natural gas from the MoPNG at a price determined in accordance with the current Domestic Natural Gas Pricing Guidelines. Any increase in the cost price of natural gas or any reduction in allocation amount of domestic natural gas may have an adverse effect on our business, results of operations and cash flows.

• Competition from alternative fuels: ATGLs customers have a substitute to move towards other fuels with a cost advantage. If such a scenario arises, it would affect the Companys business. Around 60% of the total sales volume of the Company is accounted by CNG due to its competitiveness, compared to alternative fuels like diesel and petrol. The vast scale acceptance of electric vehicles or hydrogen are examples of innovative and alternative fuels that could hamper business. The company has also forayed into EV charging as an adjacency to the business.

• Infrastructure Risks: Any breakdown in the network infrastructure through which we source and supply natural gas could adversely affect our business, reputation, results of operations and cash flows. Delays in commissioning new CNG filling stations on account of Statutory approvals or other factors could adversely affect our business, prospects, results of operation and cash flows.

• Market entry risks - In the event we are unsuccessful in implementing our strategy of entering new markets, our growth prospects could be adversely affected. Our strategy to enter into new markets which will require significant skills and capabilities, resources and time. In case we are unable to provide such commitment, our business, prospects, results of operations and financial condition could be adversely affected.

• Safety risk: The City Gas distribution network and system were prepared in line with the T4S (Technical Standards and specifications including Safety Standards) regulations formulated by PNGRB. All the existing networks were compliant with the Emergency Response and Disaster Management Plan of PNGRB.

• Risk evaluation, strong integrated management systems, work permit system and regular audits ensure the creation of adequate controls to reduce risks in the construction and operation phases to as Low as Reasonably Practicable (ALARP).

INTERNAL CONTROL SYSTEMS

ATGL has robust internal control procedures compatible with size and operations. The Companys internal audit system is well-defined and is done through an internal auditor that includes professionally qualified accountants, engineers and SAP experienced an executive that conducts extensive audit over the years. After conducting audits across all functional areas. The audit report is submitted to the Management and Audit Committee about the compliance with internal controls and efficiency of operations and major process risks. Some elements of the Companys internal controls system include:

• Preparation and supervision of annual budgets for all operating and service functions

• Substantial documentation of policies and guidelines

• Scope of internal audit with the frequency of audit being decided each year for prompt coverage of different areas and functions. The audit plan was given a formal approval by Audit Committee of the Board

• The Company possesses a robust compliance management system

• The Company has a well-defined delegation of power with authority limits for approving revenue and capex expenditure, which is evaluated and suitable changes are made annually

• The Company possesses ERP system (SAP) to record data for accounting, consolidation and management information purposes and links to different locations for efficient exchange of information

• Internal Audit was conducted according to auditing standards to evaluate design effectiveness of internal control system & procedures to manage risks, operation of monitoring control, compliance with relevant policies & procedure and suggest improvement in processes and procedure

• Despite having all policies, procedures and internal audit mechanism in place. The Company regularly engages with outside experts to conduct an independent review of the effectiveness of numerous business processes,

• External auditor has also performed independent testing of internal financial controls over financial reporting which is in line with regulatory reporting requirements as per applicable financial reporting framework,

• The Audit Committee of the Board of Directors, comprising of 100% Independent Directors and functional since October 2018, quarterly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with accounting standards as well as reasons for changes in accounting policies and practices, if any;

The Audit Committee of the Board of Directors consistently reviews implementation of audit plan, efficiency & scope of internal audit systems and supervises implementation of internal audit recommendations along with those related to reinforcing of Companys risk management policies & systems.

The internal control system of the Companys is planned to ensure management efficiency, verifiability, measurability and reliability of accounting and management information in compliance with all applicable laws and regulations and protection of Companys assets, This is to recognize and manage risks at the right time (compliance-related, operational, financial and economic).

Internal Financial Controls are an integral part of the ATGLs Risk Management framework that address financial as well as financial reporting risks. Assurance to the Board on the effectiveness of internal financial controls is obtained through 3 Lines of Defense which include:

a) Management reviews and self-assessment;

b) Continuous controls monitoring by functional experts; and

c) Independent design and operational testing by the Independent Internal Audit function,

A well-established, external, independent, multidisciplinary Internal Audit team operates in line with governance best practices, It reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks,

The scope and authority of the Internal Audit division is derived from the Internal Audit scope, duly approved by the Audit Committee; and Anti-fraud programs including whistle blower mechanisms are operative across the Company,

CAUTIONARY STATEMENT

Cautionary statement Statements on the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations and others may constitute forward looking statements within the meaning of applicable securities laws and regulations, Actual results may differ from those expressed or implied, Several factors that could significantly impact the Companys operations include economic conditions affecting demand, supply and price conditions in the domestic and overseas markets, changes in the Government regulations, tax laws and other statutes, climatic conditions and such incidental factors over which the Company does not have any direct control. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.