Rudra Gas Enterprise Ltd Management Discussions

The Indian economy demonstrated robust growth in the fiscal year 2024-25, with a GDP expansion of approximate 6.5%. India, currently the third-largest economy in the world based on Purchasing Power Parity (PPP) and the fourth-largest in terms of market exchange rates, has reaffirmed its belief in its economic resilience. Despite internal and external challenges, such as mitigating external imbalances resulting from the Russian-Ukraine & Isreal-Gaza conflict, the country has managed to sustain its growth momentum.

As a result, manufacturing and investment activities gained momentum. While export growth moderated, the rebound in domestic consumption, particularly in contact-intensive services such as trade, hospitality, and transportation, bolstered Indias economic progress.

Furthermore, construction activity witnessed a significant increase in FY25, driven by the substantial capital budget (Capex) allocated by the central government and its public sector enterprises. Notably, direct tax revenue collections remained buoyant, along with GST collections, indicating a revival in private-sector investment.

Despite these global challenges, the Indian economy has admirably confronted the adversities brought about by the pandemic, achieving a complete recovery ahead of numerous other nations. As we look ahead to the forthcoming fiscal year, FY2025-26, India is poised to reclaim its pre-pandemic growth trajectory, reaffirming its resilience and potential for sustained economic expansion.

Indias recovery from the pandemic has been relatively swift, and the upcoming years growth will be supported by robust domestic demand and an increase in capital investment. Encouragingly, there are early indications of a new cycle of private sector capital formation, which compensates for the cautious approach in private sector capital expenditure. The estimated provisional capital expenditure per enterprise for purchasing new assets in 2024-25 is R172.2 crore. Overall increase of 66.3% in aggregate CAPEX (unweighted) over the four-year period from 2021-22 to 2024-25.

In the Union Budget 2024-25, there has been a substantial increase in the capital investment outlay for the third consecutive year. Structural reforms, including the implementation of the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code, have enhanced the efficiency and transparency of the economy, ensuring financial discipline and improved compliance.

According to the International Monetary Fund (IMF), India is projected to grow with good pace in next 5 years.

Strong domestic demand, coupled with high commodity prices, may lead to an increase in Indias total import bill and potentially widen the current account deficit (CAD). These factors may be exacerbated by a decline in export growth due to weakened global demand, putting pressure on the Indian currency and potentially leading to depreciation. Furthermore, persistent inflation may prolong the tightening monetary policy, resulting in higher borrowing costs for the economy. Consequently, global growth in FY25 is expected to be modest, which will inevitably impact the Indian economy. However, the possibility of low oil prices and a potentially better-than-projected CAD provide some positive factors for consideration.

The market for oil and gas pipelines is benefiting from advancements in pipeline inspection technology. One notable advancement is the use of intelligent drone vehicles, which are integrated with the Internet of Things. These drones provide a cost-effective solution for visual pipeline inspection, contributing to the overall improvement of pipeline inspection capabilities.

The demand for natural gas has experienced a significant increase, primarily driven by its growing use in various industries such as power generation and transportation. This upward trend is expected to continue in the coming years, leading to substantial development in gas pipeline infrastructure. By 2030, natural gas is projected to witness substantial growth among all fuel types, driven by the environmental benefits it offers and the pursuit of energy security in regions like the Middle East, Africa, and the Asia-Pacific.

As part of its commitment to address climate change in COP21, the Government of India has pledged to reduce carbon emissions by 45 percent by 2030. However, balancing the need to meet the energy demands of a billion people while mitigating environmental pollution poses a significant challenge. In light of this, the government is actively promoting the transition to a gas-based economy.

Indias natural gas market is experiencing substantial growth, driven by increasing energy demand and government initiatives. Projections indicate a significant rise in consumption, with estimates reaching 103 bcm/yr by 2030, a nearly 60% increase from 2023. This growth is fueled by expanding city gas distribution networks, infrastructure development, and the integration of green hydrogen.

Recognizing the importance of shifting towards a gas-based economy, the Government of India has prioritized this transition. With the Indian economy expected to grow five-fold by 2040, the focus is to more than double the share of natural gas in Indias energy mix. To achieve this objective, the government is heavily emphasizing the development of a robust city gas distribution infrastructure.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has expanded the number of Geographical Areas (GAs) to the 307 authorized GAs cover approximately 100% of the mainland geographical area of India, encompassing around 733 districts across 34 states and Union Territories.

A gas-based economy has been identified as crucial for achieving Atmanirbhar Bharat (self-reliant India) and a lot of work is being done on One Nation, One Gas Grid. Infrastructure development, coupled with market reforms, presents significant potential for increased natural gas utilization across various sectors in India.

The government of India has set a target to expand the gas pipeline infrastructure to thousands of kilometers by 2024-25. Furthermore, there are plans to connect all states with the trunk natural gas pipeline network by 2027.

In the Union Budget for 2025, the government has allocated considerable amount for priority capital investments aimed at transitioning to green energy, achieving long-term net-zero goals, and ensuring energy security.

As part of its global climate change commitments made in COP21, the government is committed to reducing carbon emissions by 45% by 2030. The government has also taken significant steps to facilitate the transition to a gas-based economy.

With various indicators pointing towards India emerging as a $5 trillion economy within the next few years, and the objective of becoming the worlds third-largest economy, efforts are underway to at least double the natural gas component in the overall energy mix. Consequently, there is a strong emphasis on developing a robust city gas distribution network across the country.

The key drivers contributing to market growth include the growing demand for pipelines to transport oil and gas, as well as the increasing utilization of renewable energy sources.

The market for oil, gas, and natural gas liquids (NGL) pipelines is anticipated to experience rapid expansion until 2030. The shift towards gas-based power plants and the rising demand for natural gas liquids like propylene and ethylene are major factors motivating investments in infrastructure development. To ensure the smooth operation of oil and gas pipelines, the incorporation of advanced security technologies and preventive measures against disruptions will further enhance the industrys statistics, making operations secure, cost-effective, and efficient.

Stakeholders in the oil and gas industry recognize the importance of diversifying Indias energy sources to sustain its growth trajectory.

Despite government interventions, the exploration and production sector has not attracted significant foreign direct investment (FDI) participation, except for the involvement of a few companies. To encourage greater investment, the government needs to ensure that gas is provided to City Gas Distribution companies at affordable rates, enabling them to achieve reasonable profit margins.

The Company is one of the leading companies in its industry space with over 10 years of experience, presently working with major Oil & Gas companies across India.