Initiating Coverage: Aegis Logistics
14-04-2023

Aegis Logistics is in the business of import and distribution of Liquified Petroleum Gas (LPG) and storage and terminalling facility for LPG and chemical products. Aegis Logistics Limited,(AGL) is India’s leading oil, gas, and chemical logistics co., it operates a network of bulk liquid handling terminals, liquefied petroleum gas (LPG) terminals, filling plants, pipelines, and LPG gas stations to deliver products and services.

Industry

Consumption of liquefied petroleum gas across India was more than 28 million metric tons during FY22. LPG demand is driven residential, commercial and transportation sector, along with growing demand for cleaner fuels for cooking in urban and rural geographies. Further initiatives and support from government towards LPG has taken penetration towards 99.8% of households in FY22. During this period, about 90% of LPG was consumed by households, 8% by industrial users and 2% by vehicles. Over 60% of LPG was imported and over 99% of domestic production was from public sector refineries. Abundance of LPG in international market and poor profit margins for domestic refiners, domestic production is unlikely to increase.

Business Model

Liquid logistics: Aegis Logistics operates a network of liquid terminals in India, which are used for storing and handling petroleum products, chemicals, and other liquids. The company's liquid terminals are strategically located near ports, refineries, and industrial hubs, which enables it to serve a diverse set of customers across the country. It has capacity of handling 1,603,000 KL with various expansions undergo with Vopak.It serves clients such as BPCL, HPCL, Reliance Industries, Caltex, Supreme Industries, Jubilant Lifesciences, Bombay Dyeing, and Laxmi Organics. Facilities are offered on a long-term contract or spot contract basis, and other services such as customs bonding, inventory management, just-in-time delivery, and on-site product quality testing are also provided.

LPG sourcing:AGL has a joint venture with Itochu Corporation, for LPG gas sourcing. Currently, Aegis has a 15.5% market share in LPG imports in India where it sources gas for various distributors and refiners.

LPG Retailing: Company operates its LPG retailing business through 135 Autogas stations in 10 states and a network of 262 LPG distributors across 14 states. Aegis also operates 37 LPG bottling plants through their supply to both commercial and domestic LPG markets. LPG retailing is the highest profit margin segment for the company.

Storage Terminals & Pipelines:Aegishas a gas storage business, which involves storage of liquefied petroleum gas (LPG) and other gases such as propane, butane, and ammonia. Aegis has static capacity of 115,000 MT and throughput of 9,600,000 MT through which it services customers by storage, handling, and distribution of LPG and other gases.It operates their storage terminals from six different terminals located near ports, having refrigerated gas terminals and a pressurized gas terminal in Pipavav. Additionally, it has its own pipeline facilities and transports gas via Roadways and Railways.

Business Performance

Aegis revenue is derived from Gas & Liquid terminals, as well gas sourcing. Sourcing business revenue is dependent on gas prices and volumes, which as share of revenue is highest but contributes less to EBITDA. Revenue without sourcing business has grown at CAGR 19% over last 5 years. While sourcing volumes have declined by CAGR 5.7%, this segment has 16% market share in LPG import.

Risks

Use of alternative fuels like CNG and PNG in residential as well commercial settings.

Infrastructure obsolescenceor delay in commissioning.

Any disruptions in supply chain, such as delays in the delivery of product, could impact its operations and revenues.