Inox India and the LNG Revolution: A Game-Changer for India’s Energy Future

In recent months, global energy markets have witnessed significant shifts, with various sectors re-evaluating their energy strategies. For example, Hertz, the renowned rental giant, made headlines when it decided to reduce its electric vehicle (EV) fleet in favor of gas-powered cars. The reason? Hidden costs associated with owning and maintaining EVs. This move had a ripple effect, leading to market corrections in major EV companies like Tesla and Polestar.

Back in India, the EV revolution is progressing at a different pace. While two- and three wheeler EV adoption is accelerating, challenges such as inadequate infrastructure and high costs have slowed the transition for four-wheelers and heavy duty vehicles. Even as the conversation about electrification continues, with government subsidies and new policies being introduced, another energy trend is quietly gaining momentum liquefied natural gas (LNG).

The Role of LNG in India’s Energy Future

India is setting its sights on LNG as the future fuel for long-haul trucks and heavy-duty vehicles. The country’s target is ambitious: to have one-third of its heavy-duty fleet run on LNG within the next five to seven years, shifting away from diesel and increasing the share of natural gas in the country’s energy mix from the current 6% to 15%. This transition is driven by the need to reduce pollution, cut diesel dependency, and meet environmental goals.

While the plan sounds promising, is this just another lofty target, or is there real potential for change?

The Global LNG Landscape: Lessons for India

To gain confidence in India’s LNG ambitions, we can look at the global LNG market. China, for instance, boasts a fleet of over 800,000 LNG trucks on its roads, while the United States and Europe have about 15,000 LNG trucks combined. In contrast, India is just beginning its journey, with fewer than 500 LNG trucks currently operational.

However, India’s slow start presents a classic “chicken-and-egg” problem. The widespread adoption of LNG trucks requires a robust infrastructure of LNG fueling stations, which, in turn, depend on a large enough fleet to justify the investment. Currently, this infrastructure is lacking.

To address this, the Indian government has started by setting up 50 LNG fueling stations along the Golden Quadrilateral. The long-term plan is to develop 1,000 such stations by 2030. The supply chain for this endeavor will be managed by key players in the oil and gas sector, including Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Petroleum Corporation Ltd. (HPCL), GAIL, Petronet LNG, Gujarat Gas, and their subsidiaries or joint ventures.

LNG: A Fleet Owner’s Perspective

For fleet owners, the initial cost of an LNG truck is higher than that of a diesel truck. However, studies from Niti Aayog suggest that LNG offers long-term advantages when considering the total cost of ownership, including operational and fuel costs.

LNG trucks also come with several additional benefits. For instance, a single fill-up of LNG allows for a range of up to 1,400 kilometers, making them ideal for long-distance travel. These trucks also produce less noise, reducing driver fatigue, and have a lower environmental impact, which scores ESG (Environmental, Social, and Governance) points for fleet operators. This has caught the attention of industries like logistics (e.g., Delhivery), cement, chemicals, mining, containers, and steel, where companies are increasingly considering transitioning their fleets to LNG.

Several vehicle manufacturers have already responded to this potential demand. Tata Motors, Ashok Leyland, and Blue Energy have all launched LNG trucks in India. Blue Energy, in particular, has already deployed 500 LNG-powered heavy-duty trucks on Indian roads. Industry estimates suggest that 2,500 trucks will be sufficient to make the initial 50 LNG stations financially viable.

The Inox India Advantage

One company that stands to benefit significantly from this LNG transition is Inox India. LNG needs to be stored and transported at extremely low temperatures, which requires specialized cryogenic equipment. This is where Inox India excels.

Inox India is a global leader in providing customized cryogenic equipment, including storage tanks, transport tanks, vaporizers, and regasification equipment. The company boasts a customer base across more than 100 countries, with nearly 50% of its revenue coming from exports. Its business segments include industrial applications, LNG, and cryo-scientific solutions (e.g., satellite propulsion systems and launch facilities).

Inox India’s LNG segment has been gaining traction. In its latest order book of Rs 11 billion, 23% of the orders are related to the LNG segment. In terms of revenue, the LNG segment accounted for 15% of the company’s earnings in the most recent quarter.

Inox India plays a crucial role in both the supply chain for LNG fueling stations and the manufacturing of fuel tanks for LNG trucks. In the LNG fueling station market, Inox India holds a dominant position, with a 70-75% market share. The company has supplied over 60% of the stationary and trailer-mounted mobile LNG tanks in India.

Financial Strength and Market Position

From a financial standpoint, Inox India is well-positioned to capitalize on the LNG boom. The company is nearly debt-free, boasts an operating profit margin of over 20%, and enjoys return ratios above 30%. As LNG infrastructure expands and fleet adoption grows, Inox India is set to benefit significantly from this shift.

The Road Ahead

While India’s LNG journey is still in its early stages, the government’s commitment to expanding LNG infrastructure and the growing interest from fleet operators and industries indicate that LNG could become a viable alternative to diesel in the coming years. If India follows through on its plans, the country could see a substantial reduction in pollution, a decrease in diesel dependency, and a more sustainable transportation sector.

For investors looking to tap into this emerging trend, Inox India appears to be a key player worth watching. Its strong market position, financial health, and expertise in cryogenic solutions make it well-suited to benefit from the growth of LNG infrastructure in India.

In conclusion, India’s shift towards LNG presents a unique opportunity for both the transportation and energy sectors. While the road to widespread LNG adoption is filled with challenges—such as building the necessary infrastructure and convincing fleet owners to make the switch—the long-term benefits in terms of cost savings, environmental impact, and reduced diesel reliance are clear.

Inox India, with its leadership in cryogenic technology and LNG solutions, is well-positioned to play a central role in this transition. However, as with any emerging market, investors and stakeholders should approach with caution and conduct thorough due diligence before making any decisions.

The LNG boom In India is still unfolding, but if the country stays on course, companies like Inox India could see significant growth in the coming years. The opportunity is real, and it’s only a matter of time before we see how this story plays out.