Gujarat Gas — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Gujarat Gas delivered a resilient Q1 FY26 performance characterized by record CNG volumes and strong margin expansion per SCM, despite a decline in overall revenue. The quarter was marked by a strategic pivot as the company announced its entry into the propane and LPG distribution market to counter volume loss in the Morbi industrial cluster. While industrial volumes faced pressure from cheaper alternate fuels, the management remains bullish on CNG growth and infrastructure expansion.

Highlights

  • Revenue from operations stood at ₹4,065 crores, a decline of 11.9% YoY.

  • EBITDA reported at ₹579 crores, showing a marginal YoY growth of 0.87%.

  • EBITDA margin per SCM improved significantly to ₹7.17 compared to ₹5.75 in the previous quarter.

  • CNG sales volume reached a record high of 3.72 MMSCMD, growing 12% YoY.

  • Industrial sales volume declined 6% QoQ to 4.71 MMSCMD, primarily due to Morbi customers shifting to propane.

  • Board approved entry into sourcing and sale of propane and LPG to industrial customers to become a total energy solution provider.

  • Total sales volume for the quarter stood at 8.88 MMSCMD.

  • Company added ~35,000 new domestic connections, bringing the total to over 23 lakhs.

Concerns

  • Alternate Fuel Competition (Propane)

  • APM Gas Allocation Shortfall

Key financials

  1. Revenue ₹4,065 Cr -11.9%YoY
  2. EBITDA ₹579 Cr +0.87%YoY
  3. PAT ₹327 Cr -0.9%YoY
  4. EBITDA per SCM ₹7.17 +24.7%QoQ

What they filed

Q1 FY27: revenue up 63.1%, net profit up 84.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,782 4,153 4,102 5,851 3,780 −0%3,658 −12%5,792 +41%9,545 +63%
EBITDA514 380 450 837 447 −13%447 +18%609 +35%1,381 +65%
Net profit309 221 288 547 280 −9%267 +21%152 −47%1,007 +84%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Sales Volume
8.43 MMSCMD Total
  • Industrial 4.71 MMSCMD 55.9%
  • CNG 3.72 MMSCMD 44.1%

Guidance & targets

Margin

  • EBITDA margin per SCM Margin · FY26 · Medium confidence ₹4.5 to ₹5.5
    The Company's estimated EBITDA margin will be in the range of Rs. 4.5 to Rs. 5.5 for this financial year.

    — Rajesh Sivadasan, CFO

Capex

  • Annual CAPEX Capex · FY26 · High confidence ₹800-₹1,000 crores
    The Company is also planning to incur annual CAPEX in the range of Rs. 800-Rs. 1,000 crores in this Financial Year.

    — Rajesh Sivadasan, CFO

Market Share

  • Propane Market Share in Morbi Market Share · FY26 · Medium confidence 25%
    We are basically targeting close to 25% of this market and what we intend to do is basically we want to become an integrated energy supplier for all their energy needs.

    — Management

Volume

  • Morbi Industrial Volume Volume · Q2 FY26 · Medium confidence 2.3-2.5 MMSCMD

    Previously 2.51 MMSCMD → 2.3-2.5 MMSCMD

    It could be in the range of 2.3-2.5 [for Q2].

    — Management

Market context

  • CNG Station Additions (FDODO) Capacity · by December 2025 · High confidence Double digit
    I think before this December, we will be able to add at least a double digit CNG station under this scheme.

    — Management

Risks & concerns

  • Alternate Fuel Competition (Propane)

    high

    Morbi industrial customers are shifting to propane due to a ₹4/SCM price advantage over natural gas.

    Both acknowledged

  • APM Gas Allocation Shortfall

    high

    Company only receives ~51% allocation for priority segments, forcing reliance on costlier spot and long-term RLNG.

    Management acknowledged

  • Geopolitical and Tariff Uncertainties

    medium

    Persistent uncertainties related to global tariffs and geopolitics continue to cloud the business outlook.

    Management acknowledged

Areas of evasion (2)

  • Specific margin guidance for the new propane business.
  • Detailed unit economics for the FDODO franchisee model.

Q&A highlights

2 direct
Gas Sourcing Mix Direct
The gas from short-term contract is basically 34%, long-term contract is 38% and the rest is all domestic gas, majority of that coming from APM and New Well Gas.

Reveals the company's reliance on expensive non-APM gas (nearly 50% of priority sector needs) which impacts margins.

Asked by Probal Sen, ICICI Securities

Propane Business Model and Economics Partial
There is no CAPEX involved in this entire exercise that we are planning... we hope to get propane from the international market at a lower price which we can use to compete.

Confirms the asset-light nature of the new propane venture but leaves margin expectations vague.

Asked by Yogesh Patil, Dolat Capital

CNG Realization and Dealer Margins Direct
The dealer margin... Rs. 3-Rs. 4 margin... [is] part of the operational cost. That is not in the topline.

Clarifies accounting treatment of dealer commissions, helping analysts reconcile reported revenue with headline CNG prices.

Asked by Nitin Tiwari, Phillip Capital

2 min read 5 chapters

Detailed narrative

Industrial Segment: The Morbi-Propane Challenge

Industrial volumes saw a 6% QoQ decline to 4.71 MMSCMD, primarily driven by the Morbi cluster where volumes dropped from 2.87 MMSCMD to 2.51 MMSCMD. This shift is attributed to a significant price differential, with propane currently enjoying a ₹4 per SCM advantage over natural gas. Management expects Q2 volumes in Morbi to remain subdued in the 2.3-2.5 MMSCMD range due to the Janmashtami festival and general slowdown.

Strategic Pivot: Entry into Propane and LPG

In a major strategic shift, Gujarat Gas's Board approved the sourcing and sale of propane and LPG to industrial customers. The company aims to capture 25% of the Morbi propane market (estimated at 1.67 lakh metric tons per month) by the end of the financial year. This asset-light model involves no major CAPEX, utilizing existing terminal capacities and leveraging GSPC's international sourcing strength to offer a 'total energy solution' to customers.

CNG Segment: Record Performance and Expansion

The CNG segment was a standout performer, reaching a record sales volume of 3.72 MMSCMD, a 12% YoY increase. Growth was particularly strong outside Gujarat at 27%. The company is aggressively expanding its infrastructure, with plans to add double-digit stations under the FDODO (Franchisee Owned, Dealer Operated) scheme by December 2025, supported by a growing vehicle base of 15.65 lakhs.

Sourcing Dynamics and APM Shortfall

Gujarat Gas faces a challenging sourcing environment, receiving only 51% of its priority sector gas requirements from low-cost APM sources. The shortfall is met through a mix of New Well Gas, HPHT Gas (0.7 MMSCMD in Q1), and expensive spot/long-term contracts. Currently, the sourcing mix stands at 38% long-term, 34% short-term, and the remainder from domestic sources.

Financial Outlook and Margin Guidance

Despite achieving a high EBITDA per SCM of ₹7.17 in Q1, management maintained a conservative full-year guidance of ₹4.5 to ₹5.5 per SCM. This caution stems from uncertainties in Q2 due to festivals and the need to reduce prices to remain competitive against propane. The company plans a robust CAPEX of ₹800-₹1,000 crores for FY26 to strengthen its gas network and digital infrastructure.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Oil, Gas & Consumable Fuels earnings calls