Gujarat Gas — Q3 FY26 earnings call

Call held 21 Jan 2026

Management summary

Gujarat Gas reported a mixed Q3 FY26, with strong EBITDA growth driven by improved margins and robust CNG segment performance, which saw 11% YoY sales growth. However, industrial sales, particularly in Morbi, experienced a 10% QoQ decline due to competitive propane pricing. The company is actively addressing industrial volume challenges through price adjustments and strategic sourcing, while also progressing on digital transformation and infrastructure expansion.

Highlights

  • EBITDA for Q3 FY26 stood at INR 502 crores, compared to INR 439 crores in Q3 FY25.

  • EBITDA margin per SCM was ₹6.5 in Q3 FY26, an increase from ₹5.04 in Q3 FY25.

  • CNG sales volume increased by 11% year-over-year, with a 9% rise in Gujarat and a notable 22% growth in areas outside Gujarat.

  • The domestic customer base grew by 38,000 new commissioned connections in Q3 FY26, bringing the total to over 23.83 lakh households.

  • Post price reduction, Morbi industrial volumes increased from 1.68 MMSCMD in Q3 to 2.2 MMSCMD, with expectations to reach 3-3.2 MMSCMD by February/March 2026.

  • Non-Morbi industrial volumes showed a steady growth of approximately 1% QoQ and 7% YoY, reaching 2.25 MMSCMD.

Concerns

  • Industrial sales volume decreased by 10% QoQ to 3.93 MMSCMD in Q3 FY26 from 4.35 MMSCMD in Q2 FY26.

  • Morbi volumes specifically reduced from 2.13 MMSCMD in Q2 FY26 to 1.66 MMSCMD in Q3 FY26 due to lower propane prices.

  • APM gas allocation faced a 51% shortfall for the priority segment (Domestic and CNG), with a 64% shortfall for CNG.

  • The sequential gas cost reduction was only INR 0.20 per SCM, lower than analyst expectations of INR 1 per SCM.

  • New gas transmission tariffs are expected to have a negative impact of INR 1 per SCM on gross profit margins for each MMSCMD volume increase.

Key financials

  1. Revenue from Operations ₹3,865 Cr -10.8%YoY
  2. EBITDA ₹502 Cr +14.3%YoY
  3. PAT (9 Months) ₹1,176 Cr +1.5%YoY
  4. EBITDA Margin per SCM ₹6.5 +29%YoY
  5. Industrial Sales Volume 3.93 MMSCMD -9.7%QoQ
  6. CNG Sales Growth 11% +11%YoY

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

  • Industrial Segment
    3.93 MMSCMD Sales Volume1.66 MMSCMD Morbi Volume2.25 MMSCMD Non-Morbi Volume
  • CNG Segment
    0.11 yoy_pct Sales Growth0.09 yoy_pct Gujarat Sales Growth0.22 yoy_pct Outside Gujarat Sales Growth
  • Domestic Segment
    38,000 customers New Connections Added (Q3 FY26)₹23.83 lakh Total Households

Capital allocation

high confidence
  • Capex ₹650 Cr
    • Gas infrastructure ₹408 Cr
    During the 9 months, we have invested approximately INR408 crores in gas infrastructure. And for the full financial year, we plan to incur a capital expenditure to the range of INR650 crores to INR700 crores.
  • Debt Debt disclosed
    Gujarat Gas continues to maintain a strong credit profile with a AAA Stable rating and an Al plus rating from CRISIL, CARE and India Ratings.

Guidance & targets

Profitability

  • EBITDA margin per SCM Profitability · FY26 · High confidence ₹5.5 to ₹6.5
    For the entire financial year, we estimate the EBITDA margins to be in the range of ₹5.5 to 6.5 per SCM.

    — Rajesh Sivadasan

Capex

  • Capital Expenditure Capex · FY26 · High confidence INR 650-700 crores
    And for the full financial year, we plan to incur a capital expenditure to the range of INR650 crores to INR700 crores.

    — Rajesh Sivadasan

Volume

  • Morbi volumes Volume · February and March 2026 · Medium confidence 3 to 3.2 MMSCMD
    So we are expecting close to 3 to 3.2 MMSCMD in Morbi

    — Management

  • CNG growth rate Volume · Low confidence 13%
    And the way new technologies are coming into CNG vehicles, we are expecting 13%, at least, we would like to achieve.

    — Management

Capacity

  • CNG stations Capacity · coming 2 to 3 years · Medium confidence 1,000 stations
    Yes. I think I won't be surprised if we'll enter into 4-digit number in coming 2 to 3 years, that is we may cross 1,000 CNG stations.

    — Management

Gas Sourcing

  • Long-term gas sourcing proportion Gas Sourcing · Medium confidence 60-70%
    So I think the objective is to have a stable price, less reliance on spot and maybe on an overall basis, have 60% to 70% volumes tied up on a long term basis.

    — Devendra Agarwal

  • Long-term gas sourcing timeline Gas Sourcing · by end of 2027 · Medium confidence by end of '27
    Maybe by end of '27, we should be there, I guess.

    — Devendra Agarwal

What to watch in Q4 FY26

Morbi industrial volume recovery

February and March 2026
Current 2.2 MMSCMD (current run rate)
Target 3-3.2 MMSCMD

Why it matters

Recovery in Morbi volumes is crucial for overall industrial sales and profitability, given its sensitivity to price differentials.

So we are expecting close to 3 to 3.2 MMSCMD in Morbi

Risks & concerns

  • Industrial volume decline due to propane price competitiveness

    medium

    Morbi volumes reduced from 2.13 MMSCMD in Q2 FY26 to 1.66 MMSCMD in Q3 FY26 as propane prices remained considerably lower than GGL's natural gas prices.

    Management acknowledged

  • APM gas allocation shortfall for priority segments

    medium

    There was a 51% overall shortfall in APM gas allocation for the priority segment (Domestic and CNG), with a 64% shortfall for CNG, necessitating sourcing from spot and long-term volumes.

    Management acknowledged

  • Impact of new gas transmission tariffs on gross profit margins

    medium

    New gas transmission tariffs are expected to have an approximate INR 1 per SCM negative impact on gross profit margins for every 1 MMSCMD volume increase.

    Analyst acknowledged

  • Geopolitical tensions and supply chain disruptions

    low

    Ongoing geopolitical tensions could disrupt the supply chain, impact shipping routes, and cause price volatility, posing a key challenge.

    Management acknowledged

Q&A highlights

7 direct
Morbi industrial pricing and propane differential Direct
Currently, the propane price is around INR38.6 against our gas prices of INR41.

This clarifies the current competitive landscape in the Morbi industrial segment, where GGL's gas price is still higher than propane, impacting volumes.

Asked by Probal Sen, ICICI Securities

Gas cost reduction vs. analyst expectations Partial
I think it depends on the sources of gas and where you're sourcing the gas. I think APM is only 24% of the entire portfolio we are having. The rest of the portfolio is for the long term and the short-term gas we are having.

Analysts expected a larger gas cost reduction (INR 1/SCM) than the actual INR 0.20/SCM, indicating a mismatch in understanding of GGL's diverse gas sourcing mix and its impact on costs.

Asked by Yogesh Patil, Dolat Capital

Impact of new gas transmission tariffs on gross profit margins Direct
Just one second. Approximately INR1 per SCM.

Management confirmed a significant negative impact of INR 1 per SCM on gross profit margins for every 1 MMSCMD volume increase due to new transmission tariffs, which is crucial for future profitability modeling.

Asked by Yogesh Patil, Dolat Capital

Spot LNG price volatility and its impact on Morbi volumes Direct
But we expect the prices to again come back to initially $9 kind of a level. And then going forward in middle of 2026, we expect a lot of term contracts to start get delivering volumes into India. So we expect spot prices to be much more reasonable once the winter is over, which is probably 2 months from now.

This provides insight into the expected trajectory of spot LNG prices, which directly influences the competitiveness of natural gas against propane and thus Morbi industrial volumes.

Asked by Amit Murarka, Axis Capital

Timeline for scheme of arrangement completion and GSPL relisting Direct
We are expecting final hearing from MCA somewhere in the month of February. That will be followed by once we receive a final order from MCA and complete other formalities. So we expect that by the time we get into the next earnings call, I think all formalities will be completed.

This gives a clear timeline for the completion of the corporate restructuring, including the relisting of GSPL, which is a significant event for shareholders.

Asked by Amit Murarka, Axis Capital

CNG station expansion through FDODO scheme and growth rate Direct
First of all, today is a very good day for us. Today, we have commissioned our first FDODO online station in Morbi. Before that also, we have started 1 FDODO station in Dwarka also. We have signed total 78 agreements for the FDODO, and they are in the various stage of construction. And the way things are going, we will connect more than 10 CNG stations in this financial year and balance in the next financial year.

This details the progress on the FDODO (Dealer Owned Dealer Operated) model for CNG station expansion, indicating a clear plan for infrastructure growth and its expected contribution to the CNG segment's volume growth.

Asked by Maulik, Equirus

Strategy for selling propane as an alternative fuel Direct
So basically, the Board has decided that we should have our own infrastructure. So that's for the slightly longer term. So we are in talks with the relevant port authorities to have our own infrastructure, which includes the unloading and storage of propane. In the meantime, we are talking to some of the existing infrastructure providers.

This reveals GGL's strategic move to enter the propane market to counter competition and retain industrial customers, outlining both long-term infrastructure plans and short-term capacity booking.

Asked by Somaiah V, Avendus Spark

Differentiation strategy for propane sales to existing customers Direct
So basically, all these users are already registered with with Gujarat Gas. They already have a security arrangement in place. So if they buy propane from any other supplier, they will have to pay in advance, whereas in case of Gujarat Gas, since we already have the financial securities, we'll give them some credit, which is very valuable for these consumers.

Management explains how GGL plans to differentiate its propane offering by leveraging existing customer relationships and offering credit, which is a key competitive advantage.

Asked by Somaiah V, Avendus Spark

3 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Gujarat Gas reported a Q3 FY26 revenue from operations of INR 3,865 crores, a decrease from INR 4,333 crores in the corresponding quarter of the previous year. Despite this, EBITDA improved to INR 502 crores in Q3 FY26, up from INR 439 crores in Q3 FY25. The EBITDA margin per SCM also saw a significant increase, reaching ₹6.5 compared to ₹5.04 in the prior year's Q3. For the nine-month period, PAT stood at INR 1,176 crores, a slight increase from INR 1,159 crores in the same period last year.

Industrial Segment Dynamics and Morbi Recovery

The industrial segment experienced a 10% sequential decline in sales volume, falling to 3.93 MMSCMD in Q3 FY26 from 4.35 MMSCMD in Q2 FY26. Specifically, Morbi volumes decreased from 2.13 MMSCMD to 1.66 MMSCMD due to propane's lower prices. However, following a price reduction of INR 4.50 per SCM effective January 1, 2026, Morbi volumes have recovered to 2.2 MMSCMD, with expectations to reach 3-3.2 MMSCMD by February/March. Non-Morbi volumes showed resilience, growing 1% QoQ to 2.25 MMSCMD and 7% YoY despite the Diwali festival.

CNG Segment Growth and Infrastructure Expansion

The CNG segment demonstrated robust performance, with sales rising 11% year-over-year. Gujarat recorded a 9% increase, while areas outside Gujarat saw a notable 22% growth. The CNG vehicle base expanded by 14% YoY to approximately 16.94 lakh by December 2025. The company is aggressively expanding its CNG infrastructure, with 78 agreements signed for FDODO (Franchisee Dealer Owned Dealer Operated) stations, and expects to connect over 10 new stations this financial year, aiming for a total of 1,000 CNG stations within the next 2-3 years.

Digital Transformation and ESG Initiatives

Gujarat Gas is undergoing a significant digital transformation, planning to expand its ERP ecosystem to integrate key business functions and implement a robust SCADA system for centralized monitoring. An advanced metering infrastructure is also planned for industrial and commercial customers to facilitate data collection and billing. The company is committed to ESG, having signed 8 new tripartite agreements for CBG purchase, bringing the total to 27. Promoting gas use has reduced CO2 emissions by 56 lakh kg/day for industrial customers and 21 lakh kg/day through CNG sales.

Gas Sourcing and Pricing Strategy

APM gas allocation saw a 51% shortfall for the priority segment, with a 64% shortfall for CNG, which was mitigated by sourcing from New Well Gas, HPHT, and spot/long-term volumes. The company reduced prices in the Morbi Ceramic segment by INR 4.50 per SCM from January 1, 2026, to narrow the price differential with propane. Management expects propane prices to increase further in February, which should improve GGL's competitiveness. The long-term strategy aims to tie up 60-70% of volumes on a long-term basis by end of 2027 to ensure stable pricing and reduce reliance on spot markets.

Corporate Restructuring and Regulatory Updates

The scheme of arrangement with the Ministry of Corporate Affairs is progressing, with the final hearing expected in February 2026 and completion anticipated by the next earnings call in May 2026, including the allotment of shares to GGL and GTL shareholders. Regarding the Delhi High Court litigation on open access guidelines for CGD, GGL has an interim protection, and the court is hearing associated regulatory matters, with a final verdict not expected in the near future.

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