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    Gujarat Gas

    GUJGASLTDGood
    Oil, Gas & Consumable Fuels·21 May 2025
    Management Summary

    Gujarat Gas delivered a resilient performance in FY25 despite challenges in the industrial segment and reduced APM gas allocations. While industrial volumes in the Morbi cluster faced headwinds from cheaper propane alternatives, the CNG segment showed robust double-digit growth, reaching record highs. Management is aggressively pursuing a merger with GSPC/GSPL to streamline sourcing and expects completion by late 2025.

    Highlights

    8

    • Revenue from operations stood at ₹4,289 crores for Q4 FY25, a marginal decline from ₹4,294 crores YoY.

    • EBITDA for the quarter was ₹524 crores, down 15.7% from ₹622 crores in the previous year's corresponding quarter.

    • Profit After Tax (PAT) for Q4 FY25 reported at ₹287 crores compared to ₹410 crores YoY.

    • Overall sales volume for FY25 reached 9.62 mmscmd, representing a 3% increase over the previous financial year.

    • CNG volumes hit an all-time high of 3.56 mmscmd in Q4, with overall CNG segment growth of 12% annually.

    • Industrial volumes in Morbi declined to 2.87 mmscmd in Q4 from 3.35 mmscmd in Q3 due to propane price competition.

    • EBITDA margin per scm stood at ₹6.25 for the quarter, compared to ₹7.06 in Q4 FY24.

    • Board recommended a dividend of ₹5.82 per share (291% of face value) for FY25.

    Concerns

    2

    • Propane Price Competition

    • APM Allocation Reduction

    What Changed1

    vs Q1 FY26

    Tone shiftNeutral → Good

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹4,289 Cr-0.1%YoY
    2. 02EBITDA₹524 Cr-15.8%YoY
    3. 03PAT₹287 Cr-30%YoY
    4. 04EBITDA Margin per SCM₹6.25-11.5%YoY
    5. 05Annual EBITDA₹2,090 Cr+5.3%YoY

    Segment breakdown

    Industrial
    5.03 mmscmd Sales Volume-7.0% QoQ Volume Growth2.87 mmscmd Morbi Volume
    CNG
    3.56 mmscmd Sales Volume12% Annual Growth15.4 lakhs Vehicle Base
    Domestic
    22.6 lakhs Commissioned Customers1.51 lakhs Annual Additions
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Capex
    Annual Capex Guidance
    ₹1,000 crores
    		High
    Volume
    CNG Volume Growth
    12%
    		High
    Margin
    EBITDA Margin Guidance
    4.5% to 5.5%
    		Medium
    Capacity
    CNG Station Additions
    70
    		Medium
    Other
    Merger Completion Timeline
    September / October 2025
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Propane Price Competition

    Propane is currently ₹3.5-3.7 cheaper per scm than PNG, leading to a 7% QoQ decline in industrial volumes. — Both acknowledged

    high

    APM Allocation Reduction

    APM allocation has dropped from 2.3 mmscmd in Q4 to approximately 2 mmscmd currently, increasing reliance on costlier spot gas. — Management acknowledged

    high

    Open Access Regulation

    Potential for third-party LNG suppliers to enter Morbi area; management is currently protected by a favorable interim court order. — Analyst deflected

    medium

    Areas of Evasion(1)

    • Specific split of short-term sourcing between HPHT, IGX, and Spot was not provided granularly.

    Q&A highlights

    3

    “Basically, 25% of the gas which has come in from the APM... long-term contracts contributing close to 35% of 9.38 mmscmd and the short-term contracts... close to 40%.”

    Reveals the company's heavy reliance on short-term/spot markets (40%) following the reduction in cheaper APM gas allocations.

    asked by Probal Sen, ICICI Securities

    2 min read5 chapters

    Detailed Narrative

    01

    CNG Segment Reaches Record Highs

    The CNG segment emerged as the primary growth engine for Gujarat Gas in Q4 FY25, reaching an all-time high sales volume of 3.56 mmscmd. Overall CNG sales across all regions rose by 12% annually, supported by an 18% growth in the CNG vehicle base to 15.4 lakh vehicles. Management expects this momentum to continue, guiding for 12% volume growth in FY26 and planning to add approximately 70 new CNG stations under the FDODO scheme.

    02

    Industrial Headwinds in Morbi Cluster

    Industrial volumes faced significant pressure, declining 7% QoQ to 5.03 mmscmd. The reduction was primarily concentrated in the Morbi ceramic cluster, where average volumes fell to 2.87 mmscmd from 3.35 mmscmd in Q3. This shift was driven by a ₹3.5-3.7 per scm price disadvantage compared to propane. Management noted that while spot LNG prices have corrected slightly, propane remains the more competitive fuel for industrial users in the current environment.

    03

    Sourcing Strategy Amidst APM Cuts

    The company is navigating a challenging sourcing environment following a reduction in APM gas allocations. In Q4, APM gas accounted for only 25% (2.3 mmscmd) of the sourcing mix, while short-term and spot contracts rose to 40% (3.77 mmscmd). Current APM allocation has further dipped to ~2 mmscmd. To mitigate this, GGL is negotiating long-term contracts with GSPC, aiming for pricing linked to Brent/Henry Hub to provide a natural hedge against propane price volatility.

    04

    Strategic Merger and Corporate Restructuring

    The proposed composite scheme of arrangement involving GSPC, GSPL, and Gujarat Gas is progressing through regulatory channels. Management expects the merger to be completed by September or October 2025. The merger is anticipated to eliminate layered structures, unlock value, and provide retrospective tax benefits from April 1, 2024. It will also integrate the gas trading business directly into Gujarat Gas, strengthening its sourcing capabilities.

    05

    Capex and ESG Initiatives

    Gujarat Gas invested ₹742 crores in infrastructure during FY25 and has significantly raised its capex guidance to ₹1,000 crores for FY26. On the ESG front, the company successfully completed a hydrogen blending pilot project at 8% and has initiated actions to increase this to 15%. Additionally, the company is aggressively digitizing operations through SCADA, ERP, and GIS systems to enhance operational efficiency and predictive maintenance.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.