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    Mahanagar Gas

    MGLGood
    Oil, Gas & Consumable Fuels·23 Jul 2025
    Management Summary

    MGL delivered a strong operational performance in Q1 FY26, characterized by nearly 10% volume growth and robust margin expansion, despite a significant reduction in lower-cost APM gas allocation. The company is aggressively pursuing infrastructure expansion with a ₹1,100-1,300 crore capex plan over two years and is diversifying into battery ventures and CBG. The merger with UEPL is on track for completion by mid-August 2025, which is expected to provide tax benefits and accelerate growth in new geographical areas.

    Highlights

    8

    • Overall average gas sales increased 9.61% YoY to 4.229 mmscmd

    • EBITDA from operations stood at ₹485 crores, a 28% increase over the previous quarter

    • Net Profit after tax (PAT) rose 29% QoQ to ₹324 crores

    • Industrial and Commercial sales volume saw significant growth of 26.09% YoY to 0.679 mmscmd

    • Normalized EBITDA per SCM (excluding one-time trade margin reversal) was ₹9.68

    • APM gas allocation for CNG dropped to 37% from 47% in the previous quarter

    • Company added 20,332 CNG vehicles and 16,348 domestic households during the quarter

    • UEPL subsidiary reported 0.225 mmscmd volume with a 30% annual growth target

    Concerns

    1

    • APM Gas De-allocation

    What Changed3

    vs Q2 FY26

    Tone shiftNeutral → GoodGuidance items4 → 6 (+2)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    05 metrics
    1. 01EBITDA₹485 Cr+28.0%QoQ
    2. 02Net Profit₹324 Cr+29.0%QoQ
    3. 03Average Gas Sales4.229 mmscmd+9.6%YoY
    4. 04EBITDA per SCM₹12.6
    5. 05Normalized EBITDA per SCM₹9.68+15.9%QoQ

    Segment breakdown

    • CNG2.981 mmscmd66.9%
    • Domestic PNG0.569 mmscmd12.8%
    • Industrial & Commercial0.679 mmscmd15.2%
    • UEPL (Subsidiary)0.225 mmscmd5.1%
    Donut· Share of Sales Volume

    Guidance & targets

    6
    CategoryTargetPriority
    Capex
    Core Business Capex (MGL + UEPL)
    ₹1,100-1,300 crores
    		High
    Volume
    Overall Volume Growth
    High single-digit
    		Medium
    Volume
    UEPL Volume Growth
    30%
    		Medium
    Margin
    EBITDA per SCM
    ₹9.5
    		Medium
    Capacity
    New CNG Stations
    80
    		High
    Other
    Investment in IBC (Battery Venture)
    ₹350-380 crores
    		High

    Risks & concerns

    5
    RiskSeverity

    APM Gas De-allocation

    APM allocation for CNG dropped from 47% to 37% QoQ, forcing reliance on more expensive alternatives like NWG and HPHT. — Both acknowledged

    high

    Declining BEST Bus Volumes

    BEST bus fleet operating on CNG has dropped from 3,000 to 1,800 buses, impacting a key high-volume customer segment. — Management acknowledged

    medium

    New Vehicle Price Inflation

    Significant increase in new car prices is slowing down the rate of new CNG vehicle additions. — Management acknowledged

    medium

    Tariff Reform Impact

    New PNGRB zone-wise tariffs could impact margins by ₹0.60-0.70 per kg of CNG, though management hopes to pass this on. — Analyst acknowledged

    medium

    Areas of Evasion(1)

    • Specific quantum of tax losses/unabsorbed depreciation from UEPL merger.

    Q&A highlights

    3

    “average APM received in Q4 was around 47%. Against that, APM received in this Q1 is around 37%, okay? And that 10% reduction has been replaced by NWG and other gases.”

    Reveals the significant shift in sourcing strategy and the impact of government allocation cuts on input costs.

    asked by Yogesh Patil, Dolat Capital

    2 min read5 chapters

    Detailed Narrative

    01

    Resilient Volume Growth Amidst Segment Shifts

    MGL reported a 9.61% YoY increase in total gas sales to 4.229 mmscmd. While CNG growth slowed to 7.54% due to early monsoons and higher vehicle prices, the Industrial and Commercial (I&C) segment surged by 26.09% to 0.679 mmscmd. Management noted that while BEST bus volumes have declined from 125,000 kg/day to 98,000 kg/day, they are actively engaging with MSRTC, which currently operates 600 CNG buses and has a potential fleet of 18,000 for conversion.

    02

    Navigating the APM De-allocation Challenge

    A critical highlight was the drop in APM gas allocation for CNG from 47% in Q4 FY25 to 37% in Q1 FY26. MGL successfully managed this by sourcing 0.5 mmscmd of New Well Gas (NWG) and 0.5 mmscmd of HPHT gas. Despite the lower APM mix, normalized EBITDA per SCM improved to ₹9.68 from ₹8.35 in the previous quarter, aided by softer global LNG prices and better realizations in the I&C segment.

    03

    Strategic Expansion and UEPL Integration

    The merger with Unison Enviro (UEPL) is nearing completion, with the final order expected by August 15, 2025. UEPL is targeted to grow volumes at 30% annually, supported by a significant portion of the group's ₹1,100-1,300 crore two-year capex plan. Infrastructure in GA-3 (Raigad) is also scaling, with volumes reaching 0.324 mmscmd and a growth target of 15-20% for the coming years.

    04

    Diversification into New Energy Frontiers

    MGL is diversifying beyond traditional CGD business. It plans to invest ₹350-380 crores for a 40% stake in International Battery Company (IBC) for battery manufacturing, with the first phase expected to be completed by mid-2026. Additionally, a CBG plant in Mumbai is in development with a total project cost of ₹600-650 crores, where MGL's equity contribution will be approximately ₹130 crores.

    05

    Infrastructure and Network Maturity

    The company aims to add 80 new CNG stations this year, up from 66 last year. Management addressed concerns about declining throughput per station, explaining that many new stations are 'daughter booster' stations in newer GAs which naturally have lower initial volumes but reach plateau levels within 2-3 months. The long-term strategy involves converting these to 'online' stations as pipeline connectivity expands over the next 3-4 years.

    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.