Detailed Narrative
Robust Q1 FY26 Financial Performance
Mahanagar Gas reported a strong Q1 FY26 with overall average gas sales increasing by 9.61% YoY to 4.229 mmscmd. This volume growth translated into a 28% QoQ rise in EBITDA from operations to INR 485 crores and a 29% QoQ increase in Net Profit After Tax to INR 324 crores. The EBITDA per SCM, excluding a one-time📎 trade margin reversal, remained stable at INR 10, consistent with Q4 FY25.
Strategic UEPL Amalgamation Approved
The National Company Law Tribunal (NCLT) approved the scheme of amalgamation of Unison Enviro Private Limited (UEPL) with Mahanagar Gas Limited on July 9, 2025, with February 1, 2024, as the appointed date. This merger is expected to become effective by August 15, 2025, upon filing with the ROC. Management anticipates tax benefits from unabsorbed depreciation and faster eligibility for depreciation on UEPL's capital expenditure post-merger.
Mixed Trends in Volume Growth
While overall gas sales grew, CNG sales volume growth slowed to 7.54% YoY in Q1 FY26, compared to higher rates in previous quarters. This deceleration was attributed to a decline in new vehicle additions, partly due to increased car prices, and a reduction in volumes from BEST buses (down from 125,000 Kgs/day last year to 98,000 Kgs/day). Conversely, the Industrial and Commercial segment showed strong growth of 26.09% YoY, reaching 0.679 mmscmd.
Significant Capital Expenditure Plans
MGL plans substantial CAPEX, with INR 1,100-1,300 crores earmarked for core business expansion (MGL and UEPL) over the next two years. This includes INR 300-350 crores for adding 80 new CNG stations and INR 250-300 crores for steel trunk lines. Additionally, MGL is investing INR 350-380 crores (40% stake) in the first phase of an IBC (battery venture) project and INR 130 crores as equity in a CBG project, with the latter having an overall cost of INR 600-650 crores.
Gas Sourcing and Margin Management
In Q1 FY26, domestic APM gas accounted for 100% of domestic supply and 37% of total CNG volume, with approximately 0.5 mmscmd from new well gas. Despite fluctuations in Henry Hub prices, the average cost of gas per unit remained flat, as a reduction in APM allocation was offset by lower rates of other gases. Management expects EBITDA per SCM to be around INR 9.5 by year-end FY26, acknowledging potential impacts from PNGRB's zone-wise tariff of INR 0.60-0.70 per kg on CNG, which they believe can be partially passed on to customers.
Network Expansion and Future Growth Drivers
MGL continues to expand its infrastructure, connecting 16,348 domestic households and laying 79.08 km of pipelines in Q1 FY26. The company aims to add 80 new CNG stations this year across MGL and UEPL geographies. Mahanagar LNG Limited (MLPL) plans to add 6-7 LNG stations by year-end, and two large CNG stations in Sion and Wadala are expected to be commissioned within 7-8 months. UEPL is projected to achieve 30% volume growth annually for the next 2-3 years, while GA-3 is targeted for 15-20% growth in FY26-27.