Mahanagar Gas Limited

MGL faced significant margin pressure in Q2 FY26, with EBITDA per SCM falling to approximately ₹8.0 from ₹9.68 in the previous quarter. This was primarily driven by a sharp reduction in APM gas allocation, which now covers only about 35% of domestic requirements compared to 80-90% historically. To bridge the gap, the company increased its reliance on higher-cost sources including HPHT gas, New Well Gas (NWG), and spot RLNG. Additionally, a ₹2 depreciation in the exchange rate added roughly ₹0.50 per SCM to procurement costs, while lower alternate fuel prices (LPG) impacted realizations in the I&C segment.

Despite margin headwinds, MGL achieved strong volume growth, with overall average sales reaching 4.593 MMSCMD, a 9.22% YoY increase. The Industrial & Commercial (I&C) segment was a standout performer, growing 8.45% sequentially to 0.757 MMSCMD. CNG volumes also showed steady growth of 2.19% QoQ, supported by the addition of 27,150 CNG vehicles during the quarter. Management remains confident in maintaining this momentum, targeting 10% or higher volume growth for the full financial year.

The company is aggressively expanding its infrastructure to support future growth, laying 87.4 km of pipeline in Q2 to reach a total length of over 8,061 km. MGL added 14 CNG stations during the quarter, bringing the total to 485, and is on track to add approximately 80 stations for the full year. Total group capex for FY26 is guided at ₹1,100 to ₹1,200 crores, with ₹900-1,000 crores allocated to MGL's three original Geographical Areas (GAs) and ₹150-200 crores for the newly amalgamated UEPL GAs.

Management addressed concerns regarding the Maharashtra EV policy, noting that while targets are defined, implementation mechanisms remain unclear. In the core Mumbai market, EV penetration in the 3-wheeler segment remains negligible due to severe constraints in parking and charging infrastructure. MGL is countering potential EV competition by launching new incentive schemes, such as the 'fleet program,' which offers digital loyalty incentives and slabs of discounts for transporters and bulk consumers to encourage CNG adoption and retrofitment.

The amalgamation of Unison Enviro Private Limited (UEPL) with MGL is now effective, and all financial reporting has been restated to reflect the consolidated entity. Beyond operational synergies, the merger is expected to yield significant tax benefits. Management estimates that approximately ₹35 crores in income tax benefits will accrue over the next two years due to the ability to depreciate license costs and utilize UEPL's accumulated losses. While UEPL's current EBITDA per SCM of ~₹7 is slightly lower than MGL's, its high volume growth of 30-35% is expected to drive overhead absorption and margin alignment over time^⏳.