Detailed Narrative
Regulatory Tailwind: Mumbai High Court Pollution Mandate
A significant portion of the call focused on a recent Mumbai High Court order directing the state government to study phasing out diesel and petrol vehicles in favor of CNG and electric power. Management identified a massive opportunity in the commercial vehicle segment, where current CNG penetration is only 10% (38,000 out of 400,000 vehicles). If implemented, this could boost CNG volume growth to 15-20%, mirroring historical trends seen in Delhi's NCR region.
Strategic Diversification: EV Battery Manufacturing
MGL is aggressively diversifying into the EV value chain through a JV with International Battery Company (IBC). The company has invested ₹35 crores for a 44% stake in a project to manufacture lithium-ion cells. Phase 1 targets a 1GW capacity with an estimated revenue potential of ₹900-₹1,000 crores, expected to start contributing in approximately 18 months. Management is targeting an 18% IRR for this niche project, banking on domestic manufacturing protections and technology from a South Korean partner.
Margin Management Amidst APM Cuts
Despite significant cuts in APM gas allocation during the quarter (October and November), MGL managed to maintain an EBITDA per SCM of ₹10.3 for the 9-month period. Management noted that 50% of the cuts have since been reinstated as of January 16, 2025. Combined with two price hikes (₹2 and ₹1 per kg on CNG), the company expects margins to improve in Q4, remaining within their long-term guidance band of ₹10 to ₹12 per SCM.
UEPL Integration and Performance
The wholly-owned subsidiary Unison Enviro (UEPL) reported Q3 revenue of ₹102 crores and a modest net profit of ₹1.27 crores. While UEPL's net margins appear low due to high amortization of authorization costs and interest on inter-company loans, its cash EBITDA is healthy at ₹50-₹55 crores per annum. Management expects UEPL to deliver 20%+ volume growth, significantly outperforming the core portfolio's growth rate.
Sourcing Mix and Forex Exposure
MGL has actively adjusted its gas sourcing portfolio to counter APM reductions, increasing Henry Hub linked contracts to 1.45 MMSCMD and securing 0.5 MMSCMD of HPHT gas. However, management highlighted that all local gas purchases are dollar-denominated, leaving the company unhedged against Rupee depreciation. A ₹1 fall in the exchange rate impacts costs by ₹0.22-₹0.25 per SCM, though natural hedges exist in industrial pricing linked to dollar-denominated alternate fuels.