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    Mahanagar Gas

    MGLGood
    Oil, Gas & Consumable Fuels·10 May 2024
    Management Summary

    Mahanagar Gas (MGL) delivered a record-breaking FY24 with peak sales volumes and profitability, driven by robust growth in the Industrial & Commercial (I&C) segment and aggressive infrastructure expansion. The company successfully integrated Unison Enviro and is diversifying into LNG trucking and electric vehicles. While Q4 saw some margin pressure due to one-time marketing spends and lower APM gas allocation, management remains confident in maintaining double-digit growth in I&C and expanding its CNG footprint.

    Highlights

    7

    • Highest ever annual sales volume achieved at 3.609 mmscmd, up 5.45% YoY

    • Annual EBITDA reached ₹1,843 crores, a significant 56% increase YoY

    • Net PAT for FY24 stood at ₹1,289 crores, growing 63% YoY

    • Commissioned record 36 new CNG stations and upgraded 45 existing ones in FY24

    • Added 3,20,125 domestic PNG connections, the highest by any CGD entity in India

    • Completed 100% acquisition of Unison Enviro Private Limited (UEPL)

    • Proposed final dividend of ₹18 per share, taking total FY24 dividend to ₹30 (300% of face value)

    Concerns

    1

    • Declining APM Gas Allocation

    Key financials

    Metrics

    6

    Periods

    2

    Headline

    5
    • Revenue (UEPL Consolidation)
      ₹56 Cr
    • EBITDA
      ₹1,843 Cr
      YoY+56.0%
    • Net PAT (Annual)
      ₹1,289 Cr
      YoY+63%
    • Average Sales Volume
      3.609 mmscmd
      YoY+5.5%
    • EBITDA per SCM
      13.9%

    Q4

    1
    • Net PAT
      ₹265 Cr
      QoQ-16.4%

    Segment breakdown

    • CNG2.549 mmscmd71.4%
    • Domestic PNG0.52 mmscmd14.6%
    • Industrial & Commercial (I&C)0.499 mmscmd14.0%
    Donut· Share of Annual Volume

    Guidance & targets

    4
    CategoryTargetPriority
    Volume
    Overall Volume Growth
    6% to 7%
    		Medium
    Margin
    EBITDA Margin per SCM
    ₹9 to ₹11
    		High
    Capex
    Annual Group Capex
    ₹1,000 crores
    		High
    Capacity
    New CNG Stations
    50+
    		Medium

    Risks & concerns

    5
    RiskSeverity

    Declining APM Gas Allocation

    Allocation dropped to 74% in Q4; management is managing costs through a mix of HPHT gas and term contracts (Henry Hub/Brent linked). — Both acknowledged

    high

    Muted Q-o-Q CNG Volume Growth

    Analyst noted only 1% Q-o-Q growth; management attributed this to seasonality and lower per-capita consumption of private cars compared to commercial fleets. — Analyst downplayed

    medium

    OMC Trade Margin Disputes

    Ongoing negotiations with Oil Marketing Companies for interim period margins; management claims adequate provisions are already in place. — Analyst acknowledged

    low

    Areas of Evasion(2)

    • Specific quantification of non-cash charges in UEPL consolidation
    • Exact breakup of the ₹200 crore provision for OMC margins

    Q&A highlights

    3

    “Mainly, there is an increase on account of the marketing scheme we introduced for promotion of CNG vehicles. So almost more than INR25 crores has been spent during the quarter on account of these marketing schemes... this is a kind of one-time expenditure.”

    Explains the Q4 margin contraction as a strategic, non-recurring investment rather than a structural cost increase.

    asked by Probal Sen, ICICI Securities

    2 min read5 chapters

    Detailed Narrative

    01

    Record Infrastructure Expansion and Connectivity

    MGL achieved a historic milestone by commissioning 36 new CNG stations and upgrading 45 existing ones in FY24. The company also added over 3.2 lakh domestic PNG connections, the highest in the country for any CGD entity. Total pipeline length has now reached 6,968 kilometers, supporting a connectivity base of nearly 2.49 million households across its three Geographical Areas (GAs).

    02

    Industrial & Commercial Segment Outperforms

    The I&C segment was the standout performer with 12.32% annual volume growth, reaching 0.499 mmscmd. This was driven by strategic pricing interventions, including a guaranteed 10% discount to Fuel Oil (FO) for new large customers. Management expects this momentum to continue with double-digit growth targeted for FY25, supported by a pipeline of 1 lakh SCMD worth of new industrial contracts.

    03

    Strategic Marketing Spend Impacts Q4 Margins

    Q4 profitability was impacted by a one-time📎 marketing expenditure of approximately ₹25 crores aimed at promoting CNG vehicle adoption through incentives like ₹20,000 gas coupons. While this contributed to a Q-o-Q dip in Net PAT from ₹317 crores to ₹265 crores, management views this as a necessary investment to drive long-term volume growth in the private car and commercial vehicle segments.

    04

    Diversification into LNG and EV Ecosystems

    MGL is actively diversifying its portfolio through the launch of Mahanagar LNG Private Limited (51% stake) to develop an LNG corridor for long-haul trucking. Additionally, the company made equity investments in 3EV Industries for electric 3-wheelers and signed an MoU with MCGM for a Compressed Bio-Gas (CBG) plant in Mumbai, which is expected to produce 55-60 tons of CBG per day.

    05

    Unison Enviro Integration and Future Outlook

    The acquisition of Unison Enviro (UEPL) is now complete, with MGL holding 100% stake. While consolidation introduced non-cash amortization charges, UEPL is operationally EBITDA-positive, generating approximately ₹60 crores annually. MGL plans to invest ₹150-200 crores annually in UEPL's GAs to convert existing 'daughter booster' stations to 'online' stations, which is expected to drive significant volume growth.

    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.