Mahanagar Gas Limited — Q4 FY24 earnings call

Call held 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

  • 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

  • Declining APM Gas Allocation

Key financials

2 periods

Headline

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

Q4

  • Net PAT
    ₹265 Cr
    QoQ -16.4%

What they filed

Q1 FY27: revenue up 14.0%, net profit down 39.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,786 1,758 1,963 2,081 2,049 +15%2,058 +17%2,051 +4%2,372 +14%
EBITDA413 314 395 501 338 −18%352 +12%260 −34%343 −32%
Net profit287 225 242 320 193 −33%202 −10%132 −45%194 −39%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Annual Volume
3.568 mmscmd Total
  • CNG 2.549 mmscmd 71.4%
  • Domestic PNG 0.52 mmscmd 14.6%
  • Industrial & Commercial (I&C) 0.499 mmscmd 14.0%

Guidance & targets

Volume

  • Overall Volume Growth Volume · FY25 · Medium confidence 6% to 7%

    Previously 5.45% → 6% to 7%

    For this 2024-25 and next financial year, we expect growth to be slightly better than 5.4% -- 5.5%, maybe in the range of 6% to 7%.

    — Management

Margin

  • EBITDA Margin per SCM Margin · Long-term · High confidence ₹9 to ₹11
    we are still comfortable with the range of 9% to 11% in the long-term, I mean.

    — Management

Capex

  • Annual Group Capex Capex · FY25 · High confidence ₹1,000 crores

    Previously ₹775 crores → ₹1,000 crores

    So put together as a group, our Capex should touch INR1,000 crores or a little more than INR1,000 crores, okay.

    — Management

Capacity

  • New CNG Stations Capacity · FY25 · Medium confidence 50+

    Previously 36 → 50+

    this year, FY 2025, we expect to do much better in terms of CNG stations. Maybe more than 50 stations we are targeting to be completing this year

    — Management

Market context

  • I&C Segment Growth Volume · FY25 · High confidence Double-digit
    And we are expecting to see double-digit growth in the I&C segment in this financial year also.

    — Management

Risks & concerns

  • Declining APM Gas Allocation

    high

    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

  • Muted Q-o-Q CNG Volume Growth

    medium

    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

  • OMC Trade Margin Disputes

    low

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

    Analyst acknowledged

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

2 direct
Sudden increase in Operating Expenditure (Opex) Direct
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

Declining APM Gas Allocation Direct
In this quarter, on an average, we have been able to get around 74% APM compared to our sales in the priority sector... we try and blend even spot, if possible, to the extent of whatever term contracts we can ramp down.

Highlights the risk of rising gas costs as cheaper domestic allocation drops, forcing reliance on more expensive HPHT or spot LNG.

Asked by Probal Sen, ICICI Securities

Consolidation impact of Unison Enviro (UEPL) Partial
When you consolidate the results, there is certainly some impact of the valuation and the values which are attributable to license, those are also amortized... Unison is an EBITDA-positive company. And currently, they are making around INR60 crores EBITDA per annum.

Clarifies that the reported loss in the consolidated entity is due to non-cash accounting charges (amortization of licenses) rather than operational weakness at UEPL.

Asked by S. Ramesh, Nirmal Bang Equities

2 min read 5 chapters

Detailed narrative

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).

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.

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.

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.

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.

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