MGL — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. ANKUR AGRAWAL – PHILLIPCAPITAL (INDIA) PRIVATE LIMITED Mahanagar Gas Limited November 14, 2022

Ladies and gentlemen good day and welcome to Mahanagar Gas Limited Q2 FY23 Earnings Conference Call hosted by PhillipCapital (India) Private Limited.

As a reminder all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Ankur Agrawal from PhillipCapital (India) Private Limited.

Thank you and over to you sir.

Ankur Agrawal

Thank you Renju.

Good evening to all the participants.

On behalf of PhilipCapital India, it is my pleasure to welcome you all to the Mahanagar Gas Limited’s Q2 FY23 and H1 FY23 earnings conference call.

Today we have with us the senior management team of MGL.

They're represented by Mr. Sanjay Shende – Deputy Managing Director, Mr. Rajesh Patel – Chief Financial Officer and Mr. Rajesh Wagle – Senior Vice President, Marketing.

They will share the initial remarks on the quarterly performance of the company and that will be followed by the Q&A session.

Before that I would now pass it on to Mr. Diwakar Pingle for reading out the disclaimer.

Over to you sir.

Thank you.

Diwakar Pingle

Thank you Ankur.

Welcome to the participants in this call.

Before we begin, I would like to mention that some of the statements made in today's discussion may be forward looking in nature and we believe that the expectation contain in the statements are reasonable.

However, these statements involve a number of risks and uncertainties that may lead to different results.

The risk and uncertainties related to these statements are included but not limited to fluctuation sales volume, fluctuation foreign exchange or the cost and ability to manage growth.

I urge you to consider the quarterly numbers are not a reflection of long-term trends or indication of full year results.

They should not be attempted to be extrapolated or interpolated into a full year number.

With that said I will now hand over the call to management.

Thank you and over to you, sir.

S. Ramesh: · In terms of the CAPEX and the incremental upside in your future growth in the CGD volumes,

To what extent does it help you offset the increase in the gas cost or is it some more price increase required to offset the increase in gas cost?

That was the question.

And what will be the share of spot LNG in your overall gas purchase basket?

In terms of the CAPEX and the incremental upside in your future growth in the CGD volumes, can you give us some sense how much you will spend this year and over the next couple of years and how would that help you grow your volume over the next 2-3 years?

Can we get some sense in terms of what is the upside in volumes you we can expect, how do you spend 800x3 or 2,400 crores of CAPEX?

How much will it help you in terms of your future

Moderator · Conference Operator

Next question comes from the line of Varatharajan Sivasankaran from Antique Limited.

V. Sivasankaran

What has been the vehicle conversion numbers and we are still quite surprised by the flat volume growth QOQ.

Is there any reason why it was so?

Moderator · Conference Operator

Next question comes from the line of Aditya Suresh from Macquarie.

Aditya Suresh

First is in terms of your margins, is it fair to say that at the current CNG price of 89.5, oil is constant in the current environment even we are able to protect your existing margin, even in the next quarter or do you see that margins should fall given where we are from a pricing perspective?

Moderator · Conference Operator

The next question comes from the line of Maulik Patel from Equirus.

Maulik Patel

Do you have anything on this medium-term contract which you signed last year?

Can you just tell us what's the validity of those contracts, for how long those contracts are there?

Moderator · Conference Operator

Next question comes from the line of Saurabh Handa from Citigroup.

Saurabh Handa

My first question is on these term RLNG contracts.

You said you got around 0.45 MMSCMD and in Q2, how much is the contracted quantity across these three contracts?

Moderator · Conference Operator

The next question comes from the line of Sabri Hazarika from Emkay Global.

Sabri Hazarika

First question is regarding this ONGC-GAIL pipeline tariff issue.

So, you'd be like fighting this out in higher courts, right?

So just wanted to know I mean this court appeal would be the last one of it or you have room, if by chance if something comes against your favor then is there any further chance or it is like the final forum?

Moderator · Conference Operator

Next question comes from the line of Abhilasha Satale from Quantum AMC.

Abhilasha Satale

We are awaiting this Kirit Parikh Committee report and most probably there is a rumor that there will be some downside to the APM prices.

As and when it happens what will be our strategy?

Will we pass on the benefit to improve discount to the alternative fuels and improve the conversion rate or we are in a position to retain large part of the benefit which will come through us from the cost side?

Moderator · Conference Operator

Next question comes from the line of Yogesh Patil from Centrum Broking.

Mahanagar Gas Limited November 14, 2022

Yogesh Patil

First of all, could you please share the breakup of input gas volume in terms of gas pool, contracted LNG and spot LNG?

If you could provide it in terms of percentage term that would be really helpful?

Moderator · Conference Operator

Next question comes from the line of Somaya V from Spark Capital.

Somaya V

The question pertains to spot LNG buying in the previous quarter, Q2. So industrial more or less would have been sufficient to the mid-term contracts that we have.

Just wanted to check that's a Mahanagar Gas Limited November 14, 2022 right understanding.

And second in terms of the priority sector for us, the CNG part, the shortfall would have been to the extent of say 4%-5% and that too from say mid of August.

Is that the right understanding?

Moderator · Conference Operator

Next question comes from the line of S.

Ramesh from Nirmal Bang Equities.

S. Ramesh: · In terms of the CAPEX and the incremental upside in your future growth in the CGD volumes,

If you're looking at the sensitivity of the CV segment, what is the percentage discount of CNG compared to diesel below which your conversion of CVs will possibly not be as visible?

Is there a number you can share with us because that's possibly one segment which is growing exactly because if you're seeing the potential for a correction in diesel spreads and international prices how do you see that play out in the next 1 to 2 years based on your understanding on the ground?

Mahanagar Gas Limited November 14, 2022

On a similar line of thought in terms of the competitiveness of CNG versus petrol and diesel you have realized that has come down.

So is there a threshold below which you will have to cut prices and take some sacrifice on margins say in the next 6 months to 12 months and then eventually over a period of time try to make up.

What is your thought on that?

Moderator · Conference Operator

The next question comes from the line of Varatharajan Sivasankaran from Antique Limited.

Varatharajan S

Looking at acquiring domestic gas now that RIL as well as ONGC are planning to increase production and there will be auctions from both parties soon.

Would you be looking to bid and if at all we will going to bid I am just trying to understand since your volumes grow on a Mahanagar Gas Limited November 14, 2022 continuous basis what would be the volume you would effectively bid for.

Would it cover one quarter, 1-year or 2-years and how do you manage this entire volume at which you want to bid and the term of the contract?

Moderator · Conference Operator

Next question comes from the line of Ankur Agrawal.

Ankur Agrawal

I just wanted to check regarding the margins for the commercial and industrial segment.

I mean we understand that pricing has come off from the first quarter currently but brent prices have also come off during that time.

Are you seeing some ease in the input gas cost as well?

How are the margins waving on the C&I side, if you could help us understand that?

Moderator · Conference Operator

Thank you.

Due to time constraints, we have reached the end of question-and-answer session.

I would now like to hand the conference over to Ankur Agrawal for closing comments.

Ankur Agrawal

Thank you to all the participants.

I would like to thank the management of Mahanagar Gas Limited for taking out the time for this interactive session.

I would also like to thank all the participants who joined on the call today.

Thank you all.

Over to you Renju.

Moderator · Conference Operator

Thank you.

On behalf of PhillipCapital (India) Private Limited that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you.

We will now begin the question-and-answer session.

The first question comes from the line of S.

Ramesh from Nirmal Bang Equities.

S. Ramesh: · In terms of the CAPEX and the incremental upside in your future growth in the CGD volumes,

If you can explain to what extent the price increase you have taken in CNG and PNG in November as offsetting the increase in gas cost?

That will help us understand how this will help you maintain or improve margins in this quarter.