MGL — earnings call

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Prepared remarks

Moderator · Conference Operator

MR. YOGESH PATIL -- DOLAT CAPITAL Mahanagar Gas Limited January 24, 2024

Ladies and gentlemen, good day, and welcome everyone to Mahanagar Gas Q3 FY'24 Earnings Conference Call hosted by Dolat Capital.

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 star then zero on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Yogesh Patil from Dolat Capital.

Yogesh Patil

Good evening, ladies and gentlemen.

On behalf of Dolat Capital, I welcome everyone to

Probal Sen: · Right. So just as a follow-up there, sir, what's the kind of vehicle conversion run rates we saw

Right.

So just as a follow-up there, sir, what's the kind of vehicle conversion run rates we saw per month in this quarter?

Sorry, for commercial vehicles, you said from a run rate of 1,100- 1,200 that's on a per month basis or this for the entire quarter results?

So, in the beginning, it was 1,100-odd in Q1 maybe, now it's gone up to 1,400.

Did I understand you correctly?

Just 1 more question, if I may, sir.

On the margins front, I just wanted to understand what sort of spot RLNG was consumed this quarter as a percentage of our total sourcing if at all?

2%.

And the rest is all now tied up in a combination of mid-term and short-term LNG contracts, right?

Mahanagar Gas Limited January 24, 2024

Right, right.

So sir, from a margin guidance perspective, given the way that prices have behaved both for medium term as well as spot, can we expect that this kind of margin trends will,I mean, barring any other issues with respect to pricing, can we expect that some of this kind of a margin strength will sustain over the next year or so?

Right, sir.

Sir, 1 last question, if I may.

What was the proportion of APM in the priority sector allocation as a percentage right now?

Moderator · Conference Operator

The next question is from the line of Yogesh Patil from Dolat Capital.

Yogesh Patil

Sir, your CNG volume grew by more than 6% on Y-o-Y basis so considering this, will you increase the CNG volume growth guidance for the long term?

Moderator · Conference Operator

The next question is from the line of Maulik Patel from Equirus Securities.

Maulik Patel

Can you just give us an update on this acquisition of Unison, –what is the expectation is that it will be commencing from the next financial year in terms of an approval and everything?

· Probal Sen:

Mahanagar Gas Limited January 24, 2024

Moderator · Conference Operator

The next question is from the line of Niharika from Aequitas Investments.

Niharika Jain

So, my first question is, has the MGL bid for the 12th round, which has got concluded for Northeastern and North...

Moderator · Conference Operator

The next question is from the line of Varatharajan from Antique Stock Broking Limited.

Varatharajan

Wanted to understand this promotion, which we ran during the quarter, will obviously like to know when they use the card, it will be charged on to the P&L.

But cumulatively, like what would be the amount broadly just to get an idea of what kind of an expense we should expect next quarter or following quarter?

Moderator · Conference Operator

The next question is from the line of S.

Ramesh from Nirmal Bang Equity.

S. Ramesh

So, if you're looking at the Unison Enviro GA development, when do you expect to complete the payment for the acquisition cost?

And what is the current reading of the gas connectivity for the supply of gas to those networks?

Are you going to use virtual network?

Or is there pipeline connectivity for sourcing the gas?

Moderator · Conference Operator

The next question is from the line of Vishnu Kumar from Avendus Spark.

Vishnu Kumar

Just following up on one of the earlier participant's questions, if the petrol price cut happens, you mentioned that at some point, we'll have a look at volume growth and decide.

So, what we see currently is there is a INR 30 price gap between petrol and CNG.

What level of price difference do you think can have an impact on our volumes?

Mahanagar Gas Limited January 24, 2024 And the second question would be the medium or longer term at what level of per unit EBITDA where we would be comfortable rather to take a price cut?

And how much would probably we'd be thinking as a medium-term target?

Moderator · Conference Operator

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

Sabri Hazarika

Congratulations on good set of numbers.

So, I have 2 sets of questions.

The first one is relating to UEPL.

Unison -- so you mentioned that currently, the volumes are around 0.13 mmscmd.

So, what has been the growth like in the last 1 year for UEPL?

Moderator · Conference Operator

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

Kirtan Mehta

I'd like to take this opportunity to understand some of the volume growth drivers for the next year.

So, we have signed 0.15 mmscmd of the industrial contracts.

Would you be able to bifurcate that between Ratnagiri and the other GAs?

And going into FY '25, what kind of potential that we can target in GA-3 as well as sort of the other industrial customers left out in GA-1 and GA-2?

Moderator · Conference Operator

The next question is from the line of Somaiah from Avendus Spark.

Somaiah

So, first question is on the HPHT gas.

So, the HPHT gas that we procured we'll be getting at a price closer to the ceiling of $10 for MMBtu, that would be right...

Moderator · Conference Operator

The next question is from the line of Raunak from Robo Capital.

Please go ahead.

Mahanagar Gas Limited January 24, 2024

Raunak

Natural gas prices have come down by 15% to 20%.

So how do we see its impact in the volume of our business?

Moderator · Conference Operator

The next question is from the line of S.

Ramesh from Nirmal Bang Equities.

S. Ramesh

Just on the LNG station additions, what is the kind of cost you are likely to incur in the second half of this year?

And how do you plan your capex?

And what is the kind of visibility on volumes and the top line we can expect from the LNG sales, say, over the next 1, 2 years?

Moderator · Conference Operator

Thank you.

That was the last question.

I would now like to hand the conference over to Mr.

Yogesh Patil

from Dolat Capital for closing comments.

Please go ahead.

Thanks a lot to Mahanagar Gas management for such a detailed answer to each questions.

Thanks a lot for your time, sir.

Now we will conclude the call.

Ashu Shinghal

Thank you everybody for joining me.

Thanks.

Moderator · Conference Operator

On behalf of Dolat Capital, that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.

(This document has been edited for improving readability)

Registered Address

MGL House, G-33 Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400051, Maharashtra

Contact details

[identifier removed]

Website

www.mahanagargas.com

CIN

L40200MH1995PLC088133

Questions and answers

Ashu Shinghal

I'm Ashu Shinghal, MD, Mahanagar Gas, and I welcome all of you to the earnings call of Mahanagar Gas Limited for the third quarter of the financial year 2023-24.

I would like to thank all of you for attending our call today.

MGL continues to create CGD infrastructure across its licensed areas.

During the quarter, 118,215 domestic households were connected.

And thus, we have established connectivity for nearly 2.37 million households.

We have laid 90 kilometers of steel and PE pipelines during the quarter, thereby taking the aggregate length to 6,742 kilometers.

We have added 1 CNG station during the quarter.

And with this, we have 320 CNG stations as on 31st of December.

We have also added 98 industrial and commercial customers during the quarter and thus have about 4,691 customers as on 31st December.

In respect of our Raigad GA, we have connected to 75,432 domestic households and 32 CNG stations, are currently operational.

During the quarter, we have laid 11-kilometer of pipeline in Raigad, thereby taking the total length of pipeline to 404 kilometers in Raigad district.

This expansion of our pipeline network has created a very good ecosystem for the CNG and PNG system in the Raigad area.

The first CGS and the first mother filling station at Savroli in GA-3 Mahanagar Gas Limited January 24, 2024 has been commissioned, and this will now enable expeditious unlocking of the demand in Raigad.

During the quarter, MGL has commissioned its LNG station at Savroli, and LNG sales to B2B customers has also commenced.

Coming to MGL operations for the third quarter ending 31st December '23 compared to the corresponding quarter of the last year, at company level, average gas volume sales has increased to 3.671 mmscmd from 3.412 mmscmd, which is an increase of 7.6%.

Sales volume in the case of CNG has increased to 2.632 mmscmd from 2.474, which is an increase of 6.38%.

In case of industrial and commercial, sales volume has increased to 0.508 from 0.439 mmscmd, which is an increase of 15.84%.

Sales for domestic PNG has increased to 0.53 from 0.499 mmscmd, which is an increase of 6.37%.

The current 9-month quarter EBITDA is INR 1,449 crores compared to previous year's 9-month EBITDA of INR 794 crores, that is an increase of 82%.

Net profit after tax for the 9 months is INR 1,024 crores compared to net profit after tax for previous 9 months of INR 521 crores.

Net PAT is INR 317 crores for the quarter as compared to INR 338 crores in the previous quarter.

I'm happy to announce that Board of Directors has also approved an interim dividend of INR 12 per equity share for the current financial year.

In December '23, MGL signed a MOU with Mitsui O.S.K.

Lines for production and utilization of hydrogen associated products and LNG for various applications.

During the quarter at the prestigious, Governance Now Awards, MGL has been awarded in 2 categories: IT infrastructure excellence for being the first CGD entity moving to AWS cloud-based servers and digital transformation leader award for providing better customer and vendor experience under PSU IT category.

We continue our initiative in environment, safety, and CSR.

MGL has also been awarded the Mahatma award for working on maximum number of sustainable development goals under the banner We Care.

MGL assessed 14 out of the 17 SDGs impacting the lives and livelihood of marginal communities.

With this, I conclude, and would now like to open the floor for questions.

Thank you very much.

Moderator · Conference Operator

Thank you very much.

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

The first question is from the line of Probal Sen from ICICI Securities.

Probal Sen: · Right. So just as a follow-up there, sir, what's the kind of vehicle conversion run rates we saw

Congratulations on a strong set of numbers.

I have 3 questions.

One, this is obviously a 5 quarter high in terms of the volume growth that you have reported.

And I know you do not like to comment on quarter-to-quarter volume fluctuations.

But just directionally, can you just let us know what are the primary reasons why volume growth picked up this sharply in this quarter?

And what can we actually expect over the next few quarters, whatever view you can give us?

That's my first question.

Mahanagar Gas Limited January 24, 2024