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. PROBAL SEN – ICICI SECURITIES LIMITED Mahanagar Gas Limited October 25, 2024

Ladies and gentlemen, good day, and welcome to Mahanagar Gas Q2 FY '25 Earnings Conference Call hosted by ICICI Securities.

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 * and “0” on your touchphone telephone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Probal Sen from ICICI Securities Limited.

Thank you, and over to you, sir.

Probal Sen

Thank you, Palak.

Welcome, everyone, to the post Q2 FY '25 earnings call of Mahanagar Gas Limited.

With us, we have members of the senior management, including Mr. Ashu Shinghal, Managing Director; Mr. Sanjay Shende, Deputy Managing Director; Mr. Rajesh Patel, Chief Financial Officer; and Mr. Rajesh Wagle, Senior Vice President of Marketing Division.

Before starting the call, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature, and we do believe that expectations contained in the statements are reasonable.

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

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

With that said, I will now hand over the call to the management for their opening remarks, post which we will have a Q&A session.

Over to you, sir.

Amit Murarka

Right.

But like I'm sure you must be taking this up with the ministry, but if, let's say, the gas price is going to go up consistently, and I mean, the blended gas cost because of the newer wells issue, how do you kind of stay competitive versus the liquid fuels and also kind of push LNG -- push gas into new markets?

Moderator · Conference Operator

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

Sabri Hazarika

So a few questions.

Firstly, I think the opex per SCMwas also higher during this quarter.

So any particular reason or is it the normal run rate.

Moderator · Conference Operator

The next question is from the line of Nitin Tiwari from PhillipCapital.

Nitin Tiwari

Sir, my questions are partially answered, but just staying on that topic of deallocation of APM gas and how the strategy would evolve post that reallocation because as you also pointed out, this reallocation has just accelerated the change, which was already happening, right?

So Mahanagar Gas Limited October 25, 2024 essentially, it all boils down to how we are going to price the products I mean CNG particularly in order to maintain our growth and margin.

So again, I mean, like we want to question you on do we maintain our -- are we going to maintain our guidance of 5% to 6% growth that we were looking at earlier and along with a margin of INR10 to INR12 because I mean, the way we look at it given this reallocation, a broad sense is that INR5 to INR6 revision in CNG price might be required for you to maintain the margin.

And when that happens, I mean, the gap certainly closes with a petrol price and a lot more with the diesel price.

So would that not impact conversion of vehicles and growth of volumes?

And I mean, this is certainly a near-term problem.

A corollary to that is that essentially, this change was any which was happening.

So what's your strategy like 4 to 5 years down the line when your APM allocation would be really low and you would largely be dependent on imported gas or expensive gas.

So how do you see the scenario panning out then?

If you could throw some light on that, sir.

Moderator · Conference Operator

Thank you.

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

Please go ahead.

Yogesh Patil

Thanks for taking my questions.

Sir, as you mentioned, the EBITDA margin guidance of INR10 to INR12 and we are still waiting for the CNG price hike, which is due.

So this guidance is considering the CNG price hike or without CNG price hike?

That's one.

Moderator · Conference Operator

Thank you.

The next question is from the line of Nirmal Gore from Aditya Birla AMC.

Please go ahead.

Nirmal Gore

My question is about the APM gas reallocation.

Just wanted to know why there was a sudden reallocation done because considering the fact that the allocation towards CGD was any which Mahanagar Gas Limited October 25, 2024 was declining, but the sudden decline of 20%.

I just wanted to know why this was done, what was the rationale?

And in addition to that, if you could throw some light on where this APM gas has been diverted?

Moderator · Conference Operator

Thank you.

The next question is from the line of Hemang Khanna from Nomura.

Please go ahead.

Hemang Khanna

Sir, again, just going back to the APM allocation.

I wanted to get a sense on the raw material side, following the cut and with the sourcing efficiencies you're currently employing, what is your current increase in raw material prices or gas sourcing currently?

And a follow-up to that is that do you -- what is the view that -- do you believe that you'll be allowed to fully pass on the impact of the higher input cost to consumers?

We appreciate that you're the lowest cost CNG provider in the country right now.

But even in that landscape, will you be allowed to fully pass on this impact to consumers?

Moderator · Conference Operator

Thank you.

The next question is from the line of Kartik from CLSA.

Please go ahead.

Kartik

I had one question on what do you think is the current discount versus diesel in percentage terms?

And based on your experience, what is the level of discount that you think customers are finding so that your volumes are not impacted?

Moderator · Conference Operator

Thank you.

The next question is from the line of Saurabh Handa from Citi Group.

Please go ahead.

Saurabh Handa

Sir, my first question is just on this APM allocation cut.

Now the perception is that the CGD sector has been singled out and bearing the brunt of this whole reallocation to, say, ONGC petrochemical plant.

Now in your discussions with the government and the ministry, do you get a sense that there is indeed a shift in their stance towards the priority for the sector?

Or this is just something which needs to happen and a sort of one-off.

And if it was a one-off, then why not do a pro rata cut across sectors why just the CGD sector?

Moderator · Conference Operator

Thank you.

The next question is from the line of Madhur Rathi from Counter Cyclical Investment.

Please go ahead.

Madhur Rathi

Sir just wanted to understand your perspective on the previous question.

Sir, do we see the Indian CGD ecosystem or the gas pipeline ecosystem going towards a common carrier over the next few years, whereby we would receive some kind of rental or for the -- our infrastructure utilization by different players.

So on that front from can you thrown some light.

Moderator · Conference Operator

Thank you.

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

Please go ahead.

Kirtan Mehta

Thank you sir for the opportunity.

One question to understand about the sort of our vehicle pool.

Would you be able to sort of divide it into two pools where the vehicles use typically 30 kilometers, 40 kilometers of run every day and the one which have the significantly higher run of 100 kilometer plus.

Is it possible to give some approximate number?

Moderator · Conference Operator

Thank you.

The next question is from the line of Ramesh from Nirmal Bang Equities.

Please go ahead.

Ramesh

So if you were to look at your plan to acquire that 40% stake in international battery, can you take us through what is in it for you in terms of your long-term business plan in that business?

What is the kind of size and the profitability of this company?

And can you tie in with some numbers, whichever you can share in terms of how it would help you generate the return on that investment?

Moderator · Conference Operator

I would now like to hand the conference over to Mr. Probal Sen from ICICI Securities Limited for closing comments.

Probal Sen

Thank you, Palak.

Thank you very much for all the attendees as well as the management for taking their precious time out and taking an extended time beyond the said time to answer all the questions with as much details as they could.

Wishing everybody and their loved ones a very Happy Diwali.

From the management side, sir, any closing remarks you would want to make.

Otherwise, we'll cut the call.

Moderator · Conference Operator

On behalf of ICICI Securities, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

(This document has been edited for improving readability) Mahanagar Gas Limited October 25, 2024

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

Moderator · Conference Operator

Thank you very much.

The first question is from the line of Amit Murarka from Axis Capital.

Amit Murarka

My first question is on this APM gas allocation reduction.

So I understand that there's a change in classification of the APM gas by ONGC, which has led to this.

My thought was that if all the new production is going to come from -- I mean, it's going to come from the wells, which will be priced higher, does it mean that the $6.5 gas that comes to you will keep falling now every quarter from even the current levels?

So could you just help understand that?