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
MAHANAGAR GAS LIMITED · MODERATOR:
MR. SANJAY SHENDE – DEPUTY MANAGING DIRECTOR
– MAHANAGAR GAS LIMITED · MR. RAJESH PATEL – CHIEF FINANCIAL OFFICER –
MR. RAJESH PATEL – CHIEF FINANCIAL OFFICER –
MAHANAGAR GAS LIMITED · MODERATOR:
MR. MUKESH PANHOTRA – AVP MARKETING –
Moderator · Conference Operator
MR. VARATHARAJAN SIVASANKARAN – ANTIQUE STOCK BROKING LIMITED
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to the Mahanagar Gas Limited Q3 FY '25
December, '24. · We also have added 83 industries and commercial customers during this quarter. And as on 31st
We also have added 83 industries and commercial customers during this quarter.
And as on 31st December we have 4,974 industrial and commercial customers.
In relation to our Raigarhd geographical area up to December '24, we have connected 87,794 domestic households and 55 CNG stations which are currently operational.
During the quarter, we have laid 12.41 kilometer of pipeline in Raigarh, taking the total length to 445.67 kilometer.
With respect to Unison Enviro Private Limited, the wholly owned subsidiary, the company has added 3 CNG stations during this quarter and total of 67 CNG stations as on 31st December.
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 During the quarter, 4,774 domestic households were connected and cumulative household connections are at 34,003 for UEPL and they have 63 industrial and commercial customers as on 31 December.
Average gas sales for the 9 months ending 31st December '24 is 4.006 MMSCMD, whereas it was 3.554 MMSCMD in the corresponding period last year, which is an increase of 12.75%.
Sales volume in the case of CNG have also increased from 2.566 MMSCMD to 2.859, which is an increase of 11.44%.
In case of industrial and commercial, the volumes have increased from 0.482 to 0.604 MMSCMD, which is an increase of 25.52%.
And the volumes of -- for domestic PNG has increased from 0.506 to 0.542 MMSCMD which is an increase of 7.23%.
During this quarter, the overall average gas sales volume is 4.116 MMSCMD as compared to the previous quarter volume of 4.042 MMSCMD which is an increase of 1.84%.
Sales volume in the case of CNG is standing at 2.919 as compared to previous quarter of 2.886 MMSCMD with an increase of 1.16%.
In the case of industrial and commercial, the volume is 0.646 as compared to previous quarter of 0.628 that is an increase of 2.86%.
Sales for the domestic PNG is 0.551 as compared to the last quarter of 0.528 MMSCMD which is an increase of 4.32%.
EBITDA for the 9 months ending December '24 is INR1,131 crores and net profit after tax is INR793 crores.
For the current quarter EBITDA is INR313 crores and net profit after tax is INR225 crores.
Coming to UEPL during the quarter, we have achieved an overall average gas volume of sales volume 0.192 as against 0.164 in the previous quarter which is an increase of 17.38%.
Current quarter volume consists of CNG volume of 0.177 MMSCMD and PNG volume of 0.15MMSCMD.
Therefore, MGL on a consolidated entity has achieved total sales volume for the quarter as 4.308 MMSCMD.
Average gas sales for UEPL for the 9 months ending 31st December '24 is 0.175 consisting of CNG volume of 0.162 and PNG volume of 0.013 MMSCMD.
MGL as a consolidated entity has achieved total gas sales volume for 9 months ending December 31, 2024 is 4.181 MMSCMD.
A scheme of amalgamation or merger of UEPL with MGL was approved by the Board in October '24 last year and the scheme was submitted to NCLT Mumbai on 6 December, 2024.
And the matter was heard by the Mumbai bench on January 17, 2025 and they've reserved the pronouncement of its interim order.
With respect to Mahanagar LNG Private Limited, a JV of MGL with BLNG.
In the business of operating LNG as a fuel to vehicles has commissioned its first LNG station at Aurangabad in the month of October '24 and has sold during the quarter, 91 tons of LNG, with a present sale of around 2,000 kgs per day.
It may be noted that there are reduction in APM allocation in two tranches in the month of October and November across all CGDs.
However, part of the APM allocation has been reinstated with effect from 16 January '25.
Thus currently, MGL is having 100% APM allocation for its domestic gas and approximately 50% allocation for its CNG sales volume.
There's a positive development that in a Mumbai High Court order dated 9 January with respect to Suo moto public interest litigation.
January 29, 2025 They have flagged serious concerns over worrisome pollution levels in the city of Mumbai and MMR region, directing the state government to form a committee to study feasibility of phasing out diesel and petrol driven vehicles from the roads of Mumbai and permit only, motor vehicles which run on CNG and electric charge to reduce pollution to the vehicles.
Further, the court has directed MPCB to rigorously monitor and take stringent action against polluting industrial units in the region.
In response to this, the Transport Government -- Department of Government of Maharashtra has issued notification forming Committee on 22nd January to study and give their report within 3 months time under the Chairmanship of Shri.
Sudhir Kumar Shrivastava retired IAS Officer, wherein MD MGL has been included as one of the committee members.
The Mumbai High Court order is a very positive development for controlling pollution in the city of Mumbai and MMR region and has provided opportunity to companies like MGL also who are providing cleaner fuel for transport sector and industry to contribute to the -- reduction of environmental pollution.
This is in line with what has happened in NCR in Delhi also, a few years back.
MGL continues its journey of diversifying and seizing the opportunity in the new energy-related businesses by investing in a Greenfield project for manufacturing of lithium-ion cells for electric vehicle battery and other applications.
The company has entered into a joint venture agreement with IBC based out of USA for setting up a facility in the state of Karnataka in this quarter.
MGL has invested INR35 crores for equity holding of 44% in JV company for Battery Company India Private Limited in the month of January '25.
MGL for it's annual report '24 has bagged a bronze award at 14th PRCI Excellence Award 2024 for its remarkable annual report from Public Relations Councils of India.
In January '25, MGL has been conferred with Greentech Global WorkPlace Safety Award 2024 for its outstanding achievement under excellence in safety training category.
I'm happy to announce that Board has approved an interim dividend at the rate of 120% that is INR12 per equity share for the current financial year.
With this, I conclude and would like -- now like to open the floor for the questions.
Thank you very much for patience hearing.
Moderator · Conference Operator
Thank you very much.
We will now begin the question and answer session.
The first question is from the line of Yogesh Patil from Dolat Capital.
Please go ahead.
Yogesh Patil
Congratulations for the good set of numbers.
As you mentioned, the recent news flow government of Maharashtra has set up a panel and exploring phasing out of petrol and diesel vehicles in the Mumbai Metro region.
We wanted to understand how it will be implemented.
That's one thing.
And what kind of CNG volume growth you can see from this kind of a decision?
Any ballpark number, if you could share with us that would be really helpful.
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
January 29, 2025
Moderator · Conference Operator
Thank you.
The next question is from the line of Amit Murarka from Axis Capital.
Please go ahead.
Amit Murarka
Just firstly on the pricing and margin side.
So you did take two price hikes of INR2 and INR1 kg each on CNG.
But the margin still has dropped.
So are you like looking back to go back to, let's say, INR10 or higher margin as we were doing in the last several quarters or this should be seen as a more stabilized margin now?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 But we are in a comfortable position because of one that we have made some procurement portfolio adjustments.
And second, there have been reinstatement of APM allocation from 16th of January.
Amit Murarka
Sure.
So do you mean there's no further price hike is needed in that sense after the restoration of the APM allocation?
Moderator · Conference Operator
Thank you.
The next question is from the line of Probal Sen from ICICI Securities.
Please go ahead.
Probal Sen
Sir, just wanted to get a little bit of sense of what are the capex plans, if you can break it down between the different GAs including for Unison?
And also if you can get a sense -- give us a sense of how much to be spent on CNG, how much on network and so on.
That was my first question?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
January 29, 2025 So once we get full customer base and understanding of this, we'll be in a better position to talk about what kind of sales revenue and margins will come.
But surely when you look at the EV cell as a market, the kind of capacity which we are putting up is very, very small compared to the requirement in India because currently, all the EV cells are being imported in India and then battery packs are made.
So most of the manufacturers who may not have their own facility of having the battery pack and EV cell tie up.
We will be able to push this.
And considering the demand in India based on whatever survey or the studies we have done, 1 gigawatt is a very very small number.
Probal Sen
Sir, if I can ask a follow-up.
Are we already speaking to some customers with respect to this project?
Moderator · Conference Operator
Thank you.
The next question is from the line of Gagan Dixit from Elara Securities.
Please go ahead.
Gagan Dixit
Sir, for the CNG this allocation - when you say 50%, so that 50% means that $6.5 that's the APM gas that you are getting, if my understanding is correct?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 HPHT bid is going to happen most likely in April by RIL, almost of 5 to 6 MMSCMD.
So -- and when you compare today NWG price and Henry Hub price or HPHT, there is not much difference.
Gagan Dixit
And sir, my second question is about...
Moderator · Conference Operator
Sorry, to interrupt you, sir.
May I request you to please come back in the queue, sir.
Gagan Dixit
Okay, yes.
Moderator · Conference Operator
Thank you.
The next question is from the line of S.
Ramesh from Nirmal Bang Equities.
Please go ahead.
S. Ramesh
Thank you and good evening.
So if you look at the cell manufacturing project, is there -- any detail you can share in terms of the overall tax rate you'll have to pay for that project?
Could it be at 15% and secondly any sense you can give us on the VAT rate or GST on capex and the inputs and the final lithium-ion cell?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
January 29, 2025
Moderator · Conference Operator
Thank you.
The next question is from the line of Kirtan Mehta from Baroda BNP Paribas Mutual Fund.
Kirtan Mehta
After this UEPL merger, will we be able to use any tax synergies?
Are there any past tax losses, which can be utilized?
Moderator · Conference Operator
Thank you.
The next question is from the line of Pratyush Kamal from Incred Equities.
Please go ahead.
Pratyush Kamal
So I have a few sets of questions, which I wanted to ask.
First is regarding your sourcing.
So you source couple of -- you do have a couple of contracts, which are linked to Henry Hub and some are linked to Brent.
I just wanted to understand like what is the pricing mechanism for these contracts?
And what is the general sourcing mix for you?
What percentage of the total volumes do you get from Henry Hub versus Brent versus APM, etcetera?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 HPHT is around 0.5 million, okay?
And rest is spot and whatever NWG have.
Small amount of NWG is coming on a short-term basis.
But as sir said, there will be a long-term allocation or an allocation like APM in the near future, maybe this month or by April or so.
Pratyush Kamal
Okay, sir.
And what are the slopes and fixed components when you talk about Brent like contract and Henry Hub?
Moderator · Conference Operator
Thank you.
The next question is from the line of Sabri Hazarika from Emkay Global Financial Services.
Please go ahead.
Sabri Hazarika
Yes.
So two questions.
Firstly, your volume breakup between GA-1, GA-2 and GA-3 and the outlook for GA-3.
I mean last time, you mentioned 0.621 mmscmd sort of potential.
So any revision on that?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
Sabri Hazarika
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Saurabh Handa from Citigroup.
Please go ahead.
Saurabh Handa
Thank you for the opportunity.
Sir, on your question on your comments on the number of EVs in Mumbai, say around 4 lakhs and currently, the penetration is 10%.
Hypothetically, if a similar sort of directive comes as we saw in Delhi, could this number go up to like 25%, 30%, thereabout?
I mean just to get a sense of what is the realistic penetration one can assume if you have similar directives as we've seen in Delhi in the past.
Moderator · Conference Operator
Thank you.
The next question is from the line of Vikash Jain from CLSA.
Please go ahead.
Vikash Jain
I just wanted to understand currently of about 50 mmscmd of gas that ONGC is producing.
I think about 6 has been taken away as new well gas.
Of the remaining which is there, roughly how much has been allocated to priority sector in city gas?
That’s the first part of the question.
Second thing is when you see a change in allocation again on 1st of April, maybe another 5%, 6% will, again, go away, say, about 2 to 3 mmscmd.
Is there a chance that LPG or some other sector you see could get -- could bear the impact more than city gas?
So that's something which I wanted to know.
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
Moderator · Conference Operator
Thank you.
Next question is from the line of Niharika Jain from Aequitas Investments.
Please go ahead.
Niharika Jain
Thank you for the opportunity.
So my first question is, I think in the call you have mentioned that we would have some impact on forex.
Now for the APM gas and all the contracts, is there hedge for us or all the contracts, even including APM are unhedged for us as far as forex is concerned?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 whereas some entities who took forward, they had a higher cost.
But yes, today, the time is such that we may still evaluate what needs to be done going forward, considering probably expected movement in the forex rates INR and the dollars.
Niharika Jain
Is my understanding correct, if I say that the rupee has depreciated by 3% in, say, quarter 4.
So my cost directly gets impacted by 3%, right?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
Moderator · Conference Operator
Sorry to interrupt.
May I request Ms. Jain to please rejoin the queue.
We have participants waiting for their turn.
The next question is from the line of Devang Patel from Sameeksha Capital.
Devang Patel
Sir, if you can please quickly share the data points on, what is the share of BEST buses and 3- wheelers in our volume?
And what is the 9-month growth in each of these 2 segments?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025
Moderator · Conference Operator
The next question is from the line of Madhur Rathi from Counter Cyclical Investments.
Madhur Rathi
Sir, I wanted to understand when we source our gas.
So if there is a pricing currently consider it for an example like $6 pricing, sir, at what price do we get with all these transmission and intermediaries?
How much cost does that add up in the landed cost for us?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 HS option is also there.
So we will do a mix of the alternate sources and then determine what will be the selling price of CNG.
And also we'll have a look at petrol and diesel.
The margins, as we mentioned, EBITDA per SCM will be in the range of, say, INR9 to INR11 or INR10 to INR12, depending on situation because we want to keep two things in place: One that the price disruption doesn't happen or too much price variation doesn't happen in CNG or CNG anyway 100% allocation of APM is coming.
So we would like to keep prices steady and keep the growth numbers also in line of sight.
So having said these things, we will take a call on when to -- what is the right time for increase or decrease of CNG prices as well as maintaining our portfolio because right now, we are not exposed to spot prices variation.
So that way, we are much more protected and the signals and the policy initiatives are coming, but whatever APM is getting de-allocated will be sold at NWG prices with CGD entities.
So we have a clarity on what will be the de-allocation and what will be the price impact, how much we can absorb or how much we can pass on, keeping the margins and the growth numbers in place.
Madhur Rathi
Okay.
Sir, just a final question from my side.
Sir, with this EV economics getting better, so the life of -- over the life of EV, it is getting more attractive than CNG.
And with -- I think with increasing gas cost currently, sir, it will look even more attractive.
Sir, so how do we tackle this issue and can this lead to consumers slipping from petrol diesel to directly moving to EV then just moving from where petrol diesel to CNG?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 MGL is concerned, we are -- we don't find that EV is going to be very big threat for the whole company.
Moderator · Conference Operator
The next question is from the line of Hardik Solanki from ICICI Securities.
Hardik Solanki
Sir, just want -- if you look at the effective tax rate for the quarter, it has reduced below 20%.
Sir, is there any specific reason behind that?
MAHANAGAR GAS LIMITED · MODERATOR:
January 29, 2025 as compared to LNG prices, which is expected to be slightly more surplus.
So in that, maybe 1, 2 years or 3 years' time, we will see that we will be able to maintain these margins or improve these margins.
Moderator · Conference Operator
Ladies and gentlemen, due to time constraints, that was the last question for today.
I now hand the conference over to the management for closing comments.
Thank you.
On behalf of Antique Stock Broking Limited, that concludes this conference.
Thank you for joining us, and you may now disconnect your lines.
(This transcript has been edited, without altering the content, to ensure clarity and improve readability.)