MGL - Mahanagar Gas Limited Share Price

Management Outlook and Major Points:

1. Volume Growth:

   • Anticipates continued double-digit volume growth, driven by CNG (10%+), industrial/commercial (25%+), and domestic PNG.
   • Expects 10"“15% annual growth in CNG volumes, supported by regulatory shifts (e.g., Mumbai High Court's pollution directives) and infrastructure expansion (9 new CNG stations in Q3).

2. Regulatory Tailwinds:

   • Mumbai High Court's push to phase out diesel/petrol vehicles in favor of CNG and EVs mirrors Delhi's past transition, creating growth opportunities.
   • MGL's MD is part of a state committee to implement these changes, positioning the company favorably.

3. Gas Sourcing & Margins:

   • Partial reinstatement of APM gas (50% for CNG) and use of mid-term Henry Hub/HPHT contracts to stabilize costs.
   • Targets EBITDA/SCM of Rs.10"“12, balancing forex risks (unhedged USD exposure) and gas price volatility.

4. Diversification into EV:

   • Joint venture for lithium-ion battery manufacturing (Rs.35 crore investment) to start production in 14 months.
   • Sees EV as complementary, not a threat, given India's coal-heavy power mix and CNG's cost advantage in commercial segments.

5. Subsidiaries & Capex:

   • UEPL merger (awaiting NCLT approval) to unlock tax synergies and streamline operations.
   • Aggressive capex (Rs.650+ crore in 9M FY25) for pipeline expansion and CNG stations.

6. Dividend & Financials:

   • Declared interim dividend of Rs.12/share.
   • 9M FY25 EBITDA at Rs.1,131 crore (+12.75% YoY), with net profit of Rs.793 crore.

Key Risks:

• APM gas allocation cuts post-April 2025.
• EV adoption pace impacting long-term CNG demand.

Summary: Management remains bullish on volume-led growth, regulatory support for CNG, and strategic diversification into EV infrastructure, while maintaining stable margins through gas portfolio optimization.

Question 1:
Yogesh Patil (Dolat Capital): 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. 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.

Answer:
The High Court's directive is in early stages, but similar to Delhi's NCR transition, CNG growth could rise 15"“20% if implemented effectively. Current CNG volumes grew 11% YoY in 9MFY25; commercial vehicles (4 lakh in MGL's area, 10% CNG penetration) could drive incremental growth.

Question 2:
Yogesh Patil (Dolat Capital): Mumbai High Court also directed BMC that the city bakery units should not use polluting fuels like wood or coal. They have directed bakeries to convert to gas or other green fuel in the next 1 year. What is the additional PNG commercial volume you expect from this move?

Answer:
Bakeries are small establishments; volume impact will be limited. Commercial PNG has higher margins than industrial but lower than LPG-linked segments. Focus remains on commercial vehicles (e.g., 4 lakh diesel vehicles in MGL's area) for volume upside.

Question 3:
Yogesh Patil (Dolat Capital): CNG volume is growing more than 10% last four quarters consistently. What would be your guidance for CNG volume in upcoming years?

Answer:
9MFY25 CNG volume growth is 11.4% YoY; FY25 likely to end at ~13%. FY26 guidance is ~10% growth, driven by CNG and industrial/commercial segments.

Question 4:
Amit Murarka (Axis Capital): Margins have dropped despite price hikes. Are you targeting a return to INR10/kg+ margins?

Answer:
Margins dipped due to delayed price hikes, mid-term gas contracts, and APM cuts (partially reinstated in January). FY25 EBITDA/SCM guidance is INR10"“12; Q4 margins may improve with APM restoration and portfolio adjustments.

Question 5:
Amit Murarka (Axis Capital): With UEPL merger, can consolidated growth sustain double digits?

Answer:
Consolidated 9MFY25 volume grew 12.75% YoY (UEPL: 17.4%). Standalone MGL targets 8"“10% volume growth; UEPL's faster growth (20%+) supports double-digit consolidated growth.

Question 6:
Probal Sen (ICICI Securities): What are capex plans for MGL and UEPL?

Answer:
9MFY25 capex: ~INR650 crore (MGL) + INR125"“150 crore (UEPL). FY25E total: ~INR900 crore (MGL: pipelines/CNG stations; UEPL: INR150"“200 crore in FY26).

Question 7:
Probal Sen (ICICI Securities): When will EV initiatives (e.g., Li-ion JV) contribute meaningfully?

Answer:
Phase 1 of the Li-ion cell plant (500MW) starts in 14 months, reaching 1GW in 1.5 years. Revenue expected post-commissioning; IRR projected at 18%.

Question 8:
S. Ramesh (Nirmal Bang): How does UEPL's performance impact consolidated margins?

Answer:
UEPL's 9MFY25 revenue: INR275 crore; PAT: INR17.5 crore. Lower margins due to amortization of authorization costs. MGL consolidates UEPL's INR50"“55 crore annual cash EBITDA.

Question 9:
Kirtan Mehta (Baroda BNP Paribas): Will UEPL merger unlock tax synergies?

Answer:
Yes. UEPL's INR35 crore accumulated losses/depreciation will be absorbed by MGL immediately post-merger, improving tax efficiency.

Question 10:
Gagan Dixit (Elara Securities): What is the gas sourcing mix post-APM reinstatement?

Answer:
Current sourcing: 2 MMSCMD APM (50% allocation for CNG), 1.45 MMSCMD Henry Hub-linked gas, 0.5 MMSCMD HPHT. Post-April 2025, 7% APM cuts may shift to NWG allocations.

Question 11:
Saurabh Handa (Citigroup): What is the commercial vehicle CNG penetration outlook post High Court order?

Answer:
Current penetration: 10% (38,000/4 lakh vehicles). Similar to Delhi's NCR transition, penetration could rise to 25"“30% with policy support. Daily usage: 7.5"“30 kg/vehicle.

Question 12:
Madhur Rathi (Counter Cyclical): How does EV adoption impact CNG demand?

Answer:
EVs compete in small vehicles, but CNG remains cost-effective for commercial segments (e.g., buses). Current 90% untapped diesel commercial vehicles offer room for CNG growth.

Question 13:
Hardik Solanki (ICICI Securities): Why did the tax rate drop in Q3?

Answer:
Effective tax rate fell due to reassessment of past tax returns and refunds. Normalized rate remains ~22"“25%.