Mahanagar Gas Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

3 Ajay Sinha, Praveer Kumar Srivastava, Rajesh Patel

Analysts

10 Aaryan, Vineet Banka, Kartik Gada, Indra Kumar Gupta, Sabri Hazarika, Vikash Jain, Yogesh Patil, Probal Sen, Jay Shah, Vivekanand Subbaraman

Financials & KPIs

Geographic & Segment Commentary

• CNG (~73% of volumes): 3.496 MMSCMD, +9.74% YoY; growth driven by cumulative vehicle and station base rather than quarterly additions. Bus fleet (6,000 STU/private buses) contributes ~0.14 MMSCMD (4-5% of CNG volume). Fleet Program launched to counter EV threat in taxis, three-wheelers, and buses.
• Domestic PNG: 0.623 MMSCMD, +9.09% YoY; record 97,461 conversions in Q1; cumulative 2.17 million connections. PNG Drive 2.0 is driving LPG-to-PNG replacement with government push; FY27 potential of 8-10 lakh additions subject to manpower/material availability.
• Industrial & Commercial: 0.648 MMSCMD, -7.15% YoY, reflecting 20% government-directed gas curtailment. Realizations rose ₹27-32/scm QoQ, linked to alternate fuels (bulk LPG for commercial; FO/LDO for industrial). New connections being signed with lower DCQs, to be scaled up when supply normalizes.
• GA-wise mix: GA2 largest at ~2.1 MMSCMD; GA1 ~1.95 MMSCMD; Raigad at 0.4 MMSCMD (vs 0.33 last year); Unison (UEPL) at 0.322 MMSCMD, growing 30-35% YoY with stated potential of ~1.2 MMSCMD.
• Gas sourcing: ~30% APM, ~21-22% NWG+pooled, ~14-15% HPHT, balance Henry Hub term contracts with minimal Brent/IGX/spot. Q1 pooled gas at $12.5-13/MMBtu, Brent-linked at $13-14/MMBtu; spot touched ~$20/MMBtu.

Company-Specific & Strategic Commentary

• PNG Drive 2.0: Substantially enhanced pace of DPNG conversions through operational improvements, resource augmentation, and stronger coordination with government agencies; record 97,461 connections in Q1 and 156.57 km of pipeline laid.
• Digital transformation: Completed SAP ECC to SAP S/4HANA migration in Q1, a key milestone in MGL's digital initiative.
• Fleet Program: Targeted at private CNG bus operators where EV financing is scarce; multiple MoUs signed and vehicles being added over the next few months to offset potential STU bus electrification losses.
• Non-CGD portfolio (deliberately small): Long-haul LNG (2 stations, 5 tanker loads/day, near break-even); battery JV on hold (kWh realization fell from $100+ to $70-75; restructuring due to partner capital constraints); EV three-wheeler cargo/logistics startup not yet profitable; CBG plant first phase (350 TPD municipal solid waste) on MCGM land. Management allocating limited time/money—CGD remains core.
• Inorganic appetite: Open to acquiring CGD companies, particularly new entrants struggling with gas management amid declining APM allocations; PNGRB bidding rounds largely closed.
• Pricing stance: CNG priced at ~40-45% discount to petrol and ~12% to diesel; cumulative ₹5/kg price hikes since February have not fully recovered gas costs; MGL avoids frequent price changes to protect fleet-adoption psychology.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Gas Sourcing Mix and Allocation Mechanism

• Question: What was the sourcing mix and effective gas price for Q1, and what is the APM/NWG/pooled allocation mechanism now that emergency measures were lifted? (Probal Sen, ICICI Securities; Vivekanand Subbaraman, Ambit Capital)
• Answer: Sourcing is ~30% APM, ~21-22% NWG+pooled, ~14-15% HPHT, with the balance from Henry Hub term contracts and minimal Brent/IGX/spot. Pooled gas cost $12.5-13/MMBtu, Brent-linked $13-14/MMBtu, spot touched ~$20. HPHT is bid-based with CGD priority—MGL holds ~0.6 MMSCMD of long-term HPHT contracts and drew ~0.2 via IGX. APM+NWG+pooled combined was ~2.0 MMSCMD in Q1; Q2 allocation is uncertain. (Management)

I&C Pricing and Margin Drivers

• Question: What was the I&C realization increase and is the sharply higher margin sustainable? (Probal Sen, ICICI Securities; Kartik Gada, Multipl Wealth)
• Answer: I&C realizations rose ₹27-32/scm QoQ, equivalent to ~70-80% of the year-ago realization level, driven by alternate-fuel linkage as Brent moved from ~$60-63 last year to $95-100 in Q1; commercial (bulk LPG-linked) rose more than industrial (FO/LDO-linked). Raigad discounts of 10% for the first three years temper the weighted average. Management cautioned against quarterly margin comparisons—Q4 was abnormally low (low Brent, high Henry Hub) while Q1 benefited from both. (Management)

CNG Volume Drivers and GA-wise Break-up

• Question: What drove the 9.7% YoY CNG growth and can you share vehicle-type and GA-wise break-up? (Yogesh Patil, Dolat Capital)
• Answer: Growth is driven by the cumulative vehicle and station base, not just quarterly additions. GA2 is the largest at ~2.1 MMSCMD; GA1 ~1.95 MMSCMD; Raigad 0.4 MMSCMD (vs 0.33 last year); Unison 0.322 MMSCMD, growing 30-35% YoY. Monsoon traffic congestion also supports CNG demand. Vehicle-type break-up was not shared on the call. (Management)

CNG Pricing vs Petrol/Diesel Parity

• Question: If LNG prices normalize to pre-war levels, will CNG prices be rolled back or stay aligned to fuel differentials? (Vineet Banka, Nomura)
• Answer: MGL maintains a 40-45% discount to petrol and ~12% to diesel, which is sufficient to drive volumes. During intermittent gas-cost spikes, MGL avoids frequent price changes to protect fleet-addition psychology; for permanent fuel-price increases, it would recover gas costs—cumulative ₹5/kg hikes since February have not fully passed through CNG input costs. (Management)

Bus Fleet and EV Threat

• Question: How many CNG buses ply and what is the view on electrification? (Vineet Banka, Nomura)
• Answer: ~6,000 STU and private buses; BEST contributes ~90,000 kg/day, MSRTC ~34,000-35,000 kg/day, with buses at ~4-5% of CNG volume. STU may adopt EV due to funding availability, but private operators face high capital costs and scarce financing, limiting EV penetration. The Fleet Program targets private operators and is already gaining traction with MoUs signed and vehicles to be added. (Management)

CapEx Acceleration, Funding, and Dividend

• Question: What is the FY27 CapEx, will it require debt, and does it impact dividends? (Vivekanand Subbaraman, Ambit Capital; Vineet Banka, Nomura; Jay Shah, Individual Investor)
• Answer: Q1 CapEx was ₹350 crore; FY27 target is ₹1,500-1,800 crore, preponed to capture the LPG-to-PNG opportunity with government support, subject to manpower and material availability. MGL is a zero-debt company with surplus balance sheet and is prepared to raise debt (e.g., for the CBG plant). Dividend will be maintained at current levels and gradually increased despite higher CapEx. (Management)

DPNG Conversion Pace and Volume Potential

• Question: How many of the ~95,000 domestic additions are actually burning customers, and what is the full-year expectation? (Sabri Hazarika, Emkay Global)
• Answer: All 95,000 are actively burning/connected customers (some may take 1-2 months to start consuming). MGL has capacity to add 8-10 lakh DPNG connections in FY27 if there are no bottlenecks in plumbers, meters, and pipes. DPNG volume growth is tracking ~9-10% in Q1; household potential is 3.8-4 million vs 3.3 million connected and 2.3 million consuming, leaving ~1 million connected-but-not-consuming households to convert. (Management)

Non-CGD Initiatives

• Question: What do non-CGD initiatives contribute to revenue/profit over the next 3-5 years? (Aaryan, Aequitas Investments)
• Answer: Long-haul LNG has 2 commissioned stations with ~5 loads/day, just breaking even. The battery JV is on hold—kWh realization fell from $100+ to $70-75 and the partner faced capital infusion constraints; restructuring is underway. The EV three-wheeler cargo/logistics startup is not yet profitable but stabilizing. A CBG plant of ~350 TPD municipal solid waste (first phase) has MCGM land allocated. Management expects these to remain small—CGD is the core focus, with options to scale up if confidence builds. (Management)

Margin Outlook and Guidance Reaffirmation

• Question: Is the current situation similar to Q1, and does the earlier double-digit volume growth and INR 8-9/scm EBITDA guidance still hold? (Vikash Jain, CLSA; Indra Kumar Gupta, Prabhudas Lilladher)
• Answer: The current situation is worse than Q1—pool gas has been withdrawn (~July 4), force majeure on RLNG persists, and spot remains volatile; however, the cumulative ₹5/kg CNG price hikes taken from February are fully available for Q2. The INR 8-9/scm EBITDA is a longer-period endeavor, not a quarterly commitment. Volume growth should be higher single-digit and may cross double-digit if CNG grows 8-9% and I&C grows 12-14%; gas availability, not demand, is the binding constraint. (Management)

Key Takeaway

Mahanagar Gas reported Q1 FY27 total volumes of 4.766 MMSCMD (+7.0% YoY), led by CNG at 3.496 MMSCMD (+9.7%) and DPNG at 0.623 MMSCMD (+9.1%), while I&C fell 7.2% to 0.648 MMSCMD on a 20% mandated gas curtailment. EBITDA rose 31.7% QoQ to ₹343 crore and PAT 46.8% to ₹194 crore, aided by alternate-fuel-linked I&C realizations that increased ₹27-32/scm as Brent averaged $95-100 in the quarter. Management is accelerating PNG Drive 2.0—record 97,461 DPNG connections and FY27 CapEx of ₹1,500-1,800 crore—while guiding CNG volume growth of 8-9% and holding a long-term EBITDA endeavor of ₹8-9/scm. The dominant swing factor is the West Asia conflict: pool gas was withdrawn in July, spot LNG touched ~$20/MMBtu, and contracted RLNG remains under force majeure, pressuring near-term margins. Watch-points include gas cost pass-through, EV adoption in taxi/bus fleets, and CapEx execution bottlenecks.