Registration data of compressed natural gas-powered vehicles in key regions of city gas distributors showed a mix trend for the three-wheeler category in August 2024, even as the two-wheeler category saw a sharp growth. The pace of these registrations impacts volume growth for city gas distribution companies like Indraprastha Gas Ltd., Mahanagar Gas Ltd. and Gujarat Gas Ltd.
While the numbers on an annual basis do show growth, the monthly data shows a decline in registrations. If the current registration momentum sustains for a year, then the CNG volume growth for the city gas distribution companies could range between 7-12%, according to Dolat Capital.
Indraprastha Gas
In August 2024, VAHAN reported a 14% monthly and 16% yearly decline in CNG registrations for three and four-wheelers in Indraprastha Gas' key areas, like New Delhi, Gurgaon and other National Capital Region areas, totaling 8,800. This marks the slowest pace in 16 months.
Furthermore, the company also faces high EV adoption risk due to Delhi's EV policy, with CNG adoption dropping to 9%. August 2024 data showed CNG adoption in these categories fell by 72 basis points to 23%, while EV adoption increased by 111 basis points.
Impact of the Re 1 per kilogram CNG price increase is evident, Dolat Capital said. The brokerage estimates a potential CNG volume growth of 0.4 million metric standard cubic meters per day at the current registration rate.
Source: Petroleum and Natural Gas Regulatory Board
Source: Petroleum and Natural Gas Regulatory Board
Also Read: Gujarat Gas' Merger To Unlock Value For Gujarat State Petronet, Gujarat Gas: Motilal Oswal
Mahanagar Gas
In August 2024, CNG registrations for three and four-wheelers in Mahanagar Gas' key areas increased 11% year-on-year to 8,200, but remained unchanged from the previous month, according to VAHAN data. Dolat Capital attributes this stagnation to the Rs 1.5 per kilogram CNG price hike in July 2024 and a slowdown in auto vehicle sales.
Conversely, two-wheeler CNG registrations surged 5.15 times month-on-month to 700. Dolat Capital anticipates this trend will continue, potentially boosting Mahanagar Gas' volume by 0.5% in fiscal 2026.
If the current trend holds, the company could see an additional 0.3 million metric standard cubic meters of CNG per day, implying a 10% growth in sales volume, according to the brokerage.
Gujarat Gas
For Gujarat Gas' geographical areas, VAHAN data showed that CNG registrations in the three and four-wheelers categories dropped 5% month-on-month to 11,400. However, registrations saw a 17% annual growth and the adoption rate jumped to its highest ever at 32.4%.
Gujarat Gas also faces significant challenges due to a slowdown in the Morbi region and high freight rates. Since July 26, 2024, elevated container freight rates have sharply reduced exports of ceramic products, leading to the shutdown of over 350 ceramic units in Morbi, the ceramic capital of India. This region is very important for Gujarat Gas since the company supplies roughly over 4 million metric standard cubic metres of natural gas per day to ceramic customers in Morbi.
Dolat Capital projects that Morbi's industrial PNG volumes will drop to 2.6 million metric standard cubic meters per day in the second quarter of fiscal 2025, a 50% sequential decline. This setback makes it difficult for Gujarat Gas to achieve its fiscal 2025 goal of 11 million metric standard cubic meters per day, with the brokerage forecasting a more realistic volume of 10.8 million metric standard cubic meters per day.
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