Mahanagar Gas Ltd. is willing to sacrifice operating margin in a bid to boost volume given its subdued growth in the first quarter, according to Managing Director Ashu Shinghal.
The marginal volume growth seen in the first quarter was due to specific energy corrections that were lower a year ago, he said.
The company may launch schemes in order to boost volume this year, as it aims to maintain 5–7% volume growth in fiscal 2024, Shinghal told BQ Prime's Sajeet Manghat in an interview.
The company can operate at Ebitda margin of Rs 12 per standard cubic metre to allow volume to grow, according to the MD. That compares with Rs 16.8 per SCM in the June quarter.
Historically, the natural gas distribution firm has maintained an operating margin of Rs 8–10 per SCM, Shinghal said. The company is eyeing an operating margin of Rs 9–11 per standard cubic metre, he said.
MD Ashu Shinghal (Mahanagar Gas website)
MD Ashu Shinghal (Mahanagar Gas website)
Mahanagar Gas Q1 FY24 Highlights (Consolidated, YoY)
Revenue up 5.7% at Rs 1,537.8 crore (Bloomberg estimate: Rs 1,506.3 crore).
Ebitda up 83% at Rs 521.3 crore (Bloomberg estimate: Rs 412.3 crore).
Margin at 33.9% vs 19.63% (Bloomberg estimate: 27.37%).
Net profit up 99% at Rs 368.4 crore (Bloomberg estimate: Rs 279.8 crore).
Growth Potential
Mahanagar Gas is dependent on commercial vehicles and buses to aid growth as they consume more compressed natural gas, which contributes 70% of its volume, Shinghal said.
The company also expects growth from its industrial and commercial segments, as it has signed around 1 lakh SCM per day of customers this quarter.
Competition From eBus Segment
In terms of the ebus segment being a challenge for the future, Shinghal highlighted the supply chain and cost issues with the production of electric buses.
The infrastructure and supply chain optimisation that are required to set up e-buses will take time, whereas the necessary framework is already there for CNG, he said.
CNG has an advantage with regards to the time taken to refuel a vehicle as compared with recharging an electric vehicle. The carbon footprint of CNG is slightly better than that for EV, according to him.
At the current level of development, EVs could travel a maximum of 100–120 km on one charge, while a one-time liquefied natural gas-filled truck could drive up to 800 km, he said.
There is an opportunity in terms of long-haul trucks and commercial vehicles picking up CNG and LNG-enabled models as an alternative to diesel, Shinghal said.
Capex Plans
Mahanagar Gas is targeting Rs 700–800 crore in capital expenditure for the current fiscal.
Around 50% of the funds will be invested in the domestic piped natural gas segment, while the remainder will be used to set up CNG stations and other miscellaneous expenses, he said.
The company plans to install 50 new CNG stations this year after having set up 25 stations in the last fiscal.
Watch The Full Interview Here:
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