MGLNSEQ4 FY2022May 17, 2022

Mahanagar Gas Limited

7,347words
140turns
14analyst exchanges
5executives
Management on call
Nitin Tiwari
YES SECURITIES
Sanjib Datta
MANAGING DIRECTOR – MAHANAGAR GAS LIMITED
Sanjay Shende
DEPUTY MANAGING
Rajesh Patel
CHIEF FINANCIAL OFFICER – MAHANAGAR GAS LIMITED
Rajesh Wagle
SENIOR VICE PRESIDENT,
Key numbers — 40 extracted
14%
volume but the recovery has been fast and the average gas volumes sold in March 2022 increased by 14% as compared to that of January 2022. Despite the second and third waves of COVD, we could fast tr
1.86 million
er 79,130 domestic households were connected and thus we have established connectivity with about 1.86 million households. During FY 2021-22, we provided connectivity to 2.62 lakh households and bettered our
2.62 lakh
d connectivity with about 1.86 million households. During FY 2021-22, we provided connectivity to 2.62 lakh households and bettered our previous best of providing 1.98 lakh coonectivity. We laid 125 km of
1.98 lakh
-22, we provided connectivity to 2.62 lakh households and bettered our previous best of providing 1.98 lakh coonectivity. We laid 125 km of steel and PE pipelines in the quarter thereby taking the aggregat
35.63%
whereas it was 2.211 MMSCMD in the corresponding period last year. Thus, there is an increase of 35.63% in the overall sales volume compared to the previous year. Average sales volume for the year ende
49.40%
les volume in case of CNG has increased from 1.415 MMSCMD to 2.114 MMSCMD which is an increase of 49.40%. In case of I&C sales, volume has increased from 0.332 MMSCMD to 0.419 MMSCMD which is an increas
26.2%
case of I&C sales, volume has increased from 0.332 MMSCMD to 0.419 MMSCMD which is an increase of 26.2%. Domestic PNG sales volume has increased marginally, from 0.464 MMSCMD to 0.466 MMSCMD which is
0.43%
sales volume has increased marginally, from 0.464 MMSCMD to 0.466 MMSCMD which is an increase of 0.43%. EBITDA for the Financial Year 2021-22 is Rs.924 crore compared to previous financial year EBIT
Rs.924 crore
MMSCMD to 0.466 MMSCMD which is an increase of 0.43%. EBITDA for the Financial Year 2021-22 is Rs.924 crore compared to previous financial year EBITDA of Rs.934 crore. EBITDA margin is at 25.96% for FY 202
Rs.934 crore
ITDA for the Financial Year 2021-22 is Rs.924 crore compared to previous financial year EBITDA of Rs.934 crore. EBITDA margin is at 25.96% for FY 2021-22 compared to previous financial year EBITDA margin of 4
25.96%
2 is Rs.924 crore compared to previous financial year EBITDA of Rs.934 crore. EBITDA margin is at 25.96% for FY 2021-22 compared to previous financial year EBITDA margin of 43.39%. Net Profit After Ta
43.39%
e. EBITDA margin is at 25.96% for FY 2021-22 compared to previous financial year EBITDA margin of 43.39%. Net Profit After Tax for FY 2021-22 is Rs.597 crore compared to Net Profit After Tax for previ
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Guidance — 20 items
Management
opening
“In January 2022, the Company achieved the cumulative inch-km target as per PNGRB’s Minimum Work Programme for Raigarh GA.”
Management
opening
“You may recall that we had already achieved the cumulative number of Domestic PNG connections target by March 2020.”
Probal Sen
qa
“Just to understand what has been put out is basically that two things, one is shortening of the review period from the quarter from six months and second it is still basically the intent to supply 100% gas on a best effort basis but if we look at the domestic gas supply that is been made available over the last several months, very clearly there is no additional domestic gas that will be made available and the balance has to be met from premium gas as well as spot RLNG.”
Management
qa
“We still haven’t got to do a full analysis yet but what we believe the way it would pan out will be that immediately whatever spot gas or term gas which we are procuring on our own and pushing into the priority segment, will get replaced by whatever market price gas GAIL is able to procure immediately.”
Probal Sen
qa
“Just to as a follow on to that in the near term you had mentioned that you have signed a term RLNG contract which is extended even in this year for another year or so, so can we get a sense barring whatever domestic allocation is there, how many term energy contracts do we have and what volume we have tied up for the next year or 18 months right now.”
Management
qa
“Well if you take out the COVID period typically last four five years you have seen a CAGR over 5% to 6% or so but now we are seeing a better growth compared to that.”
Aishwarya Agarwal
qa
“And a last question Sir from 1st October when this APM gas prices will further move up to say 9$ and we have some gas available from GAIL as per the new policy I mean at that point of time I do not know what the diesel prices will be but our growth and margins are also dependent on the diesel price correct?”
Management
qa
“However, our endeavor will be always on to add onto new vehicles and add on to the gross margin on absolute terms going forward.”
Vikas Jain
qa
“In the current scenario after this policy has come into being, is it fair to say that these contracts will be more than your requirement of industrial and commercial gas in terms of volume.”
Vikas Jain
qa
“Okay but it does mention that there will be some domestic gas and remaining has to be fulfilled by LNG or whatever way or deepwater gas.”
Risks & concerns — 7 flagged
The risks and the uncertainties relating to this statement includes but are not limited to risk and uncertainties regarding fluctuations in sales volumes, fluctuations in foreign exchange, other costs and our ability to manage growth.
— Management
Thus, priority sales volumes beyond APM gas allocation and substantial increase in Spot gas prices put pressure on the margins of priority sector during the quarter.
— Management
In case of supplies to the I&C customers, high RLNG costs had put pressure on margins as the I&C sales prices are linked to alternate fuels which did not see similar increases.
— Management
Full year is very difficult to answer but it was in the range around 8% to 9% on an average.
— Management
Was there an impact of the MSRTC strike which was happening in Maharashtra since November 2021?
— Maulik
Yes CNG volumes are down by 4% compared to the previous quarter mainly due to January and February had impact of third wave of COVID so I think there was a restriction on traffic and on that mobility so that had impacted us.
— Management
It is difficult to pinpoint that, but we are hoping that maybe six or eight months there should be some moment because currently safety regulations they are slightly, the one which we ran we got under a pilot program kind of a thing.
— Management
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Q&A — 14 exchanges
Q
Thank you for the opportunity. Good evening Sir. Sir the first question was with respect to the gas supply new guidelines that you mentioned which would be positive. Just to understand what has been put out is basically that two things, one is shortening of the review period from the quarter from six months and second it is still basically the intent to supply 100% gas on a best effort basis but if we look at the domestic gas supply that is been made available over the last several months, very clearly there is no additional domestic gas that will be made available and the balance has to be me
Management
It is just a couple of days. We still haven’t got to do a full analysis yet but what we believe the way it would pan out will be that immediately whatever spot gas or term gas which we are procuring on our own and pushing into the priority segment, will get replaced by whatever market price gas GAIL is able to procure immediately. Maybe in the immediate term it could be spot so maybe our spot may get replaced by GAIL spot but at a common price for all CGD companies and since this is not a onetime thing. This is a sustained kind of policy thing. Over time GAIL will try to procure some HPHT gas
Q
Thank you. Have we taken enough price hikes for the CNG so that our margin reaches to Rs. 10 per SCM?
Management
If you noted MD’s speech, price of CNG was Rs. 60 per kg as of April 1 and currently it is at Rs.76 per kg and in similar proportion increase has happened in domestic also. This price increase fully covers the APM gas cost increase from 2.97 dollar per MMBTU to 6.14 dollar per MMBTU. See you generally used to do from Rs. 10 per SCM margin so have we reached there or we need to take some more price hike to reach there because lots of volatility in the prices in between which has led to volatility in the margins which have been reporting since last few quarters? If you look at the price rise whi
Q
Thanks for taking my question. So on the contracts that you mentioned here you mentioned three of them one is with GSPC, the other is with I think the US LNG contract and thirdly is the new gas contract or the deepwater so all of those three what is the tenure of these contracts. These are like five year contracts. How long are these contracts?
Management
One is Six, one is five and one is 18 months. In the current scenario after this policy has come into being, is it fair to say that these contracts will be more than your requirement of industrial and commercial gas in terms of volume. No not really. The way all these contracts are structured, we have managed within the contract. There will not be any impact as far as industrial and commercial volumes are concerned. It is within the minimal threshold. We have about enough downward freedom in these contracts to ensure we do not land up with take or pay regime. Okay basically you have been doing
Q
Good afternoon Sir, so I have two questions. The first one is related to this domestic gas guideline only. Wanted to know if you are getting the allocation from 16 May for this quarter then it would be the total priority sector volumes of last quarter which will be considered right. Which is both APM plus the amount of LNG or will it be just APM?
Management
It will be considering the sales volume of priority sector of last quarter and on to that 2.5% as per the circular or the ministry guidelines. Not last quarter’s APM allocation. It will be last quarter’s total volume. It will not be last quarter’s APM allocation. It will be last quarter’s priority sales volume plus two and half percent over that. That is CNG and domestic PNG sales volume. For example just a hypothetical situation in Q1 suppose if you are doing certain amount of priority sector volumes where sizeable are 25% component is LNG so in the subsequent quarter this LNG part of price s
Q
Good evening and thank you very much. So with reference to the new gas allocation scene to be managed by GAIL, now in terms of your ability to respond to change in your overall blended cost of gas how will it change in terms of the leader lag because so far you were controlling your gas procurement and the blended cost of gas, how do you see this impacting the way you change prices every month or every quarter particularly for the industry and commercial segment where you review every month and for CNG and the domestic PNG prices happen when you change in cost of gas? How do you see this play
Management
Let me clarify, I think you are mixing up the two things. The APM gas allocation are always given by government only in post COVID because of the shortfalls we started buying and using spot for this segment whereas industrial and commercial we always had market determined gas and it will always remain that way. Whatever new guidelines has come in is only for the APM. So whatever happens post COVID and individually the CGD started blending or putting their own spot gas now that part is being addressed through this pool gas mechanism so there is no change as far as our freedom to buy gas and oth
Q
Thanks for the opportunity. Sir one question; CNG volume took a relatively larger dip in this quarter on q-o-q basis. Was there an impact of the MSRTC strike which was happening in Maharashtra since November 2021?
Management
MSRTC has only a couple of 100 buses, its negligible. Not even 0.2 or 0.3% of our volumes. Second question is related to this policy. As we mentioned that you had a two term contracts which you signed in the last four or five months, one is with GSPC and the second one with GAIL for Henry Hub, now I understand both of their pricing are currently lower than the prevalent spot RLNG prices. Does that mean as an increase in the cost post implementation of the policy in your priority sector volume? Policy has just come out on Friday. So can you be little more specific what you are referring to? Bas
Q
Breakup of Industrial and commercial customers. Second question in the last quarter you had mentioned that it was around 2200 CNG buses, 800 diesel and 200 EVs so you could you please give us the current break up?
Management
Can you address your first question because your voice is getting muffled. First question answer is we have 88 industrial customers and rest is commercial customers, 88 is industrial and rest is commercial which is around 4200 plus. What is your next question? My next question was the current BEST fleet, so in the last quarter you had mentioned that there is around 2400 CNG buses, 800 diesel buses, and 200 EV in the last quarter you had mentioned, so would you please give us the break up? See currently we have around 2500 buses from the BEST, TMT etc and around 600 odd buses from private opera
Q
Thank you. Thanks for the opportunity Sir. I just want the clarity on this 5% CNG volume drop. On a q-o-q basis CNG volumes are down 5% so what growth has declined?
Management
It is hardly 0.43% down compared to PNG. You are saying CNG Volumes? Varadharajan Siva K: Yes that is right. Yes CNG volumes are down by 4% compared to the previous quarter mainly due to January and February had impact of third wave of COVID so I think there was a restriction on traffic and on that mobility so that had impacted us. The 2800 CV numbers you mentioned, where they all OEMs vehicle or was there a significant portion which was retro fitted as well. Usually very, very few retrofit. Retrofit and commercial good vehicles are almost negligible. Varadharajan Siva K: Would you have simila
Q
In the current quarter the total domestic sales is 2.75 MMSCMD which is CNG and PNG domestic and already in the last quarter we had told we have 0.15 MMSCMD of 18 months of LNG contract and some 0.1 MMSCMD. So how much of quarter four quantity did we get from contract and how much did we procure from spot.
Management
It should be roughly 0.45 to 0.5 for spot. 0.45 to 0.5 for spot are we talking about? Term contract you are asking right. Yes. Term contract how much were we able to procure in quarter four. All the three contracts put together roughly 0.45. Spot would be around you mentioned around 14% or so out of 2.75, 14% would be the shortfall towards APM is it ? I gave you a figure for the company level. Are you asking right now about only priority sector? Only priority sector yes. Okay 2.75 was the average roughly 2.5 was APM and rest is spot. Not term contract, spot, 0.25. So the contract went towards
Q
Sir my question was regarding the mobile refueling unit so is there only one MRU or have we added more during the quarter?
Management
We are on the verge of giving three more LOIs. Again there is a change in terminology this is not MRU. This is now called CDU, composite dispensing unit and in a few days time we are expecting to give three more LOIs. What will be the timeline after issuing the LOI? The time it will take to commit onto the ground. It is difficult to pinpoint that, but we are hoping that maybe six or eight months there should be some moment because currently safety regulations they are slightly, the one which we ran we got under a pilot program kind of a thing. Now that we want to run this as a regular business
Q
Sir just one question from my side. The commissions that we are paying to OMC are they on margin basis or are they on fixed cost per SCM basis?
Management
It is per kg. They are fixed per kg. There is no linkage of the selling price. There is no linkage of purchase price of gas. It is fixed number with rupees per kg which can vary from time to time. The cost or commission varies. It varies. Usually it is higher in cities areas and lower in semi urban and rural areas. Broadly to reflect the difference in the cost of land.
Q
Thank you Sir for giving this opportunity. You had mentioned 2800 conversions happening on the commercial side in Q4. Could you give us the sort of level of conversions that you have seen in Q4 across categories of vehicles and also for the annual FY2022?
Management
You want other than commercial vehicle numbers. Yes Sir. So in Q4, car and taxies put together roughly 13300 plus. Then three wheelers roughly 2300, buses roughly 140; other small LCV trucks roughly 680. Total is around 19260 vehicles in Q4. Right Sir. Is it possible to get these similar details for FY2022 as well collective? FY2022, full year. Full year total number of vehicle added around 62,500 which consists of car and taxis in the range of 45,000, three wheelers roughly 6400, buses 200 plus, then trucks around 1500 and this LCV is in the range of around 9400 plus. Thank you Sir. The secon
Q
Just one clarity, I needed. You said 2.5 MMSCMD is the APM gas volume that we got and the priority sector total consumption was around 2.75 so that implies a shortfall of around 9% to that rate whereas you mentioned 15% to 17% shortfall here?
Management
Yes, percentage given of shortfall 15% to 17% also right because January and February there was a COVID impact so that percentage which we are mentioning is at a peak level so if you see March it was higher 17%, some part of February it was 15%. It was the lowest in the month of January because the sales volumes were impacted and it was lower than the available APMs also. Just one clarity needed. Is there any visibility on the reallocation of the APM volume that we have some visibility there? Is there a chance of increasing the APM volumes as such no clarity on that? Circular had new prices an
Q
Thank you everybody for joining and having an interactive discussion. Thank you very much.
Management
Speaking time
Management
65
Moderator
16
Vikas Jain
7
Sabri Hazarika
7
Niharika Jain
7
Aishwarya Agarwal
6
Probal Sen
5
S. Ramesh
5
Kirtan Mehta
4
Maulik
3
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Opening remarks
Nitin Tiwari
Thank you Aman. Good evening everyone. I welcome everyone to Mahanagar Gas Limited’s fourth quarter end FY2022 earnings call. We have the pleasure of having with us today the senior management team from Mahanagar Gas Limited represented by Mr. Sanjib Datta, Managing Director, Mr. Sanjay Shende, Deputy Managing Director, Mr. Rajesh Patel, Chief Financial Officer and Mr. Rajesh Wagle - Senior Vice President, Marketing. I will now hand over the floor to the management for their opening remarks and that shall be followed by an interactive Q&A session. Over to you Sir!
Management
Thank you, Nitin. Before we begin I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and we believe that the expectation contained in the statement are reasonable; however, the nature involves a number of risks and uncertainties that may lead to different results. The risks and the uncertainties relating to this statement includes but are not limited to risk and uncertainties regarding fluctuations in sales volumes, fluctuations in foreign exchange, other costs and our ability to manage growth. I urge you to consider that quarterly numbers are not a reflection of long-term trend or an indication of full year results. They should not be attempted to be extrapolated or interpolated into a full year number. Thank you and over to you Sir!
Management
Good afternoon and welcome to the earnings conference call of Mahanagar Gas Limited for the fourth quarter of the Financial Year 2021-2022. I would like to thank all of you who have connected for our earnings call today. India is witnessing recovery in economic activity after COVID. Accelerated pace of vaccination, uptick in consumer and business confidence with better outlook on the general economic situation have resulted in greater degree of optimism. However, adverse residual effects of the pandemic across the globe coupled with major geo-political upheavals have resulted in a surge in commodity prices matched by high inflation. Crude oil price has soared to above US$100 per barrel mark and likewise imported RLNG prices have touched new highs. For MGL, Q4 of FY 2021-22 was impacted by the third wave of COVID resulting in lower sales volume but the recovery has been fast and the average gas volumes sold in March 2022 increased by 14% as compared to that of January 2022. Despite the
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