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Q4FY21 Conference call highlights of Mahanagar Gas Ltd

Q4FY21 Conference call highlights of Mahanagar Gas Ltd

Published on 27 May 2021 .Views 188 .Comments 0
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  • Q4FY21 and FY21 Results
    • Outbreak of COVID-19 in 2020 and its second wave in April’21 resulted in significant disturbances and slowdown in economic activity.
    • Reduction in sales volume across all segments except for domestic PNG due to COVID-19 induced lockdown in Q1FY22 so far.
    • Gas supplies have remained operational to the PNG domestic customers as well as CNG stations .  
    • During Q4FY21, company achieved sales volume of 2.892 mmscmd consisting of 2.024 mmscmd CNG volume and Domestic PNG volume to the tune of 0.457 mmscmd while 0.411 mmscmd volume of natural gas was supplied to industrial and commercial consumers.
    • Sales volume during the quarter increased 4% QoQ. CNG volumes increased 7% QoQ, domestic sales of PNG decreased by 10% QoQ while industrial sales volume 9% QoQ.  
    • Other income is low in this quarter mainly as company  changed its investment policy since the pandemic hit last year. Company has diverted its investments in Bank FDs, overnight funds, etc from protection of capital point of view. This resulted in lower returns.
    • In Q4FY21, company converted ~11,300 4-W private vehicles into CNG while in Q3FY21, it was around 12,100. Similarly ~ 2400 autos were converted to CNG in Q4FY21 as compared to 3000 in Q3FY21.
    • Capex for FY21 was ~Rs. 340 crores.
  • CGD Network and update on Geographical Areas (GAs)
    • Company is rapidly expanding its CGD network. During Q4FY21, 54.6k domestic households were connected. Thus, company has established connectivity for ~1.6mn households and laid ~165.7 kms pipelines in this quarter. This takes the aggregate pipeline length to 5,916 kms. Added 6 new CNG stations, summing up to 271 stations. Company also added 99 industrial and commercial consumers. Thus, as of Mar’21, company has 4,192 industrial and commercial customers. 
    • W.r.t company’s Raigad GA, company is connected to 40,288 domestic households and 19 CNG stations are operational. Company has laid ~68.53 kms of pipeline in Raigad GA during Q4FY21, thereby taking the total length of the pipeline to 260.8 kms.  
    • Company expects volumes from Raigad GA to reach 0.5 mmscmd in the next 3-4 years, considering the current scenario. Company expects aggressive growth in CNG stations in GA 3.
    • Company has installed DRF in which 3000 domestic customers will be charged immediately after establishing connectivity of Panvel railway crossing , expected to be complete in Jan’22. Major HDD contracts along NH4 to establish steel pipeline connectivity from Panvel to Khalapur. After establishing this pipeline, company will be in a position to charge a network length of 18kms from Panvel to Khalapur which will cater to new and existing CNG stations.
    • MGL’s first ( City Gas station) CGS in Savroli for GA3 is in progress and management is planning to setup first  LNG station at Savroli in FY22.  Another LNG station is planned on Mumbai- Nashik highway, which shall be completed by FY23. Management also guided for second CGS station in Kusagarh purchase of land to be still in progress.
    • For FY22, company has planned to lay 25 kms steel pipelines to achieve GA3 balance minimum work program target of 399 inch-km. Out of 25 kms, permission for 21 kms is granted and rest is under progress.  
    • Management has plans to install mobile refilling units in GA1 and GA2 , currently it is awaiting regulatory approvals. Company has already set up a mobile refilling unit on Mumbai – Goa highway.
  • Impact of second wave of pandemic: In Q3 and Q4FY21, good increase in CNG volumes. Currently, volumes of CNG have dropped due to lockdown restrictions. However, moment the lockdown eases, there will be a significant jump in CNG volumes. Drop to the extent of ~25-30% in case of CNG and commercial sales volume in Q1FY22. Company feels so it is bottoming out in case of sales volume.   
  • Capital Allocation
    • Board of directors have approved a final dividend of Rs. 14 per equity share for FY21. Company also paid an interim dividend of Rs. 9 per equity share in FY21.       
    • Company currently has a robust cash balance above Rs. 1500 crore. It plans to utilise some of the cash balance for dividends distribution and is also evaluating some business growth opportunities. Company also plans on building 8-10 customer relationship offices and improve company infrastructure.  
  • Two key risks – consensus regarding trade margins with Oil Marketing Companies (OMC) and  Uran Trombay Case which is already disclosed as a contingent liability.  
  • Future Guidance
    • Increase in fuel prices to augur well for sales volumes.
    • Company has aggressive capex plans in FY22 to the tune of Rs. 500 crore, however its execution mainly depends on factors like lockdown restrictions and possibility of third wave of COVID-19.    
    • Major focus of CGD, oil& gas companies is on rolling out pan India LNG stations to make infrastructure available for converting commercial fleet to LNG based vehicles.
    • Management in talk with MSRTC to convert 5 buses into CNG and fit these with type 4 cylinder so they can travel ~700 kms in one fill.
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