Mahanagar Gas Ltd Share Price – NSE /  BSE

Gas Distribution, Small Cap

Indraprastha Gas (down 18.66%), Mahanagar Gas (down 13.45%), Gujarat Gas (down 6.36%), Adani Total Gas (down 2.54%) and Gail (India) (down 1.40%) declined.

The government's policy prioritizes the allocation of Administrative Price Mechanism (APM) gas to City Gas Distribution (CGD) companies for crucial segments like domestic PNG and CNG for transportation. However, due to limited availability, the allocation has been curtailed, impacting the operations of these companies.

Mahanagar Gas, a leading CGD company, has highlighted that the 18% reduction in allocation, effective November 16, 2024, will negatively impact its profitability. Similarly, Indraprastha Gas has reported a 20% reduction, while Adani Total Gas has seen a 13% reduction in their APM gas allocations, which will adversely affect their financial performance.

As a result of these developments, multiple analysts have downgraded their ratings on CGD stocks, expressing concerns about their future profitability.

To mitigate the impact of reduced gas allocation, Mahanagar Gas is exploring alternative sources of natural gas, such as High-Pressure High-Temperature (HPHT) Gas, New Well/Well Intervention (NWG) Gas sourced from ONGC, and Benchmark-Linked Long-Term Contracts with gas suppliers. The CGD industry is actively engaging with key stakeholders to address the issue and seek a resolution. However, the immediate impact of the reduced gas allocation is likely to weigh on the financial performance of these companies.

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In a regulatory filing made post trading hours on Thursday, MGL stated that it has signed a share subscription agreement (SSA) and a shareholding agreement (SHA) with International Battery Company, Inc. (IBC US). Accordingly, both parties will invest in International Battery Company India Private Limited (IBC) to form a joint venture company, which is currently a 100% subsidiary of IBC US.

Last month, MGL had announced the signing of an indicative and non-binding term sheet with International Battery Company, Inc, a Delaware Corporation, for a proposed investment by the company in IBC of an amount not exceeding Rs 385 crore, for a stake not less than 40%.

IBC US is based in California, USA. The company has put up a pilot facility in Seoul, South Korea for development and production of li-ion cell and has secured certifications such as UN 38.3, BIS, and AIS for their prismatic NMC cells.

To address the local market requirement, IBC US and MGL are setting up a giga factory at Bangalore. MGL intends to take at least 40% stake in IBC. The India facility will be a technology agonistic plant which will initially produce prismatic NMC Li-ion cells having wide application across mobility and battery storage sector.Ashu Shinghal, managing director of MGL said: “MGL has established itself as a leading CGD company and a key player in India’s energy landscape. MGL has already committed investments in LNG retail, CBG and Electric Vehicle manufacturing.

Foray into battery cell manufacturing will strengthen its position in the evolving energy space which aligns with MGL’s objective of a cleaner future. IBC has a capable and experienced team who has worked with leading technology companies globally.

Through IBC, MGL and IBC US will set up a giga factory in India for Indigenous battery cell manufacturing. This will enable the consumers to source battery cells locally, which are currently being imported. thereby enhancing the competitiveness of the sector.”

Mahanagar Gas is in the business of city gas distribution (CGD), presently distribution of natural gas for domestic industrial, commercial customers and CNG vehicles.

The company reported 16.5% fall in standalone net profit to Rs 282.8 crore despite a 9% rise in net revenue from operations to Rs 1,711.62 crore in Q2 FY25 over Q2 FY24.

The scrip rose 0.16% to currently trade at Rs 1439.45 on the BSE.

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EBITDA fell by 16.8% to Rs 282.8 crore in Q2 FY25 from Rs 338.5 crore in Q2 FY24. EBITDA margin for the period under review was 23.28% (down 720 basis points YoY).

Total sales volume rose by 13.1% YoY to 371.85 SCM million in Q2 FY25. CNG and PNG sales volume for September’24 quarter were 265.47 SCM million (up 11.7% YoY) and 106.38 SCM million (up 16.6% YoY), respectively.

Mahanagar Gas is in the business of city gas distribution (CGD), presently distribution of natural gas for domestic industrial, commercial customers and CNG vehicles.

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Net profit of Mahanagar Gas declined 16.25% to Rs 283.51 crore in the quarter ended September 2024 as against Rs 338.50 crore during the previous quarter ended September 2023. Sales rose 13.71% to Rs 1786.25 crore in the quarter ended September 2024 as against Rs 1570.93 crore during the previous quarter ended September 2023.

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