Natural Gas

Mahanagar Gas: Global Gas Prices Impact

Mahanagar Gas Limited (MGL), Incorporated in 1995, is one of the leading Natural Gas Distribution Companies in India.

Recent Industry Update for City Gas Distributors

  • India increased the domestic price of natural gas for the second half of the ongoing fiscal, tracking the global surge in energy costs applicable 1 October 21
  • The gas price ceiling is hiked by 69% compared with the ceiling of $3.62 per mmBtu set for the period of April-September 2021. The gas price ceiling for the period from 1 October 2021 to 31 March 2022 is set at $6.13 per mmBtu.
  • The increase is favorable for Oil and Natural Gas Corp., Oil India Ltd., and Reliance Industries Ltd.
  • City gas distributors, however, are likely to face margin pressure.
  • MGL announced the revised prices of CNG as ₹. 57.54/Kg (from 54.57) and PNG ₹. 33.93/SCM (from 32.67) in and around Mumbai w.e.f. midnight of 13th October, 2021.

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(A) About The Company

  • Gail (India) Limited is the Promoter of the Company.
  • MGL is the sole authorized distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai, Thane and Raigad district of Maharashtra.

(B) Executive Management of Mahanagar Gas Ltd

(i) Mr. Manoj Jain (Chairman)

Mr. Manoj Jain is the current Chairman of the Company. He is a Mechanical Engineering Graduate and MBA in Operations Management possesses rich and diverse experience encompassing more than 34 years with GAIL (India) Ltd. in the areas of Business Development, Projects, O&M, Petrochemicals, Pipeline Integrity Management and Marketing which has allowed him to gain insight and knowledge across multiple business units and functional areas. As Chairman and Managing Director of GAIL (India) Limited, Mr. Manoj Jain is also currently Chairman of GAIL GLOBAL (USA) Inc. (GGUI), GAIL GLOBAL (USA) LNG LLC (GGULL), Brahmaputra Cracker & Polymer Limited, GAIL Gas Limited and Mahanagar Gas Limited.

Moreover, in his previous position as Director (BD), he was responsible for building GAIL’s Business Portfolio in India and abroad, Merger and Acquisition, Petrochemical O&M and Expansion, Exploration & Production, R&D, Start-Up, Health Safety & Environment management, Quality Management, Project Development including feasibility study and investment approval for new pipelines, process plants, renewables etc.

Mr. Manoj Jain was responsible for Gas Marketing activities in his role as Executive Director (Marketing-Gas). He also spearheaded the installation and commissioning of the USD 1.4 Billion grassroots Petrochemical complex, as Chief Operating Officer of Brahmaputra Cracker and Polymer Ltd, (BCPL).

Earlier, he worked in Operation & Maintenance at the Corporate Level for a number of years and his experience includes managing logistics of Gas Business with a perspective of Operation and Management of all pipelines of company and in the process played a significant role in establishing the National Gas Management Centre (NGMC) and systems and procedures for transmission and marketing of commingled gases.

(ii) Mr. Sanjib Datta - Managing Director

Mr. Sanjib Datta has been appointed as Managing Director on the Board of Mahanagar Gas Limited (MGL) with effect from May 30, 2018. He also holds a Bachelor's degree in Electrical Engineering from Jadavpur University, Kolkata. Before joining MGL, he has been heading the Business Development functions in GAIL (India) Limited as an Executive Director.

He has 32+ years of experience in handling multifarious assignments in the natural gas sector covering diverse functions like, Business Development, Marketing, Project Development and Construction as well as Operation & Maintenance of Pipelines and LNG Terminal.

Mr. Sanjib Datta also handled GAIL's initiatives to import of gas into India through the TAPI pipeline apart from overseeing GAIL's investments in China, Egypt and Myanmar in the areas of city gas distribution and cross country pipeline.

In India, Mr. Sanjib Datta has led GAIL's forays into the solar business and has also steered GAIL's initiatives in diverse areas, like, floating LNG regasification terminals, LNG shipping, gas based power generation, petrochemicals and specialty chemicals etc. As a Project Manager, he had also handled GAIL's participation in the restructuring and revival of the Dabhol Project after departure of Enron.

Mr. Datta has rich board level experience and has served on the Boards of GAIL Global (USA) Inc., a wholly owned subsidiary of GAIL through which GAIL is channelizing its business initiatives in E&P and LNG sourcing in USA and also on those of South East Asia Gas Pipeline Company, TAPI Pipeline Company Limited, National Gas Company Limited and Fayum Gas Limited. Besides, he has also been GAIL's nominee Director on the Board of ONGC Petro-additions Limited.

(iii) Mr. Sanjay Shende - Deputy Managing Director

Mr. Sanjay Shende has been appointed as Deputy Managing Director on the Board of MGL with effect from May 24, 2021. Mr. Sanjay Shende has a rich, illustrious career in B2B sales, exports, and also in marketing spanning almost three decades. He is a trained civil engineer. He also holds a Post Graduate Diploma in Management from the Indian Institute of Management, Lucknow.

Mr. Sanjay started his career in GAIL at the petrochemical complex at Pata, UP during the commissioning phase to establish the logistics/ supply chain for polymer . Subsequently, from 2000 onwards, he Joined Mumbai Zonal office looking after polymer sales in Maharashtra and Goa turning this region into one of the top three sales zones for GAIL.

In 2011, he joined GAIL's Ahmedabad Zonal office. He was in charge of marketing for the Natural Gas, Polymer & Liquid Hydrocarbons in Gujarat market that contributed close to 25% of GAIL's total revenue.

Moreover, from 2015 to 2018, he was posted in the petrochemicals marketing group at Noida in charge of formulating various policies and looking after the pricing of polymers.

Since 2018, he has been heading GAIL's Hyderabad zonal office looking after the marketing activities for GAIL as well as boundary management in Andhra Pradesh and Telangana.

Prior to joining GAIL, he worked at Hindustan Petroleum Corporation Limited and Indian Petrochemicals Corporation Limited.

(C) Shareholding Pattern

Mahanagar gas ltd stock research with details of share holding pattern
Mahanagar gas ltd stock research with details of key shareholders

(i) Mutual Fund Holdings

Volatility has been observed in the Mutual Fund Holdings of Mahanagar Gas Limited from last 16 Quarters.

Mahanagar gas ltd stock research with details of Mutual Funds holding

(D) Revenue Classification

Company provides Natiral Gas in the form of CNG and PNG to its customers. MGL is presently the sole authorized distributor of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in Mumbai, its adjoining areas and the Raigarh District in the state of Maharashtra.

(i) Piped Natural Gas (PNG)

Domestic PNG is used for various purposes like cooking and water heating. It is also widely used in hospitals, nursing homes, hotels, flight kitchens, restaurants, places of worship etc. PNG efficiently satisfies fuel requirements across all segments and is also a non-polluting and an economical energy source.

(ii) Compressed Natural Gas (CNG)

Company provided its CNG to Auto-Rikshaws and Taxis. Additionally, CNG is supplied to bus depots of BEST, TMT, MSRTC & NMMT. Apart from these, all types of light and heavy vehicles also run on CNG.

Company's Sales Composition as on 31 March '21 is as follows -

Mahanagar Gas Limited Stock Research with the details of Sales Composition.

(i) Year-on-Year Revenue

Company's CNG Revenue Segment has shown an irregular growth over the years and grew at a Negative CAGR of -2% over last 5 years. MGL'S CNG Revenue decreased by 36%, from INR 2050 Crores in 2020 to 1300 Crores in 2021.

Mahanagar Gas Limited Stock Research with the details of CNG & PNG Revenue.

On the other hand, Company's PNG Revenue has also shown considerable growth over last 6 Fiscal years and grew at a CAGR of 7%. However, in 2021, this Segment Revenue de-grew to INR 840 Crores from INR 890 Crores in 2020.

In the Fiscal year 2021, the drop in Revenue of both CNG and PNG was a direct result of lower sales due to Covid-19 Pandemic.

(E) Sales Volume of Mahanagar Gas Ltd

MGL's Total Volume has shown a regular growth over last 6 Years. However, In the year 2021, Total Sales Volume decreased to 2.22 mmscmd from 2.9 mmscmd in 2020.

On the other hand, Company's PNG Volume has shown a good and stable growth over the years. In 2021, PNG Sales volume remains same as of 2020 i.e. 0.8 mmscmd.

MGL's CNG Sales Volume has also shown a consistent growth over last 6 years. However, CNG sales volume decreased to 1.42 mmscmd in 2021 from 2.1 mmscmd in 2020.

Mahanagar Gas Limited Stock Research with the details of Sales Volume.
MMSCMD = Million Metric Standard Cubic Meter Per Day

In June 2021, MGL's Total Volume is at 2.4 mmscmd. On the other hand, Both CNG and PNG Volume stands at 1.55 mmscmd and 0.85 mmscmd respectively.

(F) Piped Natural Gas

(i) Domestic PNG Customers

Company's PNG Domestic Consumer Network has shown a robust growth from 7.6 Lakhs in 2016 to 16.3 Lakhs in 2021. Moreover, – in Q-1, 2022, the company added 29,162 domestic PNG Consumers.

Mahanagar gas ltd stock research with details of PNG domestic customers

(ii) Commercial and Industrial PNG Consumers

MGL's Commercial and Industrial Consumers significantly increased from 2,926 in 2016 to 4,192 in 2021.

The Company has also added 40 industrial and commercial customers in the Q1 of FY22, thus as on quarter ending June 2021, MGL has 4196 industrial and commercial customers.

Mahanagar gas ltd stock research with details of commercial industrial PNG customers

(iii) PNG Steel Pipelines

Company's PNG Steel Pipeline Network increased to 522 Kms in 2021 from 415 Kms in 2016.

Mahanagar Gas Limited Stock Research with the details of Steel Pipelines.

(iv) Polyethylene (PE) Pipelines

MGL's Polyethylene (PE) Pipeline Network has also increased from 4,232 Kms in 2016 to 5,394 Kms in 2021.

Mahanagar gas ltd stock research with details of PE Pipelines length

(G) Compressed Natural Gas

(i) CNG Customers

Company's CNG Customers Network has also shown a Significant growth from 4.7 Lakhs in 2016 to 7.92 Lakhs in 2021. Further, the Company has 8.01 CNG Customers as Quarter ending June '21.

Mahanagar gas ltd stock research with details of CNG customers

(ii) CNG Stations

MGL's Number of CNG Stations have grown to 271 in 2021 from 188 in 2016.

Mahanagar Gas Limited Stock Research with the details of CNG Stations.

Moreover, addition of five CNG stations in Q-1, 2022 by the Company. The Company has 274 stations with the dispensing capacity of around 35 lakh KGs per day.

(H) Cost Structure

MGL's Cost Structure as of 30.June.2021, is as follows -

Mahanagar Gas Limited Stock Research with the details of Cost Structure.

(I) Diversified Gas Sourcing

(i) Allocation Policy for CNG & Domestic PNG

  • Ministry of Petroleum and Natural Gas allocates gas for entire requirement of CNG and domestic PNG under Administered Price Mechanism (APM) and Non-APM Agreements.
  • Moreover, Allocation of 110% of consumption in previous 6 months to be compulsorily supplied by GAIL and to be only used for the Domestic PNG & CNG segments.
  • And Price to be fixed on 6 monthly basis.



Mahanagar Gas Limited Stock Research with the details of Gas Sourcing.

(ii) Allocation Policy For Industrial/Commercial PNG

  • Purchase of imported RLNG for industrial/commercial PNG customers.
  • Purchase of SPOT RLNG gas from RIL's KG basin for industrial/ commercial PNG customers.
  • Mix of spot and term contracts.

Suppliers -


(J) Financial Parameters

Mahanagar gas ltd stock research with details of financial performance
  • MGL sales grew at a CAGR of 7% over last 10 Fiscal Years.
  • On the other hand, Company's PAT has shown a constant growth over the years. MGL's PAT grew at a CAGR of 11 % over last 10 years. However, in 2021 Company's PAT decreased by 22% to 620 Crores.
  • MGL's PBIDT as well as PAT Margin has shown shown some expansion over last 10 years.
  • Also, Company's ROE and ROCE maintained over last 10 years and expanded till FY20.
  • Moreover, MGL is Debt-free Company.


Every year Company spent a significant amount as Capital Expenditure.

Mahanagar gas ltd stock research with details of capital expenditure

MGL's management has guided for capex of INR 800 crore annually. The capex would be largely spent on high pressure pipeline, minimum work program for the Raigad GA, medium pressure pipeline to connect customers, addition and also on upgradation of CNG stations and general administrative/IT related spending. But all this is subject to regulatory approval.

(L) Concall Highlights (Q1 FY22) and Management Outlook

  • Management stated that CNG volumes have recovered almost near to pre-COVID-19 level and further relaxation of lockdown norms in Maharashtra would aid to volume growth in coming quarters.
  • Management stated that a growth of 5%-6% CAGR is possible for many years to come; and if there are any regulatory interventions regarding use of clean fuel etc. then the growth can easily move to double digits.
  • Management said that company’s CNG station are operating at less than a 50% utilization rate and that provides huge scope for growth. It also added that MGL targets to add 20 CNG new and upgrade 25-30 CNG stations in F.Y. 2022.
  • Ability to pass through the cost is definitely there with the company. Management also said that the company has taken CNG price hike of Rs2.6/kg, effect from July, 2021, which will offset the impact of hike in transportation tariff for the Uran-Trombay pipeline.
  • The company guided for higher EBITDA/scm margin than the margin of Rs 11.6/scm that was witnessed in FY21.

Raigad Geographical Area

In the Fiscal year 2015 -16, the company Received authorization to expand footprint to Raigad. MGL started its Commercial Operations in Raigad in 2018. MGL is primarily focused on increasing its footprint, especially in the Raigad region.

Management stated that company has laid 7.94 km of the pipeline during the Q-1, 2022, taking the total length of pipeline to 268.8 km. MGL is also supplying to domestic PNG to 41,072 households and have 19 CNG stations operational at the Raigad GA.

Mobile Refueling Unit (MRU)

MGL has commissioned 1 Mobile Refueling Unit at its Raigad GA, which is first of its kind for any CGD in the country. This is an entire CNG station on wheels, wherein the CNG cascade, compressor and dispenser are installed on a vehicle. This can be used for refueling of CNG vehicles in areas where sufficient land is not available to set up a regular CNG station.

Moreover, Company plans to open 8-10 MRUs in year 2022 post getting necessary regulatory approvals.

LNG Fuel Station

The company is under process to set-up two LNG Retailing Stations - one LNG station under construction in Khalapur and expected to get completed by end of F.Y. 2022. And another at Mumbai-Nasik Highway, which is expected to get completed after 1.5 years.

BEST Buses

The management indicated that 500 new BEST buses were added some months back and another 500 buses would be added in next 2-3 quarters. MGL is also upgrading CNG infrastructure at BEST depots to accommodate additional CNG requirement by BEST.

(M) Opportunities and Strengths

(i) Strong Parentage

MGL is promoted by GAIL (India) Limited. Gail (India) Limited a depth of understanding and interest in the domestic gas distribution business. Further, a favorable allocation policy assures gas availability from GAIL for CNG and PNG (domestic) segments. In February 2014, the Government Of India announced allocation of 100% domestic gas towards CNG and PNG (domestic) segments of CGD entities, up from the initial 80% proportional allocation.

At present, GAIL is the only Promoter of the Company has a 32.5% shareholding in MGL. Moreover, the Chairman of GAIL is currently serving as the chairman of MGL.

(ii) Monopoly in gas distribution business in Greater Mumbai and expansion areas

At present, the Company enjoys near-monopoly status and has a first-mover advantage in retail gas distribution in Greater Mumbai (GA1) and and its expansion areas (GA2). The company has, thus, been able to take the regular price hikes to factor in the increase in input costs, thereby protecting its operating margins.

(iii) Low Gas Price To Drive Gas Demand

Long-term gas demand potential for India is very strong, given regulatory support to decrease pollution and low domestic gas and LNG prices. Additionally, the Govt.'s aim to increase the share of gas in India’s overall energy mix to 15% by 2025 from current 6%, would substantially improve gas penetration in the country and boost its consumption.

Thus, it is expected that there will be mid-single digit growth in India’s gas demand for the next 4-5 years. Margins of CGD companies are expected to remain strong, given weak domestic gas prices and the favorable economics of CNG versus petrol.

(iv) Secure gas tie-up with GAIL (India) Limited

In the year 2014, the Government announced allocation of 100% domestic gas towards CNG and PNG segments of CGD entities, up from the initial 80% proportional allocation. Moreover. the is a favorable Allocation Policy that gas availability from GAIL for CNG and PNG (domestic) segments.

However, for its PNG segments, where there is growth potential in the expansion areas, Company's ability to meet additional gas requirements at competitive prices would remain critical.

(v) Favorable Outlook On demand Side

Despite Lockdown and Disruptions due to Covid-19 Pandemic, a Long term Outlook for the CGD sector remains favorable for existing cities, where incumbents are already operational with domestic gas allocation in place for CNG and PNG (domestic) segments, which should witness healthy growth in volumes.

While growth of CNG would be supported further by conversion of auto-rickshaws and taxis to CNG and its cost advantage over alternative fuels, the PNG (domestic) segment will continue to benefit from the cessation of LPG subsidy for high-income consumers.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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