MahanagaR gaS May appReCIate by 25%

Mahanagar Gas Ltd (MGL) has been supplying safe, efficient and reliable clean energy to the 20 million plus population of the Mumbai Metropolitan Region (MMR) for the last many years. This is a good contribution by the company to lower the pollution levels in the serviced area and a good step in the country’s progress towards a green industrial future. MGL is a joint venture between GAIL India Ltd and BG Asia Pacific Holdings Singapore. The latter is a subsidiary of BG PLC UK, which is a part of the Royal Dutch Shell Group. MGL is the sole authorised distributor of compressed natural gas (CNG) for vehicles and piped natural gas (PNG) for households. At present, the company is supplying CNG to over 5.7 lakh natural gas vehicles, thereby reducing vehicular emission by about 1,400 tonnes per day. The entire public transport fleet, plus a sizeable number of private vehicles are plying with CNG kits supplied by MGL. On the other hand, MGL supplies PNG to around 1.60 million people in and around the metropolis, resulting in the rise of productivity levels for the populace. The company can boast of having all the resources and competencies required for gas distribution with an enviable track record of 100% reliability in gas supply. A notable example being that even during the devastating floods of Mumbai in 2005, when most of the other utilities failed, MGL gas supply continued uninterrupted. Thanks to the rising demand for PNG and CNG, the company plans to invest around Rs 125 crore in the districts of Uran and Raigarh in Maharashtra to develop the network and simultaneously create huge employment opportunities in the development of infrastructure in the region. MGL’s achievement on the productivity front is also quite impressive, with domestic connections exceeding 9.95 lakh customers through over 200 CNG stations and 2,000 dispensing points. With the launch of CNG fuelled two wheelers, the company can tap the estimated 36 lakh two wheelers running in the state and well placed to tap the huge potential in that space. There are many challenges for the company and the key ones are the creation of infrastructure due to the congestion of the city and limited time availability. Monsoon also impacts the business to a large extent, as also limited space available to set up CNG stations in a city like Mumbai. But these can be sorted out if the government can create a green corridor for the expansion of CNG filling stations on the national and state highways. The future is quite bright for the company as it is planning to also bid for business in the envisaged 100 smart cities project being planned by the government, plus exploring various opportunities for inorganic growth, such as equity stakes in other existing similar business entities. Mahanagar Gas has also been doing well on the financial front with sales turnover going up from Rs 1,514 crore in 2013 to Rs 2,034 crore in 2017 and net profit increasing from Rs 298 crore to Rs 393 crore for the same period, respectively. The sales turnover of the company for the half year ending September 2017 stood at Rs 1,197 crore, but the profit shot up by 28% to Rs 249 crore, pushing the earnings per share to 25.22 levels. Moreover, the prospects of Mahanagar Gas Ltd for the remaining half of the financial year 2017-18 is expected to be excellent and the stock can be accumulated at the current market price by portfolio investors. Many analysts are betting on the stock to appreciate by 25% from the current levels in the next three quarters. Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.