MAHANAGAR GAS LIMITED MAHANAGAR GAS Ref: MGL/CS/SE/2019/305 Date: December 23, 2019 To, Head, Listing Compliance Department Head, Listing Compliance Department BSE Limited National Stock Exchange of India Ltd P. J. Towers, Exchange Plaza, Bandra —Kuria Complex, Dalai Street, Bandra (East), Mumbai - 400 001 Mumbai - 400051 Scrip Code/Symbol: 539957; MGL Script Symbol: MGL Sub: Transcript of Earnings Conference Call on Unaudited Financial Results for the quarter and half year ended September 30, 2019. Dear Sir/Madam, Pursuant to provisions of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that an Earnings Conference Call on Unaudited Financial Results for the quarter and half year ended September 30, 2019 was held on Wednesday, November 13, 2019 at 4:00 PM (1ST). Please find attached herewith the transcript of the aforesaid Earnings Conference Call. The same may also be accessed on the website of the company i.e. www.mahanagargas.com. You are requested to take the above information on your records and disseminate the same on your website. For Mahanagar Gas Limited /4( MUMBAI C Anand Upadhyay Company Secretary and Compliance Officer Encl.: As above Regd. Office: MGL House, Block G-33, Bandra - Kuria Complex, Bandra (East), Mumbai - 400 051 T + 91 22 6678 5000 I E [email protected] 1W www.mahanagargas.comICIN L40200MH1995PLC088133 An ISO 9001, 14001 & OHSAS 18001 Certified Company “Mahanagar Gas Limited Q2 FY2020 Earnings Conference Call” November 13, 2019 ANALYST: MR. DAYANAND MITTAL - SBICAP SECURITIES LIMITED MANAGEMENT: MR. SANJIB DATTA, MANAGING DIRECTOR - MAHANAGAR GAS LIMITED MR. DEEPAK SAWANT - DEPUTY MANAGING DIRECTOR - MAHANAGAR GAS LIMITED MR. S. M. RANADE - CHIEF FINANCIAL OFFICER - MAHANAGAR GAS LIMITED MR. RAJESH WAGLE - SENIOR VICE PRESIDENT (MARKETING) - MAHANAGAR GAS LIMITED Page 1 of 21 Mahanagar Gas Limited November 13, 2019 Moderator: Ladies and gentlemen, good day and welcome to the Mahanagar Gas Limited Q2 FY2020 Earnings Conference Call, hosted by SBICAP Securities Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” and “0” on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dayanand Mittal from SBICAP Securities Limited. Thank you, and over to you! Dayanand Mittal: Thank you Steven. Thanks everyone for joining in today's call. We have with us the senior management team of Mahanagar Gas represented by Mr. Sanjib Datta, Managing Director, Mr. Deepak Sawant, Deputy Managing Director. Mr. S.M. Ranade, Chief Financial Officer, and Mr. Rajesh Wagle, Senior Vice President (Marketing). So, with this I would like to hand over the call to the management for the opening remarks, which we will then be followed by Q&A. Over to you Sir! Company Speaker: 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 expectations 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 uncertainties relating to these statements include but are not limited to risks 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 full year numbers. Over to you Sir! Management: Thank you Madam. Good afternoon to all of you and welcome to earnings conference call of Mahanagar Gas Limited for the Second Quarter of the Financial Year 2019-2020. I would like to thank all of you who have connected for our earnings call today. As you would be aware, India currently imports about half of the gas it consumes. Imported gas accounted for 51.2% of local needs higher than 48.7% in the first half of the last fiscal year. Natural gas output was 16 billion cubic meters, 1.5% less than in the first half of last year. However, the government has plans to raise the share of gas in India's primary energy mix to 15% by 2030 from the present level of about 6%. Natural gas pipeline expected to expand to 28000 km by 2023 end from the current aggregate length of about 16000 km. And the capacity of LNG import terminals are also planned to be doubled to about 55 million tonnes per annum in the next three years. Page 2 of 21 Mahanagar Gas Limited November 13, 2019 On the consumption side, the power sector consumes about 31% of the locally produced gas while the fertilizer and city gas sector consume 25% and 22% respectively. Domestic gas production has its own challenges but with favorable government policies availability of domestic gas for the CGD sector is likely to continue in the foreseeable future. As industrial and commercial customers supplied with imported gas, procurement price of market priced gas will be the key factor rather than availability of gas for this segment. The price of locally produced natural gas based on government set formula has fallen to $3.23 per MMBTU for the period from October 2019 to March 2020. The price was $3.69 per MMBTU during April to September 2019 period. On the current demand supply scenario of LNG spot gas prices witnessed downward trend for almost two quarters. Our conscious decision to rely more on spot gas than on mid term or long-term contracts has helped us to improve margins in industrial and commercial categories. MGL today has a strong incumbent in the CGD sector with significant strengths and core capabilities. MGL has presence in attractive and contiguous portfolio of geographical areas of Mumbai, Thane and Raigad where there are significant opportunities to capture growth in both CNG and PNG sectors. Now coming to MGLs’ operations, we are rapidly expanding our CGD network in the existing license areas. During the quarter 32241 domestic households were added. Today we have established connectivity with more than 1.2 million household customers for supply of pipe gas. In the second quarter we had a net addition of 47 industrial and commercial customers and thus as on quarter end we had 3923 industrial and commercial customers. Besides as on quarter end, we had 244 CNG stations supplying CNG to around 7 lakh vehicles and our aggregate of steel and PE pipeline network stood at 5393 kilometers. With respect to our Raigad geographical area, we added more than 4300 domestic PNG connections in the license area during the quarter. Gas supply to major towns like Pen, Uran and Karjat is planned through the virtual pipeline network to begin with. Early this year, the company has received critical permissions from various authorities for laying pipelines in Raigad GA. At second quarter end, 13 CNG stations were operational in Raigad. CNG sales in Raigad reached the level of 30460 kg per day and is expected to go up when some more CNG stations become operational in coming months. During the quarter, we have seen a growth of 1.3% in overall sales volume over the corresponding quarter in the previous year. Page 3 of 21 Mahanagar Gas Limited November 13, 2019 CNG sales volume grew by 1%, Domestic sales volume grew by 4.5% while the industrial and commercial sector sales grew by 0.2%. Overall, the PNG volume grew by 2.2%. Gross margin is higher in value terms in the current quarter as compared to corresponding quarter in the previous year mainly due to marginally higher volumes in CNG and domestic PNG segments with better price realization and lower cost of spot gas used for industrial and commercial sectors. EBITDA margin was 34.9% at Rs.273 Crores in the current quarter as compared to 31.8% at Rs.221 Crores in the corresponding quarter of the previous year. The company elected to exercise lower tax rate of 25.17% as introduced by the taxation Law Amendment Ordinance 2019 during the quarter. As a result, after accounting credit for reduction in opening deferred tax liability of Rs.56.7 Crores. Net profit after tax grew by 98.6% from Rs.136 Crores in the corresponding quarter of previous year to Rs.271 Crores in the current quarter. Compared to immediately preceding quarter, there is an increase in current quarter total sales volume by 2.2%; CNG volume is higher by 2.8%. Industrial and commercial sector is higher by 4.6%; however, domestic volume is lower by 3.8%. Gross margin is 51.4% as compared to 53.8% recorded in the immediately preceding quarter. Industrial and commercial price realizations linked to alternate fuel were lower as price of bulk LPG, LSHS and LDO droped in the range of 7.5% to 13% compared to previous quarter. With marginal increase in exchange rate and supply disruption from ONGC end for few days during August and September, volumes were impacted. As a result, there is a marginal drop in EBITDA from Rs.276.8 Crores in Q1 to Rs.273.4 Crores in Q2. Net profit after tax grew by 58.96% from Rs.170.2 Crores in the preceding quarter to Rs.270.6 Crores in the current quarter. With this, I conclude and would now like to open the floor for questions. Thank you very much.