MGL has to manage sourcing the natural gas through different medium and pass on the cost to consumers. will the demand be the same if the price is hiked?
As I assumed about Sourcing the Gas through other medium for the deallocation of 20% APM will be matched, confirmed by the MGL management during the Q2 FY25 Earnings Conference call.
Also, the volume growth is at 7% Year on Year, Half Yearly.
MGL has to manage sourcing the natural gas & absorb the cost impacts, which leads to reduction margin eventually. but does this change the demand for PNG & CNG over the long run?
Based on the earnings conference call notes, the MGL management is not going to hike the gas price in the near term. Instead, they will try to improve the operational efficiency & midterm contracts for gas sourcing.
Future Plans:
On October 7 this year, MGL has entered an indicative and nonbinding term sheet with
International Battery Company USA for setting up an EV battery cell manufacturing facility in
India under proposed joint venture company, which is called International Battery Company
Private Limited. The plant initial capacity is 1 GWh, which will be developed in 2 phases of 500
MWh each. The proposed equity investment by MGL in the range of INR385 crores in this joint
venture with the equity stake of approximately 40%.
Has anyone worked out the material cost price increase annual due to external sourcing , and itâs effect on the EPS, and does it warrant a drop of more than 20% from 52w high ?
I donât see any drop in end users for CNG,and fundamentals are strong, except for the margin squeeze.
external Sourcing price depends on the midterm contract or spot price, as per the APM the source is done at $6.5 per SCM, may be external sourcing at $9 or so assumption.
MGL management said, âit is purely depending on the contract or if it purchased from the new wells or soâ.
above info is fetched from the earnings notes. FYI.
Just some back of the envelope calculation, for 20% external sourcing of 165 cr ( Total annual material expenses of 827 cr) @ 9 USD ,instead of 6.5 USD, which works out 27% rise on 165 cr =210 cr
The annual material cost increases by only 5%
The market cap from 52w high 1988 to 1388 is a drop of 30%
My mistake I took figures from Screener. in for quarter Sept 2024 ( 1313x 0.63= 827 cr), still percentage wise the calculation should hold, Correct me if I am mistaken !
Thanks Vego for clarifying. 6.5 to 9 is 38% increase. So using your analogy there is rougly 63Cr increase in Purchase of Stock in Trade. Net Profit for Q2 was 283Cr. So there is possibility of 22% reduction in profit.
Very Detailed explanation on Reduction of qty under APM. In 2 years time, APM qty would be Zero.
Also allow competition to get better pricing. Interesting.
The central governmentâs recent decision to reduce gas allocation to city gas distribution companies under the administered price mechanism follows a decline in overall gas volumes, said Gajendra Singh, member of the Petroleum and Natural Gas Regulatory Board.
Over the weekend, the government had reduced APM gas allocation to the city gas distributors by another 20%, marking the second straight month of reduction in gas allocation.
Talking to NDTV Profit, Singh explained the reason, even though the Centreâs policy for gas distribution prioritises allocation of APM gas to CGD companies.
He said that the APM gas supplied to CGDs was being produced in the Mumbai High and its discovery was made in 1986 or 1987. And this asset has âalready reached the phase where a decline has startedâ. When Mumbai High does not have enough volume, "reduction in allocation will need to be appliedâ.
