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MGL bets on Raigad project generating revenues from FY18

Company expects the Raigad project to see a demand of about 0.5 million cubic metres per year of gas

Brokerages ask clients to 'subscribe' to Mahanagar Gas IPO

Amritha Pillay Mumbai
City-gas distribution company Mahanagar Gas Ltd (MGL) is now betting on a new market beyond Mumbai with its Raigad gas distribution project, where it plans to invest Rs 50 to 100 crore annually in five years time. 

MGL won the Raigad district under the fourth round of Petroleum and Natural Gas Regulatory Board (PNGRB) bidding in 2015 and is likely to start operations in the next financial year. 

The project, the company said, is likely to start contributing to the company's total revenues with the start of operations. "The revenues will start coming in within six to eight months from the day we started investing. We have recently started investing in this area," said Rajeev Mathur, managing director, MGL, adding the project will start giving dividends from the next financial year. MGL will execute the Raigad project for a total capital expenditure of Rs 50-100 crore annually for 4-5 years time. 
 

Mathur expects the Raigad project to see a demand of about 0.5 million cubic metres per year of gas. This compares to a demand of 2.5-2.8 million cubic metres seen by the company in the Mumbai region at present. "If Raigad further develops as envisaged as a smart city, this demand projection will then increase by several times," Mathur added. 

"While Raigad has significant longer-term potential from the'smart city' policy, planned townships, international airport, and theTrans-Harbour Link, in the near term, MGL has identified 6-7 industrial clusters accessible to the gas grid that can be tapped quickly through a concentrated network," analyst Sabri Hazarik from Phillip Capital wrote in a research note on MGL. 

MGL, Mathur added, is also keen to further expand in two more cities in India and is open to collaborating with other smaller city gas providers to execute similar projects. In a bid to take advantage of the current slump in gas prices, MGL will also replace some of its medium term natural gas sourcing contracts with longer duration contracts. 

"Looking at the trends we will look at two-three year contracts, some of our medium term contracts are nearing the end, for which we will go for three years contracts. Medium term (currently) will be at one to two years, which we will extend to a larger tenure of two to three years," Mathur said. 

He added the company is hopeful to sign these contracts at better prices as he expects gas prices to remain subdued for another two- three years time. MGL sources 15% of its natural gas requirement from the international market. For its Mumbai market, the company plans to increase its current customer base in the Piped Natural Gas (PNG) business by 1.35 lakh and looks to add another 1.50 lakh customers in the next year. 

At present, MGL has around 8.86 lakh customers in the PNG segment. The city gas distributor also looks to expand its compressed natural gas (CNG) retail network, by adding another 20-25 new stations. "Half of these would be with oil marketing companies," Mathur said. 

At present, the company operates from 192 stations, of which 130 are co-located with oil marketing companies. Mathur expects a 7% to 8% growth in terms of reach and a little higher in monetary terms for the CNG and PNG business going forward. 

"At what rates weare able to source the gas will determine the monetary margins," Mathur said. Onan annual basis, the company is spending Rs 200 crore to expand its network in Mumbai and adjoining areas. To increase CNG consumption in the city, MGL also plans to kick start a pilot project topromote CNG fuelled two-wheelers in the city. 

"Within a month or two, we will launch around 100 CNG fitted two wheelers and will support anybody who helps us to run two wheelers on CNG," Mathur said. MGL plans to approach food retail chains that operate two-wheeler delivery fleets for the initiative.

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First Published: Sep 19 2016 | 12:19 AM IST

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