Mahanagar Gas Q2 FY27 Earnings Call: Guides 8-9% Volume Growth, HPHT Supply To Triple By FY28 (MGL)

Mahanagar Gas Ltd held its Q2 FY27 earnings call on November 03, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Volumes Up, Profitability Down Sequentially

• Overall sales volume +6.49% YoY to 4.89 MMSCMD — CNG +9.14% YoY to 3.55 MMSCMD and domestic PNG +9.84% YoY to 0.64 MMSCMD; industrial & commercial fell -7.48% YoY to 0.70 MMSCMD, attributed mainly to supply restrictions and higher Brent.
• QoQ volumes +2.63% to 4.892 MMSCMD — CNG +1.63%, domestic PNG +2.62%, and I&C +8.07% QoQ in Q2 FY 2026-2027.
• EBITDA from operations at Rs.287 crore vs Rs.343 crore in Q1 FY 2026-2027; PAT at Rs.137 crore vs Rs.194 crore QoQ.
• H1 FY 2026-2027 EBITDA at Rs.630 crore vs Rs.839 crore in H1 FY 2025-2026; H1 PAT at Rs.331 crore vs Rs.513 crore YoY.
• Deputy MD Ajay Sinha said results were better than market expectations — the company is currently growing at almost 9-10% in sales volume.
• Management flagged that quarterly numbers are not a reflection of long-term trends or an indication of full-year results.

HPHT Formula Restoration Is the Key Supply Catalyst

• A circular changed the HPHT gas allocation formula in favour of larger CGD entities — creating a sudden vacuum for smaller entities and forcing spot purchases in Q2 FY 2026-2027; the formula was reconsidered and retained, and is being phased back in up to June.
• Phase-in schedule: 25% new formula in November-December (Q3 FY 2026-2027), 50% over the next 3 months, 75% thereafter, and 100% from July (FY 2027-2028).
• HPHT volumes expected to step up to 7,000-8,000 MMBTU/day in Q3 FY 2026-2027 from 5,000-6,000 MMBTU/day currently, with +2,500 MMBTU/day added at each subsequent step through Q1 FY 2027-2028.
• Full run-rate of 16,000-18,000 MMBTU/day expected in FY 2027-2028 (from July 2027) — 3-3.5x current levels — conditional on monthly HPHT spot-sale quantities via IGX remaining at similar levels.
• New term LNG contract of 40,000 MMBtu signed — supply already commenced in FY 2026-2027; pricing is a blend of a smaller Brent-linked quantity and a higher Henry Hub-linked quantity; management declined to disclose the counterparty.
• Spot sourcing stayed minimal in Q2 FY 2026-2027 — pure spot RLNG was ~4% of CNG volumes and ~2.5% of total volumes; including HPHT spot via IGX, spot share was ~11% of CNG volumes, with spot LNG prices around $22-23.
• Management is tying up more term LNG than its requirement in FY 2026-2027 — given supply restrictions in the range of 70%, sometimes 80%; majority of contracts carry take-or-pay thresholds, giving leverage to switch between spot and term volumes.

CNG Unit EBITDA Slightly Below Rs.7/SCM; Guidance Withheld

• Q2 FY 2026-2027 CNG unit EBITDA at ~Rs.6.77/SCM — slightly below the Rs.7/SCM level; management indicated a CNG price hike of Rs.1-1.5 (considering tax at 25%) would make Rs.7/SCM achievable in FY 2026-2027, if everything else remains unchanged.
• Management declined to give unit EBITDA margin guidance for FY 2026-2027 and FY 2027-2028 — citing volatility beyond company control (RLNG supply levels and potential cuts to signed term contracts); partial protection via term contracts and conversion of some index-based contracts to fixed.
• Q2 opex elevated on two counts — higher volume-linked costs (power & fuel, LCV transportation, dispensing charges) not fully recovered at current margins, plus a one-time actuarial valuation impact of ~Rs.10-12 crore from the July increment cycle salary revision, expected to be much lower in Q3 FY 2026-2027.
• CNG priced at ~45% discount to petrol and 10-11% discount to diesel in FY 2026-2027 — a relative discounting that has held for a very long time, with roughly 5% movement depending on the timing of petrol/diesel revisions versus MGL's own price changes.
• On NWG allocation, management has been representing to the government for priority NWG allocation to CNG transport but has no visibility on implementation; management noted NWG prices are currently not much different from RLNG/term contracts, so "there is a need to do something on NWG."

Industrial Curtailment Drags; Commercial Grows

• I&C volumes fell -7.48% YoY in Q2 FY 2026-2027 — the decline is confined to industrial volumes; commercial volumes (small restaurants otherwise consuming 19 kg LPG bottles) actually grew ~9-10% in the recent period of FY 2026-2027.
• Industrial volume cut attributed to supply restrictions in Q1 FY 2026-2027 and RMG supplies restricted in the range of 70% in Q2 FY 2026-2027; high Brent prices, with MGL's pricing formula linked to alternate fuel pricing, made customers cautious.
• Signed DCQ customer base has not gone down and has in fact increased — management stated industrial volumes will bounce back by more than double digit once the situation normalizes (period unspecified).
• Volume mix: ~22% of INC volumes from smaller customers, ~78% from industrial/larger customers as of Q2 FY 2026-2027; management does not maintain a customer-count bifurcation.
• INC realization ranged between 65 and 100 (at times above 100) in Q2 FY 2026-2027 — reset monthly depending on consumer type, fuel combination billed, and Brent; commercial customers billed on 19kg LPG cylinders saw realization rise ~25% QoQ, tracking LPG cylinder prices up >25% vs Q1 FY 2026-2027, while FO/LDO-billed realization declined as those fuel prices fell ~6-15% QoQ.
• Alternate-fuel-based pricing applies to 100% of INC customers — "no change as of now"; some customers are partially linked to LDO and part to FO rather than a single alternate fuel.

Rs.1,500-1,800 Cr Capex Guidance Maintained; FCF Negative

• Q2 FY 2026-2027 build-out: 70,501 DPNG conversions (cumulative 2.24 million as of 30 September 2026); 65 km of steel/PE pipeline laid (network >8,500 km); 9 CNG stations added (528 total); 248 I&C customers added (6,409 total); 29,524 CNG vehicles added (>1.34 million registered in MGL geographies).
• FY 2026-2027 capex guidance maintained at Rs.1,500-1,800 crore despite H1 capex of ~Rs.643 crore; H1 run-rate is seasonally lower as pipeline-laying permissions are unavailable from mid-May to October (monsoon).
• Management flagged industry-wide CGD pressure on manpower and material availability as peers scale up simultaneously, constraining its ambition to do more capex and capture market share; guidance maintained at Rs.1,500 crore+ for FY 2026-2027.
• FCF expected negative in FY27 and FY28 by ~Rs.200-300 crore — but management said debt "may not be warranted," citing partial funding via customer deposits, current cash surplus of ~Rs.1,000 crore, and expected annual operating cash inflow of Rs.1,000-1,200 crore (FY27-FY28 context).
• Large CV incentive scheme: 800+ vehicles registered and committed as of the Q2 FY 2026-2027 call; ~110 delivered so far with incentive expense of ~Rs.3.5-4 crore in Q2 FY 2026-2027 at ~Rs.3.5 lakh per vehicle; balance of ~700-800 vehicles pending delivery.
• Incentives target larger fleet vehicles above 10 tons — LCVs are no longer incentivized because those models already sell on CNG with strong market share; an analyst-cited run-rate of ~600-700 CNG CV additions per month (up from ~300-400) was not addressed directly by management.

Volume Growth Guidance Contingent on Supply Normalization

• Management guided volume growth of more than 8-9% for both FY27 and FY28 (FY 2026-2027 and FY 2027-2028), contingent on restoration of gas availability/pricing and normalization of industrial offtake under signed contracts.
• Deputy MD Ajay Sinha hopes to maintain the ~9-10% sales volume growth rate in FY 2026-2027 and FY 2027-2028 — characterized as aspirational, not a firm commitment.
• H1 FY 2026-2027 company-level volumes grew ~6.75% versus the prior half — CNG and domestic grew ~9.5% and small commercial ~12%, with the shortfall driven by curtailment of industrial supplies amid the West Asia crisis.
• Management expects gas prices may remain volatile in the near term but gradually decline as geopolitical tensions ease; MGL sources 100% of its domestic PNG requirement and the major portion of CNG requirement from domestically produced gas.
• Imported LNG supply into India has seen plus/minus variability despite term contracts with all suppliers — this will determine whether MGL may have to fall back on spot for an interim period; the strategy is to keep spot dependence minimal.
• No sourcing mix quantified for the next 2-3 years (FY 2027-2028 onward) — management signs small tranches of term contracts as its sales volume base stabilizes and buys spot only for peaking requirements.