GUJGASLTD - Gujarat Gas Limited Share Price

Gujarat Gas Limited's management outlook for FY '26 is cautiously optimistic, with a projected growth of 12% in CNG volumes and stability in the domestic and commercial segments. The company reported a total volume of 9.62 mmscmd for FY '25, a near 3% increase over the previous fiscal year. The CNG segment particularly highlighted an 8% year-on-year growth in sales in Gujarat and 28% growth in sales outside Gujarat, totaling an all-time high of 3.56 mmscmd for Q4 FY '25.

In terms of financial performance, Gujarat Gas recorded a revenue from operations of INR 4,289 crores for Q4 FY '25, nearly flat compared to INR 4,294 crores in the same period last year. EBITDA for the same quarter was registered at INR 524 crores, down from INR 622 crores in Q4 FY '24, leading to a PAT of INR 287 crores, compared to INR 410 crores a year ago. For FY '25, the EBITDA remained resilient at INR 2,090 crores, up from INR 1,984 crores the previous year.

Management noted that the capex guidance for FY '26 is set at approximately INR 1,000 crores, with a specific focus on expanding the gas infrastructure and digital transformation across operations. Furthermore, the merger and demerger processes are expected to enhance operational efficiencies. While the APM gas allocation is under pressure, a new sourcing strategy is being developed to mitigate potential impacts on profitability.

Key forward-looking points include:

1. Capex plans of INR 1,000 crores for FY '26.
2. Continued double-digit growth in CNG volumes anticipated, with an expected growth of 12%.
3. Production in Morbi expected to stabilize around 2.6-2.7 mmscmd, contingent on broader market conditions.
4. Hopes for a favorable outcome from ongoing negotiations related to gas sourcing contracts.
5. Expected completion of the merger by September/October 2025, which could significantly enhance sourcing efficiencies.

Major Questions and Answers from the Earnings Transcript

1. Question from Probal Sen:
Can we get a little bit of a detail on the sourcing mix on the overall volume, how much is coming via term LNG?

Answer:
For the sourcing breakdown, about 25% of our gas comes from APM, totaling 2.3 mmscmd. Long-term contracts account for approximately 35%, contributing to 3.3 mmscmd, while short-term contracts, including IGX and spot gas, make up about 40%, totaling 3.77 mmscmd.

2. Question from Yash Nandwani:
What is the outlook on Gujarat gas volumes in Morbi for FY '26, and how are they trending in the first quarter of FY '26?

Answer:
Currently, we are handling around 2.6 to 2.7 mmscmd in Morbi, and we don't see a significant increase in volumes for the current quarter. The spot and propane prices have decreased, leading us to project stable volumes in the near term.

3. Question from Amit Murarka:
What are the numbers for gas sourcing, for various contract types, especially concerning the APM?

Answer:
In our sourcing for Q4, APM gas amounted to about 2.3 mmscmd. Long-term contracts contributed around 3.3 mmscmd, while short-term contracts, including spot LNG, accounted for 3.77 mmscmd.

4. Question from Yogesh Patil:
What is the current status of the scheme of arrangement involving GSPC?

Answer:
The scheme was approved by our Board in August 2024 and subsequently filed with the Ministry of Corporate Affairs in February 2025. We expect the final MCA approval and finalization around September to October 2025.

5. Question from Deepak Malhotra:
How do you foresee the overall profitability of the business if APM allocation changes?

Answer:
While the APM changes may affect margins, we believe that through the merger with GSPC, we are positioned well to manage sourcing better. We will focus on increasing volumes, leading to sustainable profitability despite any challenges related to APM reductions.

6. Question from S. Ramesh:
Are you seeing any losses from new geographical areas, and when will they break even?

Answer:
The new areas require significant infrastructure investment, typically taking around 3-4 years to break even. At this point, we are not booking losses at the profit-before-tax level; we view these investments as essential for future growth.

7. Question from Varatharajan:
Are you anticipating new units or volume growth in Morbi?

Answer:
Yes, we are seeing new units emerge in Morbi, with at least nine new units confirmed. However, the overall volume growth specifics depend on broader market conditions, particularly concerning propane and LNG prices.

These questions reflect the strategic and operational strategies Gujarat Gas is employing to maintain growth and manage costs amid a dynamic gas market.