Mahanagar Gas IPO review – Worth investing ?

Mahanagar Gas Limited

Mahanagar Gas Limited are one of the largest city gas distribution (“CGD”) companies in India to go public. It’s ready to hit the market with its Initial Public Offering(IPO) on June 21st. The firm distributes CNG for the use of vehicles and PNG for domestic, commercial and industrial use too.  The Mahanagar-Gas-IPOcompany aims to raise around Rs 1,040 crore by offering shares at Rs. 380 – Rs. 421 Per Equity Share.

About Company:-

Mahanagar Gas Ltd. established on May 8, 1995 at Mumbai. They are one of the city gas distributions (“CGD”) company in India and have more than 20 years of experience in supplying natural gas in Mumbai. They are at present the sole authorised distributor of compressed natural gas (“CNG”) and piped natural gas (“PNG”) in Mumbai and its Adjoining Areas. They distribute CNG and PNG, CNG for motor vehicles while PNG for domestic, commercial and industrial use.

Company supply CNG to over 4.3 lakhs vehicles through their network of 180 CNG filling stations, and provide PNG connection to approximately 8.2 lakh domestic households, over 2,600 commercial and 55 industrial consumers in Mumbai and its adjoining Areas.

Their CNG and PNG businesses accounted for 73.91% and 26.09%, respectively, of the total volume of natural gas sold, and 70.71% and 29.29%, respectively, of their total gas sales revenue.

They have exclusive authorisation to lay, build, expand and operate the CGD network in accordance with the Petroleum and Natural Gas Regulatory Board so that they can distribute natural gas through an extensive CGD network of pipelines.

Their network of steel pipelines and polyethylene pipelines together with other infrastructure, such as district regulator stations (“DRSs”), enables them to deliver reliable and uninterrupted natural gas to their CNG and PNG consumers.

MGL Distribution Networks:-

  • City Gate Station: – They have four CGSs, where the natural gas is received, filtered, metered, pressure regulated, and odorised. Each CGS facility includes filters, knock out drums, pressure regulators, safety valves, natural gas flow meters, isolation valves, flow control valves, control instrumentations and odorising system
  • CNG Filling Stations: – The natural gas received at the CNG filling stations is compressed up to a pressure of around 250 bars, which is the optimum threshold for supplying natural gas to vehicles. The CNG filling station is designed for the size and number of compressors and dispensers.

Company Promoters:-

  • GAIL (India) Limited
  • BG Asia Pacific Holdings Pte. Limited

Both parties hold 49.75% stake while the government of Maharashtra holds close to 0.5% ownership.

Mahanagar IPO details

Mahanagar_IPO

Their Strategy:-

  • Increase penetration in Mumbai, its adjoining Areas and supply gas in the Raigad district
  • Further development of infrastructure in existing areas
  • Continue to source reliable and cost effective natural gas from multiple vendors
  • Seeking opportunities for growth in new markets.

Competitive Strengths:

1.Well positioned in Mumbai which is one of the most populous city in the world and second largest metropolitan city in India.
2. Cost effective availability of domestic natural gas
3. Infrastructure exclusivily and established infrastructure network
4. Experience in successful development and operation of city gas distribution business.
5. Promoters with strong national and multinational experience
6. Strong financial performance with consistent growth and profitability

Financials:-

Mahanagar_financial

Mahanagar Gas Ltd. is a firm which have positioned in city Mumbai, their growth is keep on going decently. Revenues of MGL have raised at an average rate of 18.8% over the last four years.Profit earn by company is in a steady state as they are growing step by step and profit is raising slowing. Based on 2016 earnings estimates, MGL trades at a P/E of 13.5 while another comparable company, Indraprasth Gas Ltd (IGL) operate at a multiple of 20.5 times, while both of them are in similar business, as per the note of IIFL Private Wealth Management.

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