MGL in wait and watch mode for further price hikes; says co passing on LNG rate increase to customers

Mahanagar Gas is in focus after the company recently hiked CNG prices by Rs 4 per kg. This is the third hike we have seen in the last six weeks as global prices continue to remain high.

In an interview with CNBC-TV18, Rajesh Patel, CFO at Mahanagar Gas, shed light on the price hikes and the outlook.

He said, “LNG prices have been rising since July, from $12 to almost $20-25 per MMBtu now. In last six weeks, MGL has taken three price hikes. First two price hikes were on October 5th and the other was on the 14th of the same month. It was to mainly to cover the APM gas price announced by government from October 1.”

On any further price hikes, Patel said that whatever was taken is sufficient for some time, but the company will have to observe how things move.

On margins, he said, “In case of industrial and commercial customers, company has been following the philosophy of pricing the customers based on the alternate fuels and so, link to pricing will be done in the case of the industrial and commercial sector and the risk of the gas price change is on the company. "

"However, there is an enabling provision in the contract during such time to increase the premium link to the alternate fuel. So we have been taking enough steps to recover the current increase in the LNG prices. So to that extent, we are protecting our margins and with this passthrough we have been protecting our margins for the priority sector as well,” Patel mentioned.

On volumes, he said, “During the first half of the year due to COVID, allocations from the government were lower. Since more than expected growth came in from the month of May just after the lockdown was eased out, the volume pick-up with respect to CNG was quite high."

"If you look at our volumes in Q2, we have clocked almost 30 percent overall increase in volumes and within CNG, it was a growth of around 44 percent over Q1,” Patel mentioned.

On-demand, he said, “Volumes in the industrial and commercial category have been showing an upward trend and there is a good amount of demand and pick up even at this price. So, I don't think there is a reduction. If you look at our Q2 numbers, be it industrial, commercial or small restaurant category, everywhere there is an increase in the volume compared to the earlier quarter.”