BPCL, GAIL & IGL JV Maharashtra Natural Gas Likely To Launch Rs 1,000 Crore IPO Next Fiscal; Reports

Maharashtra Natural Gas Limited (MNGL), a joint venture of Bharat Petroleum Corporation (BPCL), GAIL India, and Indraprastha Gas Limited (IGL), is gearing up for its initial public offering (IPO) in the upcoming financial year, as per a report by The Economic Times. The IPO, expected to raise over Rs 1,000 crore, marks a significant step for MNGL, one of India's most profitable city gas distribution (CGD) companies.

According to a report by The Economic Times, the IPO will include both a fresh issue and an offer for sale (OFS). The OFS component will see IGL, the largest stakeholder with a 50% share, partially offloading its holdings. BPCL and GAIL hold 22.5% each, while the Maharashtra Industrial Development Corporation (MIDC) owns the remaining 5% stake.

Board Approval for Listing

The MNGL board has already granted in-principle approval for the listing. The company is now in the process of selecting book-running lead managers to guide the IPO process, stated the report further citing sources.

A senior official cited in the report highlighted, "MNGL is the most profitable joint venture we have, and we plan to unlock value for investors. The proceeds from the IPO will be used to expand operations in new regions."

Expanding Operations

MNGL, headquartered in Pune, caters to Pune, Pimpri-Chinchwad, and nearby areas. It is also expanding its footprint into districts in Maharashtra, Karnataka, and Telangana. The company provides compressed natural gas (CNG) for vehicles and piped natural gas (PNG) for domestic, commercial, and industrial consumers.

As of FY24-end, MNGL had installed 246 CNG stations, det up 846 industrial and commercial connections, and reached 858,000 domestic PNG connections. The IPO proceeds are expected to fuel further expansion in these areas.

Financial Performance

MNGL's strong financial performance shows its profitability and growth potential, with revenue reaching a record-high of Rs 3,001.88 crore in FY24. The company's EBITDA grew by 41% year-on-year (YoY) to Rs 961.53 crore, while net profit surged 45% YoY to Rs 610.12 crore. Additionally, earnings per share (EPS) stood at Rs 61.01

IPO & Market Position

MNGL's listing will make it the sixth pure-play CGD company on Indian stock exchanges. It will join the ranks of established players like Adani Total Gas (market capitalization: Rs 79,983 crore), Gujarat Gas (Rs 35,386 crore), and Indraprastha Gas (Rs 30,884 crore).

With the planned IPO, MNGL aims to enhance its market visibility and attract investor interest, leveraging its strong financial performance and growth potential.

Challenges in the CGD Sector

Despite its growth prospects, MNGL's IPO comes at a time when the CGD sector is grappling with challenges like:
Gas Supply Cuts: The government has reduced gas allocation under the administered price mechanism (APM) due to declining production from older fields. CGDs now face a 20% cut in gas supply, impacting operations.
Higher Costs: To compensate for the reduced APM gas, CGDs are sourcing costlier non-APM gas or imported liquefied natural gas (LNG), leading to price hikes.

Increased CNG Prices: City gas retailers have raised CNG prices by Rs 2-3 per kg, passing on the higher costs to consumers.