💰 Financial Performance

Revenue Growth by Segment

Total revenue for Q2 FY26 stood at INR 3,979 Cr, a marginal increase of 0.76% from INR 3,949 Cr in Q2 FY25. Segmentally, CNG volumes grew 13.3% to 3.32 MMSCMD, while PNG-Industrial volumes declined 11.4% to 4.35 MMSCMD due to competition from cheaper propane. PNG-Domestic volumes increased 9.2% to 0.83 MMSCMD.

Geographic Revenue Split

The company holds a dominant market position in Gujarat, the largest natural gas-consuming state in India, with 27 CGD licenses spread across 44 districts. While specific regional revenue percentages are not disclosed, operations are concentrated in Gujarat with expansion into newly awarded Geographical Areas (GAs) across India.

Profitability Margins

Net Profit Margin moderated to 6.67% in FY25 from 7.01% in FY24. For Q2 FY26, Profit After Tax (PAT) was INR 281 Cr, down 8.5% from INR 307 Cr in Q2 FY25, primarily due to a 51% shortfall in lower-cost APM gas allocation which increased procurement costs.

EBITDA Margin

EBITDA for Q2 FY26 was INR 520 Cr, down 6% from INR 553 Cr in Q2 FY25. EBITDA margin per SCM decreased to 6.54 in Q2 FY26 from 6.86 in Q2 FY25. The company has provided a forward-looking EBITDA margin guidance of 4.5 to 5.5 per SCM for FY26 to account for volatile gas costs.

Capital Expenditure

Planned capital expenditure is estimated between INR 800 Cr and INR 1,200 Cr annually for the next three years. This investment is dedicated to developing CGD networks in new GAs and reinforcing existing infrastructure in operational areas like Morbi.

Credit Rating & Borrowing

The company maintains a 'CARE AAA; Stable' and 'CRISIL AAA/Stable' rating. It is currently debt-free with nil outstanding loans as of September 30, 2024. It has unutilized fund-based working capital limits of INR 613 Cr, indicating zero borrowing costs on long-term debt.

⚙️ Operational Drivers

Raw Materials

The primary raw material is Natural Gas, categorized into Administered Price Mechanism (APM) gas, New Well Gas, HP/HT gas, and imported Re-gasified Liquefied Natural Gas (RLNG). APM gas is the lowest cost, but the company faced a 64% shortfall in CNG segment allocation in Q2 FY26.

Import Sources

Raw materials are sourced domestically from Indian gas fields (APM/New Well gas) and imported as RLNG from international markets through various terminals, though specific country splits are not disclosed.

Key Suppliers

Major suppliers include GSPC (Gujarat State Petroleum Corporation), which is also the parent entity. Other sources include domestic producers like ONGC and various international spot market vendors for RLNG requirements.

Capacity Expansion

Current infrastructure includes 830 CNG stations and 23.02 lakh PNG connections as of June 30, 2025. Expansion is focused on adding new stations and domestic connections within its 27 licensed GAs to drive volume growth.

Raw Material Costs

Raw material costs are highly sensitive to the gas mix; a 51% shortfall in priority sector APM gas in Q2 FY26 forced the company to source costlier spot and long-term RLNG, which typically represents over 80% of total operating expenses.

Manufacturing Efficiency

Operational efficiency is tracked via volume throughput; total volumes were 8.65 MMSCMD in Q2 FY26. The company maintains high efficiency through integrated SAP systems and a robust pipeline network.

Logistics & Distribution

Distribution is primarily through a pipeline network. The company is expanding its 'FDODO' (Full Dealer Owned Dealer Operated) station model to reduce the capital intensity of the CNG distribution network.

📈 Strategic Growth

Expected Growth Rate

5%

Growth Strategy

Growth will be driven by the proposed merger with GSPC and GEL to integrate the value chain, aggressive expansion of the CNG station network (830 currently), and a new strategy to market propane to industrial customers to recover the 11.4% volume loss in the industrial segment.

Products & Services

Compressed Natural Gas (CNG) for vehicles, Piped Natural Gas (PNG) for domestic cooking, PNG for commercial use (hotels/restaurants), and PNG for industrial fuel (ceramic clusters).

Brand Portfolio

Gujarat Gas Limited (GGL).

New Products/Services

The company is introducing propane marketing to existing industrial clusters to provide a multi-fuel offering and protect its market share against alternative fuel suppliers.

Market Expansion

Expansion is targeted across 44 districts in 6 states and 1 Union Territory, focusing on completing Minimum Work Program (MWP) targets in newly awarded GAs to avoid PNGRB penalties.

Market Share & Ranking

GGL is India's largest CGD company by gas sales volume and the leading player in Gujarat.

Strategic Alliances

The most significant strategic move is the 'Scheme of Arrangement' involving the merger of GSPC, GGL, and GSPL to create a massive integrated energy entity.

🌍 External Factors

Industry Trends

The CGD industry is shifting toward higher reliance on non-APM gas (HP/HT and New Well gas) as domestic production remains limited. Regulatory trends favor higher APM allocation for CNG/PNG, as recommended by the D.K. Saraf committee.

Competitive Landscape

Key competition comes from alternative fuels like propane and fuel oil in industrial segments. In the CGD space, GGL is the dominant player in its authorized GAs.

Competitive Moat

The moat is built on 'Infrastructure Exclusivity' and 'Marketing Exclusivity' granted by PNGRB, creating high entry barriers. This is sustainable due to the massive capex (INR 1,000 Cr+ annually) required for competitors to replicate the pipeline network.

Macro Economic Sensitivity

Highly sensitive to global Brent crude and spot LNG prices; Brent spot average trended from $82.86 in Q1 2024 to $60.00 projected for Q3 2026, which influences the competitiveness of natural gas.

Consumer Behavior

Industrial consumers are highly price-sensitive and exhibit 'fuel switching' behavior, while CNG consumers are driven by the price differential between gas and liquid fuels (petrol/diesel).

Geopolitical Risks

Geopolitical tensions in the Middle East or Russia-Ukraine can disrupt LNG supply chains and spike spot prices, directly impacting the 51% of gas requirements not covered by APM allocation.

⚖️ Regulatory & Governance

Industry Regulations

Regulated by the Petroleum and Natural Gas Regulatory Board (PNGRB), which controls GA authorizations, marketing exclusivity periods, and network exclusivity. Changes in APM gas allocation policy by the Ministry of Petroleum and Natural Gas (MoPNG) are a critical regulatory risk.

Environmental Compliance

The company obtained 'BRSR Reasonable Assurance' on core indicators. ESG initiatives are integrated into operations, though specific compliance costs in INR are not itemized.

Taxation Policy Impact

The company operates under standard Indian corporate tax rates; effective tax rate is reflected in the difference between PBT (INR 378 Cr) and PAT (INR 281 Cr) for Q2 FY26, approximately 25.6%.

Legal Contingencies

The company states there are no significant material orders passed by regulators or courts that would impact its status as a going concern.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of the APM gas allocation (currently a 51% shortfall in priority segments), which can swing EBITDA margins by 15-20% depending on spot RLNG prices.

Geographic Concentration Risk

High concentration in Gujarat; while it provides a 'first-mover' advantage, it exposes the company to regional economic shifts, particularly in the ceramic industry of Morbi.

Third Party Dependencies

Significant dependency on GSPC for gas procurement and the government for APM gas pricing and allocation.

Technology Obsolescence Risk

Low risk of physical tech obsolescence, but the company is mitigating digital risks through cyber security policies and SAP integration.

Credit & Counterparty Risk

Low risk; debtors turnover ratio of 15.01 indicates efficient collections. Most CNG sales are on a cash-and-carry basis, and industrial customers are typically billed on short cycles.