Summary
Gujarat Gas Limited - Q3 FY26 Earnings Call Summary Wednesday, January 21, 2026 4:00 p.m. IST
Event Participants
Executives Devendra Agarwal (Executive Director – Commercial), Dipen Chauhan (Head of Industrial Marketing and Business Development), Rajesh Sivadasan (CFO and Head of Investor Relations), Sandeep Dave (Company Secretary and Head of Corporate Communications)
Analysts Achal Shah, Amit Murarka, Hardik, Lokesh Manik, Maulik, Mayank Maheswari, Probal Sen, Sabri Hazarika, Somaiah V., Yogesh Patil
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹3,865 crores | -10.8% YoY from ₹4,333 crores; impacted by lower industrial volumes and price cuts. |
| EBITDA | ₹502 crores | +14.4% YoY; margin improvement offset the decline in industrial volumes. |
| Profit After Tax (PAT) | ₹266 crores | +19.8% YoY from ₹222 crores; driven by better margin management and lower spot costs. |
| EBITDA Margin | ₹6.5 per SCM | +28.9% YoY from ₹5.04 per SCM; supported by pricing strategy and sourcing mix. |
| Total Sales Volume | 8.37 MMSCMD | Significant contraction in Morbi industrial volumes due to propane competition. |
| Industrial Volume | 3.93 MMSCMD | -10% QoQ; Morbi fell to 1.6 MMSCMD while non-Morbi grew 1% QoQ to 2.25 MMSCMD. |
| CNG Sales Volume | 3.46 MMSCMD | +11% YoY; Gujarat growth at 9% and outside Gujarat at 22%. |
| Domestic Connections | 23.83 lakhs | Added 38,600 new connections in Q3 FY26. |
| Capex (9M FY26) | ₹408 crores | On track for full-year target of ₹650-₹700 crores. |
Geographic & Segment Commentary
- Morbi Industrial: Volumes saw a substantial contraction, decreasing from 3.35 MMSCMD in Q3 FY25 to 1.6 MMSCMD this quarter. The decline was driven by propane trading at a significant discount to natural gas. Management implemented a ₹4.50/SCM price cut effective Jan 1, 2026, to narrow the premium to ₹2.40/SCM and recover volumes.
- Non-Morbi Industrial: Volumes grew 7% YoY to 2.25 MMSCMD despite seasonal Diwali slowdowns. Focus remains on connecting new industrial hubs in Ahmedabad Rural, Dahej, Kutch, and Thane. Infrastructure expansion is ongoing to tap into these maturing markets.
- CNG (All India): Sustained double-digit growth of 11% YoY supported by a vehicle base increase of 14% to 16.94 lakh vehicles. Areas outside Gujarat grew faster at 22% due to a lower base. The segment benefits from CNG being 45% cheaper than petrol.
Company-Specific & Strategic Commentary
- Corporate Restructuring: The scheme of arrangement with GSPC and GTL is in the final stages with a Ministry of Corporate Affairs (MCA) hearing expected in mid-February. Completion and relisting are anticipated by end of April 2026.
- Propane Strategy: GGL is entering the propane market to retain industrial customers who prefer alternate fuels. The company is reserving unloading and storage capacity at ports to offer propane directly, leveraging existing financial securities and credit lines.
- Digitization & AI: Engaged McKinsey & Company as strategic consultants for expansion. Initiating a major technology overhaul involving AI-powered analytics for ERP, centralized SCADA systems, and advanced metering infrastructure for industrial billing.
- Infrastructure Expansion: Implementing the FDODO (Franchisee-Deemed-Owner-Dash-Owner) model to accelerate CNG station rollout. Signed 78 FDODO agreements with a goal to cross 1,000 total CNG stations in the next 2-3 years.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| EBITDA Margin | ₹5.5 - ₹6.5 per SCM | FY26 full-year range; management aims to balance volume growth with sustainable margins. |
| Capex | ₹650 - ₹700 crores | Budgeted for FY26 to expand steel pipeline network and CNG infrastructure. |
| Morbi Volumes | 3.0 - 3.2 MMSCMD | Target for Feb-March 2026 following price cuts and rising propane costs. |
| Sourcing Mix | 60% - 70% Long-term | Target by end of FY27 to reduce reliance on volatile spot RLNG markets. |
| CNG Growth | 13% CAGR | Targeted growth rate driven by new station additions and high petrol/diesel spreads. |
Risks & Constraints
| Risk | Context |
|---|---|
| Alternate Fuel Competition | Propane remains a major threat in Morbi; a ₹2.40/SCM natural gas premium persists, requiring favorable Saudi CP movements to neutralise. |
| APM Gas Shortfall | APM allocation shortfall increased to 51% for the priority sector (64% for CNG), forcing higher reliance on spot/long-term gas. |
| Transmission Tariff | New zonal tariffs are currently revenue neutral but could pose a ₹1/SCM margin headwind if industrial volumes surge by ~1 MMSCMD. |
| Regulatory Uncertainty | Open access litigation in Delhi High Court remains pending; while “no coercive action” is in place, the final verdict could impact exclusivity. |
Q&A Highlights
Industrial Pricing & Morbi
- Question: What is the current price differential between gas and propane in Morbi? (Probal Sen)
- Answer: Propane is ~₹38.6/SCM vs Natural Gas at ₹41/SCM. A $25-$30/ton increase in LPG prices would make them neutral. (Management)
- Question: What is the volume recovery trend after the Jan 1 price cut? (Yogesh Patil)
- Answer: Volumes improved from 1.68 MMSCMD in Q3 to 2.2 MMSCMD currently. We expect 3.0-3.2 MMSCMD by February as propane prices rise. (Devendra Agarwal)
Sourcing & Margins
- Question: Why was the gas cost reduction only ₹0.20/SCM despite lower spot/crude? (Yogesh Patil)
- Answer: The portfolio relies only 24% on APM. High-cost long-term contracts (39%) and short-term mix (33%) influenced the blended cost. (Rajesh Sivadasan)
- Question: How will the new transmission tariffs impact gross margins? (Yogesh Patil)
- Answer: At current levels it is neutral, but a 1 MMSCMD jump in industrial volume would create a ₹1/SCM negative impact. (Management)
Infrastructure & Strategy
- Question: What is the status of the station addition via the FDODO model? (Maulik)
- Answer: 78 agreements signed; first Morbi FDODO station commissioned today. Aiming for 10+ this FY and the balance next year. (Management)
- Question: What is the rationale for selling propane? (Somaiah V.)
- Answer: To retain customers using existing credit/security arrangements. No major infra capex needed as we are booking capacity at existing terminals. (Devendra Agarwal)
Key Takeaway
Gujarat Gas reported a resilient Q3 FY26 with PAT growing 19.8% YoY to ₹266 crores despite a challenging industrial environment. The quarter was characterized by a sharp 50% YoY drop in Morbi industrial volumes (1.6 MMSCMD) as customers switched to cheaper propane. Management responded with a ₹4.50/SCM price cut in January 2026, already seeing volumes recover to 2.2 MMSCMD. Conversely, the CNG segment remains a primary growth engine, expanding 11% YoY with a target to reach 1,000 stations in 3 years. Strategically, the company is diversifying into propane trading and aggressively shifting its sourcing mix toward 70% long-term contracts by FY27 to mitigate spot volatility. With the GSPC/GGL merger expected to conclude by April 2026, the company is positioned for a leaner structure. Management maintains an EBITDA margin guidance of ₹5.5-₹6.5/SCM, contingent on balancing industrial volume recovery with rising APM shortfalls in the CNG segment.
Want more insights like this?
Subscribe to get deep dives delivered to your inbox.
More Earnings Summaries
Explore more Q3 FY26 earnings call analyses: