Mahanagar Gas Limited (MGL) IPO review.

Dear Friends,

Mahanagar Gas Limited (MGL) IPO is open for subscription in the price band of INR380-421 per share between 21 and 23 June 2016. Applications can be made for 35 share and in multiples thereafter.

Mahanagar Gas supply natural gas in Mumbai and its surrounding areas. Company is the only authorized distributor of Compressed Natural Gas (CNG) for Vehicles and Piped Natural Gas (PNG) for Domestic and industrial use in Mumbai.
The company has a network of more than 180 CNG filling stations and PNG connections to approximately 0.86 million domestic households, over 2,866 commercial and 60 industrial consumers in Mumbai and its adjoining Areas. 

 Objective of the Issue:

1.   To achieve the benefits of listing the Equity shares on the stock exchanges.

2.   To carry out the Offer for Sale.
Company will not receive any proceeds from the offer and all proceeds from the Offer shall go to the selling shareholder.

Share holding Pattern in MGL
MGL’s consolidated financial performance (in Million Rupees)
FY2012
FY2013
FY2014
FY2015
FY2016
Total revenue
13,090.3
15,143.8
18,851.5
20,949.3
20,789.3
Total expenses
8,744.3
11,038.8
14,778.6
16,863.4
16,529.8
Profit/(loss) after tax
3,077.4
2,985.1
2,972.5
3,010.0
3,086.9
Net margin
23.5
19.7
15.8
14.4
14.8


The company's total revenue has grown at a compound announce growth rate (CAGR) of 12.42 per cent to Rs 2,121.62 crore in FY16 from Rs 1,328.34 crore in FY12. Profit after tax (PAT) has risen 0.08 per cent on an annualized basis to Rs 308.68 crore in FY16 from Rs 307.74 crore in FY12.

Reasons to invest in company
1.    Based on the earnings of INR 31.36 per share in FY 2016, Mahanagar Gas IPO P/E comes to 13.xx times. If we compare this with the P/E of 20.xx of Indraprastha Gas Limited (IGL) and 21.xx of Gujarat Gas Limited (GGL). MGL seems to be placed brilliantly.
2.    MGL has regularly paid dividends for past years. Having a dividend yield of around 3.8% makes it an attractive bet.
3.    Revenues steadily grown for this company.

Concerns to avoid this IPO
1.     Removal/reduction of gas allocation under priority basis
2.     Increase in cost effectiveness of alternate fuels
3.     Natural gas marketing exclusivity
4.    Conflict with third party that owns and operates CNG filling stations



Based on the above pros and cons, my personal opinion is, MGL IPO is a good bet to invest money. But still, I would recommend you all to do a thorough research and contact your adviser before investing any money. Due diligence before investment is strongly recommended.  

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