mahanagar gas ltd Management discussions

Global economic overview

The global economy has shown strong performance in CY2022 despite various challenges, including the fight against global inflation, the resurgence of COVID-19 in China, and Russias conflict in Ukraine. Many economies around the world have experienced stronger private consumption, investments, and fiscal support by their respective governments.

The global economy continues to face a serious threat from the Ukraine conflict, particularly in low-income and European regions. Russia has traditionally been a major energy supplier to Europe, which has led to concerns about energy security in the region. The war has also disrupted the import of food and fertilizers, further worsening inflationary pressures in the Eurozone leading to a hike in consumer goods prices. As a result, inflation has remained stubbornly high in the Eurozone, with rates remaining above 10%.

According to IMF projections, global inflation is anticipated to decrease from *8.8 percent in CY2022 to 6.6 percent in CY2023, followed by a further decline to 4.3 percent in CY2024. The projected disinflation is attributed to the declining prices of international fuel and non-fuel commodities as a consequence of weakened global demand. Further, global growth is expected to decline from 3.4 percent in CY2022 to 2.8 percent in CY2023. However, it is expected to recover and increase to 3.0 percent in CY2024.

[*Source- IMF World Economic Outlook Jan 2023]

GDP Growth

Indian economic overview

Despite the challenging conditions brought by the rising inflationary pressures worldwide, India has displayed noteworthy resilience by securing its position as the fifth-largest economy in the world. In contrast to other emerging nations, the Indian economy remained comparatively insulated from global spillovers, such as the Russia-Ukraine conflict.

It is estimated that the Indian economy grew at 7.2%¹ during the FY2022-23 period, despite the existence of high inflationary pressures. The impetus for this growth is expected to come from strong investment activity, augmented by the governments capital expenditure (capex) efforts, as well as buoyant private consumption, particularly among high-income earners.

The Reserve Bank of India has taken steps to rein in inflation by increasingthepolicyinterestrate,therebyretractingitsaccommodative measures. In addition, the financial sector of India continues to remain sturdy, supported by improvements in asset quality.

India has demonstrated a relatively swift recovery from the impact of the pandemic, and going forward economic growth is expected to be bolstered by robust domestic demand and an increase in capital investment. It is anticipated that though the Inflation will reach 6.8% during the FY2023, this level of inflation is not expected to discourage private consumption or weaken the incentive for investment.

Industry overview

Indian oil and gas industry

The Indian Oil and Gas industry is a major contributor to the economic growth and development of the country. The growth in Oil and Gas Industry is attributed to the rising population, urbanization, and burgeoning industrialization, which have collectively resulted in a substantial upswing in energy consumption, thereby generating substantial prospects for the industry.

The net natural gas production reached 33,664 MMSCM in FY2023, while the consumption of natural gas was 59,969 MMSCM. The total value of oil and gas imports for FY2023 amounted to $144 billion², an increase in 27% YoY.

The Government of India has implemented multiple measures to enhance the production of crude oil and gas within the country. These measures include policy initiatives aimed at promoting exploration and production activities, as well as the allocation and awarding of blocks to both national and private exploration and production companies.

Indias Energy Basket in 2021

Indias city gas distribution network

Indias gas distribution network is a critical infrastructure that plays a vital role in meeting the countrys energy needs. The network is primarily focused on the distribution of natural gas, which is an important source for power generation, transportation, and industrial applications. The gas sector in India is regulated by the Petroleum and Natural Gas Regulatory Board (PNGRB), which is responsible for licensing, tariff setting, and overall regulation of the sector.

Indias gas distribution system has undergone significant transformation in recent years, with a focus on increasing access to clean and affordable energy. The Government has implemented several initiatives, including the Pradhan Mantri Urja Ganga project, which aims to provide natural gas to households and industries in eastern India. Additionally, the government has launched the City Gas Distribution (CGD) bidding rounds, which have resulted in the expansion of CGD networks to several new cities across the country.

Covering about 98% of the population 88% geographical area coverage

Further, the government has set a target of increasing the share of natural gas in Indias energy mix to 15% by 2030.³ To achieve this target, the Government has increased the allocation of natural gas to the CGD sector, which includes PNG and CNG distribution. In addition to increasing the allocation of natural gas, the Government has also given priority allocation to CGD of High-Pressure High-Temperature (HPHT) gas.

In 2023, the CGD network encompasses 630 districts, and the total number of D-PNG connections are around 104 lakhs.⁴ The CGD network facilitates supply of cleaner cooking fuel to residences, commercial establishments, and industrial facilities, as well as for transportation purposes. Also, the operational Natural Gas pipeline network in India spans approximately 17,000 km. To ensure that natural gas is easily accessible throughout the country and to promote uniform economic and social progress, it has been proposed to develop an additional 15,500 km of pipelines to complete the National Gas Grid. These pipelines are currently in various stages of development.⁵ The proposed expansion of the National Gas Grid would enable the distribution of natural gas to remote regions, thereby promoting economic growth and development in those areas in line with the Governments objective of promoting inclusive growth and ensuring access to energy across the country.

Pricing Reforms

The surge in global natural gas prices, triggered by the ongoing Russia-Ukraine conflict, had led to record-high prices in India under the administered price mechanism (APM). In response to this situation, the Kirit Parikh committee was formed in 2022 to review the existing pricing formula for domestically produced natural gas. The committees objective was to establish a market-oriented, transparent, and reliable pricing regime that would ensure a fair price for end-consumers and support Indias long-term vision of a gas-based economy and support the goal of meeting 15% of energy demand from gas by 2030. Post submission of Kirit Parikh Committee Report, Government of India issued revised domestic gas pricing guidelines in April 2023. Under the approved guidelines, the APM gas price will be determined as 10% of the monthly average of the Indian crude basket and will be notified on a monthly basis. There will be a ceiling price of $6.5 per MMBtu and a floor price of $4 per MMBtu for the next two years. After that, the floor and ceiling prices will increase by 25 cents every year. Furthermore, gas produced from new wells or well interventions in the nomination fields of ONGC and OIL will be allowed a premium of 20% over the APM gas price. This incentivizes increased domestic production. In addition to the pricing changes, the implementation of the Unified Tariff (UFT) for natural gas pipelines by the Petroleum and Natural Gas Regulatory Board (PNGRB) is another positive development. The UFT aims to establish a unified tariff system across the country, promoting the vision of ‘One Nation, One Grid and One Tariff. This move simplifies the tariff structure for customers and city gas distribution companies, particularly those in remote areas. It is expected to encourage the expansion of the gas pipeline network and the development of gas markets in India.

Overall, these changes are welcomed by both domestic natural gas producers and end customers. The revised pricing guidelines provide stability and transparency, de-risking price fluctuations for producers while ensuring fair pricing for consumers. This is expected to increase domestic supply, make natural gas pricing more efficient, and support Indias transition to a gas-based economy.

Indias auto fuel

The demand for auto fuels in India has been steadily increasing over the years, driven by rising vehicle ownership and economic growth. It mainly comprises of petrol and diesel. However, the use of these fuels has had several adverse effects on the environment and public health. To address these issues, the Indian Government has implemented several initiatives in recent years. One of the most significant of these is the introduction of cleaner fuels such as Bharat Stage VI (BS-VI) grade petrol and diesel, which have lower levels of sulphur and other pollutants, thereby leapfrogging to BS-VI from BS-IV. The implementation of BS-VI norms has led to a significant reduction in vehicular emissions and improved air quality in major parts of the country. The Indian Government has also been promoting the use of alternative fuels such as CNG, electric, hybrid vehicles, ethanol blending in Petrol and Compressed Biogas.

The Government intends to achieve a target of 20% ethanol blending in automotive fuel throughout the nation by the FY 2025-26.⁶

In 2018, the Indian Government initiated the SATAT scheme, which aims to achieve a production target of 15 million metric tonnes (MMT) (equivalent to 54 MMSCMD) of CBG from 5,000 plants.⁷ The Compressed Bio Gas (CBG) production is expected to exhibit a consistent growth trend due to the increasing demand for environmental friendly & sustainable fuel.

Also, the Governments initiative to increase the number of CNG stations in the nation has resulted in more than a twofold increase in their numbers over the past two years.⁸

Company Overview

Energy is one of the fundamental requirements of a burgeoning nation. Among the key visions of our country today is to increasingly move towards a gas-based economy. MGL is among the top companies in India which are leading this transition.

MGL established way back in 1995, is one of the first CGD companies in the country, to set up the gas infrastructure, and promote usage of gas among various customer segments, in the Mumbai Metropolitan region (Mumbai, Thane, Mira Bhayandar, Navi Mumbai, Kalyan, Dombivali, Ambernath, Badlapur, Ulhasnagar, Bhiwandi, Panvel, Taloja, Kharghar). In 2015, MGL was entrusted by PNGRB the responsibility of developing the city gas distribution network in Raigad district.

Your Company has truly emerged a Leader by successfully achieving the objectives that were entrusted to it. True to its mission, MGL has invested hugely in laying the Gas pipeline infrastructure in the MMR. Today, your company has laid network of more than 550 kms. of Steel Pipeline and around 6000 kms. of Poly-Ethylene Pipeline. Over the next 5 years, MGL is committed to add the steel pipeline network of 180 kms. and the PE pipeline network of 1000 kms.

Through this network, MGL serves the needs of a multitude of customer across various categories in its geographic areas:

1. Domestic Piped Natural Gas (D-PNG) – MGL has provided connectivity to more than 21 lakh households today. Going forward, MGL plans to add around 3 lakh households for their domestic needs, primarily cooking and heating. The

D-PNG connectivity provided by MGL is one of the highest amongst the CGDs of India.

2. Industrial and Commercial – MGL supplies PNG to 4500+ commercial and industrial establishments including restaurants, hotels (from the basic to the most exalted), health care centres (from the smallest nursing homes to the largest hospitals), small and medium industries in its geographical areas. These industrial establishments switched to natural gas from solid fuels like coal and petcoke as well as liquid fuels like furnace oil, light diesel oil (LDO) etc. This shift has resulted in significant reduction in the emissions. With India leading the G20 movement and the significant focus on reducing carbon footprint, the contribution of your Company towards this endeavour cannot be overstated.

3. Automotive segment (CNG) – Your company has ensured easy and reliable availability of CNG by setting up a network of more than 300 CNG stations in its Geographical areas. This has given the confidence to the common man to adopt CNG as his transportation fuel. Today, more than 9 lakh vehicles are plying on CNG in our geographical area. Indeed, your friendly neighbourhood transport undertakings (BEST, TMT and NMMT) boast of more than 2400 buses on CNG. Also, MGL is actively working with MSRTC to ensure conversion of 1000 buses to CNG in the next 2 years. The contribution of this change in controlling air pollution and making Mumbais air breathable is one of the biggest satisfaction that accrues to you. MGL is committed to try and increase the network by 200 CNG stations in the next 5 years.

4. Automotive segment (LNG) - Liquefied Natural Gas (LNG) is another gas variant that is especially suitable for large commercial vehicles plying over long distances or circular movements. Your Company has set up its 1^st LNG station at Savroli, conveniently located for truckers, just off the Mumbai-Pune expressway.

5. Automotive segment (EV) – Electric vehicles have emerged as a key change in the sector in past few years. Your Company has kept itself abreast of this consumer shift. MGL installed its 1^st Electric Vehicle (EV) charging station at City Gate Station, Sion, Mumbai, in collaboration with Tata Power Company Limited.

6. Automotive segment (CDU) – One of the ways to overcome the scarcity of land to put up CNG stations in Mumbai and expedite opening of more outlets is setting up of CNG Composite Dispensing Units (CDU). This is an entire CNG station on wheels, wherein the CNG cascade, compressor and dispenser are installed on a vehicle and can be used for refuelling of CNG vehicles in areas where sufficient land is not available to set up a regular CNG station. After a successful trial run of a CDU at Panvel, Raigad which was first of its kind by any CGD in the country, your Company is trying to roll out more CDU facilities at congested areas in the Mumbai and nearby municipalities where availability of land is a constraint.

Your Company is a pioneer in the CGD sector with an impeccable track record of safety in operations and project execution in one of Indias most urban and densely populated cities. With focus on the core sector, your Company is aggressively rolling out pipeline and its allied infrastructure networks. During FY 2022-23, your Company has laid 314 kms. (PE and Steel) pipeline, 3,05,030 nos. of D-PNG connectivity and 24 nos. of CNG stations. Cumulatively your Company clocked sales of 3.42 MMSCMD through 313 nos. CNG Stations, 15,10,040 nos. of D-PNG conversions (active users) and 4558 nos. of I&C customers. During the year, your Company has spent Rs.686 crore towards Capex, which reflects the strategy of strengthening the core business by enhancing access to greener fuel.

Major developments in Mumbai Metropolitan Region (MMR)

The lack of world class infrastructure has been a major barrier in unleashing the true growth potential of any region. However, since last decade, Government of India as well as GOM have been working together to make the infrastructure of the commercial capital of India truly world scale. Large infrastructure projects worth thousands of crores have been undertaken, major ones having a substantial upside for MGL are:

1. Navi Mumbai International Airport,

2. Mumbai Trans Harbour Link (MTHL) & its associated projects

3. Mumbai-Nagpur Samruddhi Expressway

4. Multimodal Corridor from Virar to Alibaug

Navi Mumbai International Airport, which falls in MGLs GA-3 is under construction & is likely to be open to air traffic by 2025.

The Mumbai Transharbour link is a 22 Km bridge between Sewri on Mumbai Island and Nhava (Navi Mumbai) in order to speed up the traffic between Mumbai and Navi Mumbai and also to facilitate the traffic from Mumbai to Pune and Goa. The bridge is almost complete & likely to be thrown open to traffic by end of 2023. The connectors to Pune & Goa are being planned. These two projects will not only change the landscape of Raigad district but will give a huge boost to urbanisation thereby increasing the demand of PNG & CNG mainfold.

The Mumbai Nagpur Expressway is already open to traffic from Nagpur to Igatpuri & the balance stretch which will connect Mumbai is likely to be completed by end of FY 2023-24. Once completed, it will not only reduce the travel time from Nagpur to Mumbai by 50 % but also accelerate the logistic hub development of Maharashtra.

The Multi Modal Corridor from Virar to Alibaug will be a crucial step towards development, strengthening and creating job opportunities in seven growth centers in MMR such as Virar, Bhiwandi, Kalyan, Dombivali, Panvel, Taloja and Uran. Six of these seven growth centres are part of MGLs GA. The Corridor will also be useful for the development of Navi Mumbai International Airport, JNPT Port, MTHL etc. This Corridor will carry all the traffic from JNPT towards Navi Mumbai and Thane outside the city and will help reduce traffic congestion within the city. The travel time between Virar to Alibaug will also be reduced by 50%. These two projects are expected to drive the growth of CNG as well as LNG.

Core Competencies

Efficient and safe distribution of natural gas: Your Company has a rigorous safety-first policy for all its Operations, Maintenance and project related activities. This enables safe and efficient distribution of natural gas through pipelines and cascades to its PNG and CNG customers. The control room at Mahape office is one of its kind in the CGD industry and is capable of addressing any hazards or accident in the quickest possible time.

Customer service: Your Company has a strong customer service orientation and focuses on meeting the needs of its customers. The company provides 24/7 customer support through various channels, including phone, email, and social media etc.

Strong partnerships: Your Company has built strong partnerships with various stakeholders, including government agencies, regulators, suppliers, and customers. These partnerships have helped MGL to expand its business and improve its services.

Adoption of New Technologies: Your Company has robust systems and processes backed by suitable technologies which helps in efficient operation of its day to day activities. The Company uses the best available software and hardware for Asset Integrity, control systems, Engineering, Planning, Project Monitoring etc. The digital interface with customers has been strengthened to improve customer experience as well as seamless and digital transaction.

Environmental sustainability: Your Company is committed to environmental sustainability and takes measures to reduce its carbon footprint. The Company promotes the use of natural gas as a clean and green fuel alternative to traditional polluting fuels.

Overall,thecorecompetenciesofyourCompanyinefficientand safe distribution, customer service, technological innovation, environmental sustainability and strong partnership. These competencies have helped the company to establish itself as a leading CGD Company.

Strengths, Weakness, Opportunities and Threat

Strengths:

• One of the largest CGD companies in India having over 21 lakh domestic households connected to its network for D-PNG supplies.

• Immaculate track record of safe CGD operations for over 25 years in one of the most densely populated areas of the world.

• Expanded gas network to over 300 gas stations to service the customers demands for CNG.

• 3 contiguous GAs which provides synergy of infrastructure creation and operations.

• Expertise in engineering and planning and laying infrastructure – Laid 314 kms. (PE and Steel) pipeline this year taking our cumulative pipeline length to 6535 kms.

• Strong balance sheet and healthy financial position to invest in prospective growth opportunities.

Weaknesses:

• Longer authorization process of various statutory authorities and restricted period allowed (i.e. October to March) for infrastructure creation.

• Limited land availability at exorbitant prices to set up new CNG stations in Mumbai region.

Opportunities:

• With the collective conscience towards sustainability and cleaner fuel, CNG demand is expected to rise.

• OEMs rolling out more CNG variants in both passenger as well as Commercial Vehicle segment.

• Accelerated infrastructure development and urbanization in Thane and Raigad regions driving growth in natural gas demand.

Threats:

• Volatility in gas prices and virtual capping of fuel prices (including diesel) is rapidly reducing the arbitrage between fuels (CNG vs Diesel) thereby slowing down vehicle conversion / adoption.

• Reduced availability of domestic gas at APM rates for the priority sector (CNG and D-PNG) which is consequently met through more expensive R-LNG.

• Expiry of marketing exclusivity is a potential risk especially for CNG and I&C segment.

Key business highlights

FY2022-23 has been a year filled with opportunities, challenges and achievements for MGL. The high prices of natural gas owing to international geo-political turmoil coupled with virtual capping of diesel and petrol prices had an adverse impact on CNG segment (especially Commercial).

Irrespective of the various challenges, your Company has recorded highest figures on various parameters pertaining to its business.

In the D-PNG business, MGL achieved highest ever connectivity of 3,05,030 households, surpassing the previous highest of 2,61,753 achieved in the year 2021-2022. Similarly, your Company achieved the highest ever connectivity number in a single month wherein we achieved 37,844 connectivity in March 2023, surpassing the previous highest of 34,207 in November 2022.

Also, MGL has achieved the highest ever annual conversion of 1,38,000 in the history of MGL in FY 2022-2023, surpassing the previous highest conversion number 1,20,240 achieved in the year 2021-2022.

The highest ever D-PNG registrations in 1 month was recorded in March, 2023 with 29,096 numbers. This surpassed the previous high of 21,030 registrations collected in December, 2022.

In an effort to make it easier for prospective customers to avail D-PNG connection, MGL launched the Fixed Daily Charges payment plan wherein the customer can pay a nominal amount of H 99 per month, instead of having to pay a lumpsum amount of H 5000 at the time of registration. This will be especially beneficial to low income group and people staying in rented accommodation.

In the Industrial and Commercial segment, MGL revamped and launched its new pricing policy with never-before features for the I&C segment. New segments such as Coal-based industries, Co-generation industries and special policy for high-volume customers were introduced. Feedback from existing customers were also incorporated so as to make adoption of natural gas easier and smoother for the customers. As a result, MGL signed new I&C contracts with 103 new customers having a consolidated demand of 1 lakh SCMD (standard cubic meters per day) of gas. In FY 2022-23, your Company also achieved the highest ever volume to the I&C segment i.e. MMSCMD.

In the CNG business, your Company achieved yet another historical high by issuing 51 new LOIs (Letter of Intent) for setting up CNG ROs. MGL also started sales from 24 new CNG stations, as well as upgraded the facilities at 41 existing ROs during the financial year.

As a responsible CGD entity, your Company has always strived to bring greater value to its customers through induction of new technologies, systems and processes. As an endeavor to bring in positive changes in the lives of people, your company has plans of expanding footprints to other geographical areas to not only develop business but to catapult the access of greener fuel to the society at large. Towards this, your Company has entered into a Share Purchase Agreement (SPA) with Unison Enviro Private Limited (UEPL) and its shareholders for acquisition of 100% stake in UEPL at a price of H 531 crore, subject to necessary approval from Petroleum and Natural Gas Regulatory Board (PNGRB). This would help MGL tap the inhouse expertise to grow the networks and infrastructure in the 3 Geographical Areas being operated by UEPL viz. Ratnagiri, Latur & Osmanabad in the state of Maharashtra and Chitradurga & Davanagere in the state of Karnataka. A detailed disclosure with respect to the proposed acquisition of UEPL has been submitted by the Company to the National Stock Exchange of India Limited and BSE Limited on 3^rd March 2023 for dissemination of information to the investors.

Transformation

During the year your Company has launched ‘Project Lakshya, a companywide strategy implementation cum change management journey cutting across all functions of the organization towards reimagining, reshaping and transforming to a future-ready organization. Your Company wants to consolidate CNG and PNG businesses and emerge as a more customer-centric and digitally advanced Company, thereby simultaneously evaluating foray into new business having synergies and business which are in line with the vision of the Company.

As a part of ‘Project Lakshya, your Company is critically examining and streamlining internal processes to accelerate network development, enhance customer acquisition and improve customer experience. Target is to aggressively increase our customer base across segments of CNG, D-PNG and I&C over the next 5 years, thereby enabling overall volume growth and margins for the company.

Your Company has always been at the forefront of adopting digital technologies like SAP, CRM, SRM etc. With changing times and customer preferences, it is imperative to adopt a digital first strategy which facilitates enhanced customer experience and improves productivity. As part of Project Lakshya, multiple digital initiatives have been undertaken to target both the internal as well as the external stakeholders. Your Company has recently launched an updated MGL Connect app to offer all necessary information and functionalities to enhance customer experience.

Financial Overview

a) Revenue from Operations

During the FY 2022-23 the revenue from operations stood at H 6,921 crore.

b) EBITDA and EBITDA Margin

During the FY 2022-23, the operating EBIDTA increased by 28% to H 1,184 crore in comparison to H 924 crore on FY 2021-22.The EBIDTA margin for FY 2022-23 is 19% as compared to 26% in the FY 2021-22.

c) PAT and PAT Margin

Your Company registered an increase in PAT by H 193 crore to H 790 crore in FY 2022-23 from H 597 crore during FY 2021-22.

The PAT Margin for the FY 2022-23 is 12.54% as compared to 16.77% in FY 2021-22.

d) PBT

Your Company registered an increase in profit before tax by 30.92% to H 1,056 crore in FY 2022-23 from H 806 crore in FY 2021-22.

e) EPS

Your company recorded earnings per share of H 79.98 per share in FY 2022-23 as compared to H 60.43 per share in FY 2021-22.

f) Details of significant changes in key financial ratios, along with detailed explanations therefor

Sr. No. Ratios	March 2023	March 2022
1 Debtors Turnover Ratio (No. of times) (Net Credit Sales of natural gas /Average Accounts Receivables)	21.33	13.96
2 Inventory Turnover Ratio (No. of times) (Cost of Gas Sold/Average Inventory of Gas)	3968	3851
3 Current Ratio (No. of times) (Current Assets/Current Liabilities)	1.29	1.39
4 Operating Profit Margin (Operating Income - EBIT/Revenue from Operations-Net)	18.80%	25.96%
5 Net Profit Margin (PAT/Revenue from Operations-Net)	12.54%	16.77%
6 Return on Networth (PAT/Networth)	20.44%	17.48%

g) Explanation for major change in Ratios as compared to the previous FY

i. The increase in the trade receivable ratio is mainly due to an increase in level of activity during the current year and the previous year was impacted due to COVID-19 and resultant lockdown.

ii. The increase in the Trade Payable Turnover ratio is mainly due to 1) increase in the level of activity during the current year. Previous year was impacted due to COVID-19 and resultant lockdown, 2) value of gas purchase has increased due to increase in purchase prices and 3) with increase in level of activity direct expenses and other overheads have increased in the current year. There are no major variations with respect to number of days credit period compared to previous year.

iii. Due to the increase in volumes and sales prices, net sales of natural gas during the year have increased whereas working capital has increased marginally, resulting in higher net capital turnover ratio.

iv. Decrease in Net Profit Ratio in percentage terms is mainly due to increase in cost of gas and corresponding revision of sales prices to recover such increase in phased manner. Current year increase in gas cost was on account of requirement of more spot gas purchase due to shortage of government allocated gas and increase in spot prices due to global factors.

v. Due to the increase in interest rates, the overall return on investment has improved compared to the previous year.

h) Disclosure of Accounting Treatment

Applicable Accounting Standards have been followed and there is no deviation compared to prescribed accounting standards.

Company Outlook

MGL is on an ever-onward path of learning and proactively changing itself to meet the dynamic needs of the ever-changing market scenario, by critically examining its existing processes.

In light of current and future customers and market conditions, deliberating changes required from all perspectives and then developing revised policy and processes that will make MGL more competitive.

MGL is looking at significantly strengthening its digital marketing initiatives. The MGL Connect application has been upgraded with several new features for D-PNG and CNG customers. The process of registration in gasified buildings is being simplified to a large extent both on the MGL website as well as MGL Connect app.

Similarly, MGL has identified another segment having significant upside in increasing the Domestic PNG enrolment. This is the builder segment for which has made required changes to its Reticulated business model. These changes will make it more effortless and rewarding to the Builders to enter into an agreement with MGL before starting construction of a building so as to integrate ab-initio D-PNG infrastructure into the proposed building.

With the advent of the new Pricing policy, MGL is confident that it will be able to address the varying energy requirements of a myriad of small, medium and large commercial, service and manufacturing companies. The rapidly expanding network of pipelines in Raigad district will enable MGL to connect new industrial areas such as Patalganga, Rasayani, Mahad and Roha.

The Mobility sector is on the cusp of disruptive changes especially in the area of electrification and environmental-friendly fuels. With its new retail policy wherein MGL has introduced new business models to enable CNG stations to come up, it is planning to add at least 50 new CNG stations in the coming year. Your Company is actively engaging with OEMs to increase launch of CNG-based variants in passenger/commercial vehicles. Periodic promotions incentivising purchase of new vehicles or retrofitment of old vehicles to CNG are launched by MGL in the market. Your company is capitalizing on the Electric vehicle revolution by adding EV charging stations as an additional offering at its CNG stations, wherever possible. For the long-haul heavy commercial segment, LNG is a promising alternative for the future. Towards this end, MGL has already built one LNG station at Savroli on Mumbai-Pune expressway near Khopoli. Your Company is also exploring ways and means to catalyse the conversion of long-haul trucks from their existing polluting fuels to LNG.

In line with the policy initiatives of the Government, MGL is actively working on setting up Compressed Bio-Gas plants. This is another move to recycle organic waste in order to produce energy thereby reducing greenhouse-gas emissions and further reduce reliance on fossil fuels.

The MGL Connect app is being upgraded to offer never-before features for the CNG customers too. En-route customers looking for CNG will be able to locate the closest CNG stations alongwith the approximate travel time and waiting time at the CNG stations, so as to make an optimal decision for their CNG fuelling.

The MGL Connect app will also double as a Loyalty program helping MGL to establish a long-term connect with its vast customer base. Thus, MGL is upgrading its Loyalty program from the current card-based program to a digital-driven avatar. The 1^st phase of the new loyalty program is expected to be completed by mid-2023-24.

Your company is aggressively rolling out pipeline infrastructure to capture the untapped and future demand in these areas. The newly commissioned City Gate Station (CGS) at Savroli in GA3 would help to expand customer reach and bring down the logistics cost. Attached to the CGS is the LNG station, which is a proactive step taken by your Company to augment sales through dispensing LNG to long haul fleets, a part of which is expected to shift from diesel to LNG in the mid to long term.

New Business Opportunities

Your company is continuously scanning the market to adapt itself to the developments in the external environment, de-risk its business and ensure continuity in growth and profit. Accordingly, your Company is seriously evaluating opportunities in the Compressed Bio-Gas (CBG), Bio-ethanol, EV sector and Equipment manufacturing, which offers a sustainable business portfolio over and above the core CGD business.

Technology

MGL utilises the GE SmallWorld enterprise GIS system which is further customised for our gas pipeline network & the entire underground pipeline network is mapped in GIS. Updates for ongoing network expansion is also being updated regularly. Users can access the system from their desktop or mobile devices, facilitating field work planning.

Activities like regular mapping, landbase updates, and accuracy enhancements strengthen the reliability of GIS. An elevation profile survey of high-pressure steel pipelines is in progress to support various integrity assessments related activities.

To enhance operational abilities, MGL is implementing the "ESRI ArcGIS Enterprise" software which will improve access and usability for general GIS users. MGL have also developed a cloud-based Document Management System (DMS) for submission and archival of technical records.

On the operational front, your Company has successfully enhanced its SCADA system across five CGS, 300 CNG stations and 45 Cathodic Protection Transformer Rectifier Units. Your Company plans to include all its CNG stations and additional SVs under the ambit of SCADA. Your Company has implemented LoRA-based Automated Meter Reading (AMR) system on a trial basis for 7,000 domestic customers in its operational areas and is exploring suitable technology for scaling up the implementation of AMR, with an objective of providing actual meter readings and billing for every customer and gradual elimination of assessed bills, along with enhanced safety, security and seamless experience for the customer.

Over 1000 industrial and commercial customers have been fitted with AMR facilities. This has eliminated the need for manual meter reading.

Your company has completed installation of 14 numbers probes for monitoring the internals of pipelines for corrosion and aims to install 9 more in the days ahead.

To enhance customer experiences, awareness initiatives about self-meter reading have been rolled out along with several new initiatives.

Efforts continue to further enhance domestic meter reading accuracy and efficiency. Improvements in domestic meter reading continued using Android software as it aims to help meter readers capture details with greater ease and accuracy while providing value-added inputs to customers. The software is upgraded at regular intervals to provide customers access to information on meter reading through SMS. A system is developed to send SMS to domestic customers intimating date of meter reading/ service technician and their details like name, photograph which can be verified by customer from a link provided on registered mobile number. Further these services will be provided on WhatsApp for ease of customers.

MGL has 49 Type-3/Type-4 composite CNG cylinder cascades for CNG transportation. These cascades have resulted in transporting more CNG per trip, thereby reducing the number of trips and fuel consumption. Further, more composite cylinder cascades are planned to be deployed especially in the far flung areas.

Your company has set up Solar Panels on 06 MGL owned CNG stations, Gas receiving terminals and MGL office at Mahape. Further your Company plans to set up solar power facilities at Ghatkopar, Malad, Badlapur and Savroli CNG stations as a green initiative aimed at increasing its renewable power capacity thereby reducing power intake from the grid.

Your Company will be setting up Integrated Command & Control Centre at Mahape to enhance operational efficiency, quick response and resource mobilisation during emergencies, overall control and monitoring from one location. This integrates all existing operational systems like SCADA, GIS, fleet management software etc. Systems like SAP, forecourt automation software are also planned to be integrated subsequently.

Other technology developments include the following:

Migration of SAP Infrastructure to AWS Cloud

- Entire SAP Infrastructure is migrated from On-premise to AWS Cloud resulting in cost optimization.

Online registration for Industrial customers

- Industrial customer registration process has been fast-tracked by an Online Registration application that takes the registration request, mandatory support documents and the payment details and prints the Registration Form for final sign-off.

Feedback module for DPNG customers

- Feedback of newly onboarded domestic PNG customers is taken digitally to evaluate the customer satisfaction level and thus improve upon the process of providing domestic connection.

MGL website revamp

- MGL website has been revamped with latest technology, which will make it faster.

- The old website has been decluttered.

- The new website has improved user interface to register.

MGL connect app revamp

- New features added for CNG customers.

- User interface made easy.

- New features added to locate CNG stations.

Honeypot project initiated by Cert-In & Ministry of Electronics and Information Technology to gather cyber threat intelligence information at national level.

- A decoy device is installed in our data center which appears to be an attractive target for hackers, however it is mean to collect data and is disconnected from MGL network.

- This helps to analyse the kind of cyber-attacks that are targeted towards critical organisation like MGL and accordingly preventive measures can be initiated.

- As part of this program, we benefit by getting information on latest threats.

Cloud-based Endpoint Detection and Response (EDR) solution implementation.

- Migrated from on-premises endpoint Anti-Virus security solution to cloud-based Endpoint detection and Response solution.

- Endpoint Detection and Response (EDR) is an endpoint security solution that continuously monitors end-user devices to detect and respond to cyber threats like ransomware and malware. EDR security solutions record the activities and events taking place on endpoints such as desktops, laptop, servers, providing security teams with the visibility they need to uncover incidents that would otherwise remain invisible.

Customer Relationship Management (CRM)

MGL has well–established robust mechanism in place to attend customer complaints, query & service requests. CRM department acts as a conduit between the customer and MGL resulting in time bound effective resolution to customer concerns, with the help of a strong infrastructure set-up and well laid out processes and practices.

Adopting technological innovations, MGL was the first CGD Company to have its Customer Care Center on a live enterprise solution (SAP). WhatsApp solution was launched for MGL customers to further enrich customer experience.

MGL was the first CGD company to setup an in–house Call Center way back in 2003, which has evolved from 5 workstations to the present day 98 workstations.

To strengthen our coverage, MGL inaugurated its tenth walk-in center in Kalyan during the financial year. In addition, we are committed to enhance our customer support and have added two new walk-in centers in Badlapur and Kharghar.

MGL has full-fledged back-office operations ensure that all customers written correspondences are received, acknowledged, and replied within the set timelines.

Our CRM set up has been de-facto the industry standard as evidenced by the visits of various reputed CGDs keenly studying and replicating the process and systems.

Project Monitoring

The web-based modules have been improved to capture and display the performance of ongoing projects and assist departments in identifying areas of concern. The system benefits the company by providing accurate and timely information to all concerned parties, including regulators. The BIS department supported the development of applications such as Last Mile Connectivity, Working at Height, Plumber Tracking, CWIP Ageing Analysis, and Project Cost Monitoring to enhance the efficiency of existing project operations.

Last Mile Connectivity captures converted customer information with required images directly from the customer premises, resulting in immediate reporting of conversion date for faster invoicing of D-PNG connections. The Work at Height system tracks the exact number of plumbing resources with contractors, enabling execution planning at site and reducing time delay in issuing work permits. Smart Sheet is a dashboard that monitors the progress of PNG and CNG stations, helping senior management and GA heads make informed decisions.

Health, Safety and Environment (HSE)

At MGL, our endeavour is to provide safe and healthy working conditions for all our employees and service providers. Additionally, we strive to minimise the impact of our operations on the environment and communities in which we operate. Our strong emphasis on abiding by our corporate Health, Safety, Environment, and Quality Policies enables us to maintain a zero-harm approach. Accordingly, we have developed Injury prevention programmes, transport, and fire safety programmes, strictly adhering to our integrated SHEQ and risk management system.

Our commitments

Our key HSE priorities include a continual improvement of health and safety by reducing accidents, occupational injuries, and work-related illnesses. Thereby, we remain committed to:

• Provide a safe & healthy working environment to prevent work-related injuries and ill-health

• Protect and contribute to societies in which we operate

• Monitor our HSE and Quality performance

• Play a leading role in promoting best industry practices

• Manage HSE matters as any other critical business activity

• Promote a culture wherein major stakeholders share this commitment through mutual consultations and participation

Compliance and standards

Our HSE and Quality management system complies with the following standards and certified by third party inspection agencies:

• ISO 45001:2018 for Occupational Health & Safety Management system

• ISO 14001:2015 for Environment Management System

• ISO 9001:2015 for Quality Management System

• PNGRB ERDMP Regulation 2010 amendment 2020

Rewards and Recognition

Your Company has been awarded with:

• Renowned FICCI GIZ Platinum AWARD 2022 for Excellence in Industrial Disaster Risk Management.

• Esteemed APEX India GOLD Award 2022 for Best Fire & Safety Measures under Public Utility Service Organization Sector.

• Prestigious GREENTECH Award for Outstanding achievements in "Environment Protection" at 22nd Annual Greentech Environment Award 2022.

• Certificate of Appreciation 2022 from National Safety Council India for CGS Ambernath & CGS Taloja.

HSE Highlights for FY 2022-23

• A Major Mock drill involving Fire Brigade, Disaster Management Cell, Directorate of Industrial Safety and Health, Mutual Aid Response Group (MARG) members and Police officials was conducted to demonstrate our Emergency Response and Disaster Management Plan (ERDMP). The efforts were well appreciated by the statutory authorities.

• Celebrated National Safety Week, Road Safety Week and World Environment Day with zeal and enthusiasm.

• Use of Online Application for capturing Site Compliances/ Observations thereby reducing consumption of paper.

• Collaboration with City Institute of Disaster Management, Mumbai Disaster Control Centre Under Mumbai Municipal Corporation for training of employees engaged in emergency response.

Process & Practice followed

In order to bring uniformity into the system, your Company had integrated occupational health and safety management system, environment management system and Quality Management system. A team of ISO Representative from each department has been formed for effective implementation of the system. Various trainings were imparted for effective implementation of SHEQ management system. Further, gap assessment was conducted and road map was prepared. The Final documentation review was conducted by external Third Party and subsequently, re-certification audit was successfully completed with no major non-conformity.

HSE Training

HSE Training is a tool which helps us to achieve our organizational HSE goals by improving the skills, tackling skill gaps, improving performance, increasing productivity and knowledge enhancement of our contractors.

HSE Training at MGL has gained importance due to large volume of contractors undergoing the training and its increasing operations and areas. Training allows the contractors to acquire new skills, improve existing ones, perform better, increase productivity, and improve HSE performance.

Based on this concept, we at MGL have engaged training institutes for imparting Safety and Technical Competence training for contractors. Also, MGL is collaborating with City Institute of Disaster Management and T. S. Chanakya, Indian Maritime Institute for hands-on training for our employees.

Till date MGL has trained 120+ employees at TS Chanakya in Fire Fighting and Rescue Techniques, 400+ employees and key personnel in disaster management and 350+ personnel are trained in Basic First Aid.

Security

Changing business dynamics, coupled with continuous shifts in the socio-economic scenario and business expansion of your Company during the challenging times, demanded thorough reassessment of the security function to reinforce and strengthen the security management processes. This was achieved through risk assessment, focusing on protection of company assets and increased emphasis on use of technology in the security operations.

Security Processes and protocols were continuously reviewed and revamped with a view to strengthen the process and mitigate vulnerabilities. New challenges on the horizon demanded that security processes of your Company be continuously put to test and reinforced through the feedback from various stakeholders. This is backed by thorough risk and vulnerability analysis, threat appreciation and is achieved through accurate access control, security awareness training and incident management drills and exercises.

Expanding business of your company and foray into uncharted territories resulted in expansion of security operation. Hence physical guarding of sites and surveillance capabilities of the security control room were improved with introduction of command and control software. Integrated Command and Control Centres (ICCC) integration capability with components driving a unified user interface, made operations simple and enabled centralised command & control over operations. It supported different operational decisions during events and incidences using pattern analysis, artificial intelligence, and machine learning. The Incident Control Room facilitates direct video streaming from the incident site for multiple users at once and empowers top management to assess, review and respond to any incident/ situation within acceptable time frame. The systems ability to record, store, and analyse digital video images and recordings boosted operational effectiveness and virtually eliminated false alerts. Cameras with edge-based analytics were introduced for head count as a safety measure.

Human Resources and Industrial Relations

Employees are our key assets, and we are committed to create a professional atmosphere to nurture our employees to grow and achieve their career aspirations. We continue to create a work environment that supports innovation and inclusion with an ongoing focus on overall wellbeing of our employees. MGL has a highly talented workforce and we have been able to induct, develop and retain the best. We have onboarded 38 employees during FY 2022-23 and our total employee strength stands at 509 as on 31^st March, 2023.

MGL has created a conducive work environment where everyone feels a sense of belonging. Our women workforce was given special programs on financial planning, emotional wellness, and work life balance. Gender diversity ratio is 9:1.

Our Policies on Performance Management, Compensation, Career growth, Reward and Recognition puts greater focus on ambition, collaboration and innovation. We frequently engage with our employees by creating a sense of purpose and an environment that supports productivity. Surveys are conducted to get real-time results and action planning are done to achieve the desired outcome.

MGL believes in a competency-based culture and the Assessment Development Centres helps us to identify top talent and fast track promotions helping us to develop leaders and build competencies for future roles. Learning and Leadership are inextricably linked. With this objective, a sustainable and measurable development journey is charted out for our identified Hi-potential employees, who have been consistent high performers. The Udaan program was designed and executed to develop them both professionally and personally, thus preparing for future roles.

Learning has been a key element of our people strategy. We have organized a wide range of learning initiatives for overall development of our employees across the Grades to enhance their skills for taking higher responsibilities.

We aim to create a workplace where our employees feel supported at the hour of need. We have extended insurance coverage for our employees and their dependent family members. We have an in-house medical officer to address the health concerns of our employees and their extended family members. Tie-ups are in place with various Health clinics for Preventive health check-up.

The Company continues to maintain harmonious relations with the Staff Union. The Company amicably concluded Long Term Settlement for a period of four years, effective from 1^st April 2022. All Labour related Statutory Compliances are continuously monitored and the compliances are adhered to.

Risk Management and Internal Control System

Risk Management

MGL recognizes that all aspects of its business involve significant risk and that its actions are increasingly exposed to greater scrutiny by the public, investors, and its stakeholders. The Company has a well-defined Risk Management Framework for reviewing the major Risks and has adopted a Enterprise Risk Management Policy. Further, pursuant to the requirement of Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has constituted a Risk Management Committee inter-alia to monitor the Risk Management Plan of the Company.

The Risk Management framework is in place enabling the management to assess the specific risks, potential exposure to the Company and effective management of these risks.

Risk management policy and plans are reviewed regularly to reflect changes in market conditions and the Companys activities. The major risks identified by the businesses are systematically addressed through mitigation actions on a continual basis.

Internal Control System

Your Company has well defined Internal Control Systems including well documented Policies, Procedures, Standard Operating Procedures and in-built SAP ERP controls with respect to segregation of duties and Maker-Checker. These are designed to provide reasonable assurance with regard to reliable financial and operational information. These controls are tested periodically by internal as well as statutory auditors.

Audits are conducted by reputed audit firms. These Audit firms are supported by dedicated In-house Internal Audit team. The Internal Audit observations relating to the deficiencies / non-compliance of SOPs / policies / procedures and systems are periodically provided to the Audit Committee with suggestions / recommendations and control directives to mitigate the shortcomings. Also, robust implementation mechanism for suggested improvements and corrective actions is in place.

The Company conducts in-house monitoring of the applicable statutory and regulatory compliances through compliance tool.

Your Company uses SAP ERP Systems as a business enabler. The transactional controls built into the SAP ERP Systems ensure appropriate segregation of duties, appropriate level of approval mechanisms and maintenance of supporting records.

Cautionary Statement

This document contains statements about expected future events, financial, and operating results of Mahanagar Gas Limited, which may be forward-looking. By their nature, forward-looking statements require your Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the actual results may differ from the forward-looking statements mentioned in the Annual Report. Readers are cautioned not to place undue reliance on forward-looking statements.

Disclaimer

Certain statements in the MD&A section concerning future prospects may be forward-looking statements which involve a number of underlying identified / non identified risks and uncertainties that could cause actual results to differ materially. In addition to the foregoing changes in the macro-environment, global pandemic, like, COVID-19 may pose an unforeseen, unprecedented, unascertainable and constantly evolving risk(s), inter-alia, to your Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based, are also likely to change accordingly. These forward-looking statements represent only your Companys current intentions, beliefs and expectations and any forward-looking statement speaks only as of the date on which it was made. Your Company assumes no obligation to revise or update any forward-looking statement, whether as a result of new information, future events, or otherwise.