Mahanagar Gas IPO Review – Should you invest?
Mumbai based, Mahanagar Gas IPO would open for subscription next week. Mahanagar Gas Ltd is one of one of the largest city gas distribution (CGD) companies in India. The company revenues grew at 18% CAGR in last 5 years. This is the 11th mainline IPO in India in 2016. What are the positive factors in a Mahanagar Gas IPO? What are the hidden factors about this IPO? Should you invest in this Mahanagar Gas IPO or not? In this article, I would do Mahanagar Gas IPO Review.
About Mahanagar Gas Limited
Mahanagar Gas Ltd is one of the largest city gas distribution (CGD) companies in India. They have more than 20 years of experience in supplying natural gas in Mumbai and are presently the sole authorized distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai, its Adjoining Areas and the Raigad district in the state of Maharashtra, India. They are promoted by GAIL and BGAPH, each of who holds 49.75% of its Equity Shares. GAIL is a Maharatna public sector undertaking and the largest natural gas transmission company in India. BGAPH is headquartered in Singapore and is a part of the BG Group, an international exploration and production and LNG company.
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Issue details of Mahanagar Gas IPO
- IPO opens: 21-Jun-2016
- IPO closes: 23-Jun-2016
- Face Value: ₹ 10 per share
- Issue price band: ₹ 380 to ₹ 421 per share
- Issue size: ₹ 939 Crores on lower price band
- Market lot: 35 shares and in multiples of 35 shares therein
- Minimum investment: ₹ 13,300 on lower price band
- Lead Managers: Kotak Mahindra Capital & Citigroup Global Markets
- Listing: BSE / NSE
- Download Mahanagar Gas IPO Prospectus from SEBI Website at this link.
Objects of the Mahanagar Gas IPO issue
1) Achieving listing benefits by listing on stock exchanges
2) Carry on Offer for Sale on behalf of selling shareholders. Company would not get any proceeds from this.
Company Financials (reinstated)
- The company generated revenue of ₹ 1,073.56 Crores for the year ended Mar-11 and ₹ 2,135.63 Crores for the year ended Mar-15.
- The company posted a profit of ₹ 225.5 Crores for the year ended Mar-11 and profit of ₹ 301 Crores for the year ended Mar-2015.
- Its restated EPS for FY 2015 is ₹ 33.69 and last 3 years average EPS ₹ 33.5.
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Reasons to invest Mahanagar Gas IPO
- Revenues have grown from ₹ 1,073 Crores FY11 to ₹ 2,135 Crores in FY15 indicating a strong revenue growth of over 18% CAGR.
- Good Profits of over 14% in FY15. However one should note that profits are in declining trend in last couple of years. One should keep an eye on it.
- Well positioned in Mumbai Metro, one of the most populous cities in the world and second largest metropolitan city in India. Cost effective availability of domestic natural gas.
Reasons not to invest in a Mahanagar Gas IPO
- The majority of its natural gas supply requirements is met by the allocation of domestic natural gas from the MoPNG at a price determined in accordance with the New Domestic Natural Gas Pricing Guidelines 2014. Any increase in the cost price of natural gas or any reduction in the allocation amount of domestic natural gas may have an adverse effect on its business, results of operations and cash flows.
- The price of domestic natural gas and RLNG we purchase is denominated in United States dollars, while the selling price is in Indian Rupees. In the event that they are unable to pass on the cost of any devaluation of the Indian Rupee to its customers on a timely basis, or at all, its business, results of operations and cash flows could be adversely affected.
- BG Group plc, the company in ultimate control of BGAPH (one of its Promoters) is subject to a proposed acquisition by Royal Dutch Shell plc. In the event the proposed acquisition is completed during the course of this Offer or subsequently, part control of the Company, to the extent held by BGAPH, would indirectly vest in the Shell. There can be no assurance that Shell will be required to make an open offer to the shareholders of the Company.
- In the event alternative fuels become more cost effective, or a fuel of choice to its customers, its business, results of operations and cash flows and could be adversely affected.
- The majority of its total revenue is attributable to its CNG business. Any decrease in volume of CNG sold by them may have an adverse effect on its business, results of operations, financial condition and cash flows.
- Other risk factors (Internal and external) can be viewed in the draft prospectus from Page no. 17 onwards.
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Recommendation / Investment strategy – Mahanagar Gas IPO
- On the upper price band of ₹ 421 and on FY15 EPS of ₹ 33.69, P/E ratio works out to 12.5x. Similarly, on last 3 years EPS of ₹ 33.5, P/E Ratio works out to be 12.57x. Means company is asking issue price for P/E ratio between 12.5x to 12.57x.
- Its competitors, IGL shares are trading at a P/E ratio of 15.1x and GGL is trading at 21x, hence the issue price of Mahanagar Gas is reasonably priced.
- Company revenues grown at 18% CAGR in last 5 years. Its share price is reasonably priced. Profits are over 14%. Considering all these positive and risk factors, investors can invest in this IPO for medium to long term perspective.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy this IPO. Please consult your investment advisor before you invest in such high risk investment options.
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Suresh
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bed luck !! not alloyed to me.
Allotment of share in IPO is on the basis of first come first serve.. or everyone will get some shares.. and quantity of applied subscrition shares matters??
Hi Suresh,
I applied fro 1 bid ie.e 1 lot of 35 from icicidirect.at cutoff but it didn’t allow me to bid again although bid 2 and bid 3 options are seen.
Before submitting 1 st bid at cutoff price , I tried submitting for bid 2 and bid 3 simultaneously for same lot but it didn’t allow me.
after submitting it is saying only one application allowed per PAN .Please let me know how 3 bids can be applied .eg.
bid 1 — 35 shares –cutoff
bid 2 — 35 shares — cutoff
bid 3 — 35 shares — cutoff price
Can we do it as above or are we allowed only 1 bid ? eg.
bid 1 — 105 shares –cutoff ?
Hi Suresh,
i have a demat on yesinvest, how can I apply for this IPO.
Regards,
Hi,I am bidding the MGL IPO at 421 per share and if listed price is 390 then my share price would be 421 or 390? pls explain
How many application can be made on one demat account? I heard that a person can apply only once using one pan and one demat account. SBI ASBA site page says it.
For bids per application there is a limit of 2 lakhs per person I think. Please clarify. Thanks in advance
WHAT SHALL BE THE BIDDING PRICE FOR THIS IPO.. ALSO I DONT UNDERSTAND IT BY PLACING BID OF 421 AND AMOUNT DEBITED WILL BE 380 PER SHARE..? PLEASE GUIDE
I want to invest in this ipo.this is first time I’m investing .can u tell me how to invest or through whom I can apply & what all paper work will be needed
by ur demat account u can apply for this ipo , it’s a gr8 ipo according to my point of view this ipo gives minimum return more than 20% within 2days.
What is the best way to apply for this IPO to get maximum allotment??
Better to apply max. allowed limit in retain from 1 Demat account or any other option.
kindly advice
Two suggestions. Apply on higher price band. If you are married, applied through your spouse demat account too. I was successful to some extend even when there was over subscriptions.
Thanks.
Just to be clear,
Applying 2 lots in my DP is as equal as applying 1lot in my name and 1 in my wife name ?? or will be make difference?? considering higher price band in both cases.
Your chances of getting 1 lot would be higher when you apply in your name + your wife name
Hi Suresh m trading from last 2 years but not getting good results. I need guidance for trading. Can u help. Pls contact me through what’s app. My no is …. Thanks in advance. Pls delete this comment after u note my no.
Hi Vilas, I removed your contact nos from comment. You can post your comment here, currently i do not provide service over phone.
IF I PUT BID PRICE Rs 421 & SETTLED PRICE IS Rs380,my allotment willbe at what price?
Hi Jyoti, If you put bid for 421 thru ABSA (which is like amt is blocked), only 380 per share would be debited in your account. Balance would be unblocked in your account.
Nice Article Suresh K P . Your articles are crispy and to the point. If i have one demat account with CSDL and one demat account with NSDL, Can i apply for IPO through both CSDL and NSDL accounts?. Thanks for your answer in advance 🙂
You can apply. There is no restriction on number of applications.
Sir I need to reconfirm that if he applied both in nsdl and cdsl the chances of not allotment is confirmed as the two name will nullify his candidature in ipo allotment. As I faced the problem once. Thanks and reconfirm.
Suresh Sir, will there be any listing gain in this IPO ?
Hi Sampath, I am expecting there would be listing gains. Neverthless, don’t just apply for listing gains, if required you should be willing to hold for 2-3 years. This is the best way to invest in an IPO
Thanks again for the guidance. I will definitely hold it if I get the allotment. Thank u.
I am so lucky that except Thyrocare, I am allotted all the ipos.
By the way… Suresh Sir, I wanted to know that.. will there be any listing gain in MGL ?
Hi Suresh,
I have some questions on ASBA. Will you be able to clarify
1. How many applications can an applicant place from a bank account using single name/PAN card?
2. If an applicant has accounts in multiple banks whether he can apply from all the bank accounts using the same name/PAN card?
3. From a bank account is it possible to apply for ASBA using another persosn's name/PAN card and in that case does the person need DEMAT account?
Anoop, There is no restriction about applications for IPO thru ABSA. Since PAN card is linked to demt account, and allotment is done based on demat account and not on PAN card. To apply thru ABSA, one need to have demat account
hi suresh,
on which day do you apply for IPO. i tried number of times applying to IPO on first day 1st hour itself but never got an allotment. almost all of them were oversubscribed.
thanks
I generally apply on 2nd day of the IPO. Yes some times, I get allotment and sometimes not.
I hope allocation is not done on basis of when you applied. Most of RII, NII and QIBs apply on the last date . in fact i apply on last date by seeing subscription ration. It is mere luck but some analysis on allocation trends will improve your chances of allocation.
previously members who subscribed for around 1 lakh or 2 lakh amount used to get shares for sure but now a days from 2015(i hope), All lots (who subscribed for single lot or multiple lots) are getting equal proportion of shares.
I suggest you to apply minimum of 3 lots so that lottery chances will be brighter. My view is there are good chances for lottery to be picked from 30 out of 100 instead of 300 out of 1000 :).