Ajcon Global has come out with its report on Mahanagar Gas IPO. The research firm has recommended to "SUBSCRIBE" the IPO in its research report as on June 20 , 2016.
MGL is one the largest city gas distribution (“CGD”) companies in India. It has
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. MGL is promoted by GAIL and BGAPH (now Royal Dutch Shell plc), each of who holds 45% of its equity shares.
At the upper end of the price band of Rs. 421, the IPO is valued at 13.4x at
FY16 Post issue P/E which is at a significant discount to its immediate peers.
With due consideration to factors like a)monopoly status in CGD business in Mumbai, b) significant entry barriers for competitors to enter into MGL area
of operation, such as its infrastructure exclusivity, the requirement of large investments to establish a natural gas distribution network, lead time in the
allocation of domestic natural gas and obtaining the required regulatory approvals, c) infrastructure exclusivity and established infrastructure network; d)cost effective availability of domestic natural gas, e) MGL being closer to the source of production of natural gas in the Mumbai offshore bsin, as well as to the import terminals, Dahej, Hazira and Dabhol offers it a distinct price advantage and lower transportation tariff compared to other
CGD companies, f) with rising crude oil prices, CNG’s cost effectiveness versus competing fules like Petrol and Diesel has improved, g)debt free balance sheet, h) strong execution track record, i) positive operating cashflows, j) decent RoE, k) cheaply valued against peers like Indraprastha Gas (P/E - 17x) and Gujarat Gas (P/E - 45x) ,we recommend investors to “SUBSCRIBE the issue for listing gains”.