Mahanagar Gas - Acquires CGD Player Unison Enviro; Prospects Appear Bright: ICICI Securities

"BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .ICICI Securities Report.Mahanagar Gas Ltd. has announced its first inorganic acquisition in the city gas distribution space, Unison Enviro Pvt Ltd., from the latter’s erstwhile promoters Ashoka Buildcon and North Haven India Infra (a Morgan Stanley affiliate). Mahanagar Gas has acquired 100% stake in the fledgling CGD player and has stated Unison Enviro equity value at Rs 5.3 billion, which implies an enterprise value of ~Rs 6.4 billion (gross debt on the books of Unison Enviro as of FY22, stood at Rs 1.13 billion). The transaction value implies a price/sales multiple of 8.3 times and enterprise value/Ebitda of 3,128x times. While this may seem exorbitant, we note Unison Enviro has three reasonably large geographical areas in its portfolio (37,362 sqkm, ~10 million population and ~2 million households in aggregate). We also note that development so far in the first three years has been slow (our estimate based on the reported FY22 revenues suggests volumes at less than 0.1 million metric standard cubic metre per day). We believe volumes can easily ramp up to ~1 mmscmd by FY28E, subject to meaningful investments (Rs 7 billion-8 billion from FY21-FY27E) and good execution. At that volume level, Ebitda (assumed at an industry mid-range of Rs 6/standard cubic metre) is seen more than Rs 2 billion, which more than justifies the acquisition cost. .Click on the attachment to read the full report:.PNGRB Proposes Unified Tariff Across Entities; Positive For GAIL, Status Quo For GSPL: Motilal Oswal.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

Mahanagar Gas - Acquires CGD Player Unison Enviro; Prospects Appear Bright: ICICI Securities

Valuations look reasonable for the medium term.

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Mahanagar Gas - Acquires CGD Player Unison Enviro; Prospects Appear Bright: ICICI Securities

Valuations look reasonable for the medium term.

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