Adani Total Gas: Navigating Growth and Costs in H1 FY26

Adani Total Gas Limited (ATGL) has reported a robust operational performance for the first half of fiscal year 2026 (H1 FY26), marked by significant volume growth and infrastructure expansion. However, the company faced headwinds from escalating gas costs and adverse foreign exchange movements, which impacted its profitability despite strong revenue generation. The management's strategic focus on diversification, digitalization, and disciplined gas sourcing remains key to its long-term vision.

ATGL achieved an impressive 16% year-on-year (YoY) overall volume growth in H1 FY26. This was primarily driven by a substantial 19% YoY increase in Compressed Natural Gas (CNG) volumes, while Piped Natural Gas (PNG) volumes also grew by 9% YoY. The company's network expanded significantly, with 15 new CNG stations added in H1 FY26, bringing the total to 662. The steel pipeline network grew to approximately 14,524 inch-km, reinforcing its distribution backbone. A major milestone was surpassed with over 1 million PNG home connections, and commercial and industrial connections increased to 9,603. The e-mobility segment also saw substantial growth, with 4,209 installed charging points across 26 states and Union Territories, representing 42 megawatts of installed capacity.

Operational Expansion and Diversification

ATGL's commitment to expanding its footprint is evident across its core City Gas Distribution (CGD) business and new energy verticals. The company's e-mobility business, Adani Total Energy's e-mobility limited, is rapidly progressing towards a target of 10,000 EV charging points and aims to reach 100 megawatts of capacity soon. In the biomass segment, ATGL sold 804 MT of Compressed Biogas (CBG) in H1 FY26 and achieved 2,388 MT in manure sales, with the Harit Amrit brand launched in key regions. These diversification efforts are crucial for future-proofing the business and aligning with India's energy transition goals.

Financial Performance and Cost Pressures

While revenue from operations for H1 FY26 grew by 20% to INR 3,060 crore (consolidated: INR 3,075 crore), profitability faced significant pressure. The gas cost increased by 30% primarily due to a lower allocation of Administered Price Mechanism (APM) gas, which was replaced by higher-priced New Well Gas (NWG) and High Pressure High Temperature (HPHT) gas. Additionally, a 4% appreciation of the exchange rate against the INR further exacerbated gas costs. As a result, consolidated EBITDA for H1 FY26 stood at INR 605 crore, a slight decrease from INR 618 crore in H1 FY25. Consolidated Profit Before Tax (PBT) declined to INR 441 crore from INR 479 crore, and Profit After Tax (PAT) decreased to INR 329 crore from INR 357 crore in the corresponding period.

Strategic Sourcing and Digital Leadership

To counter the volatility in gas prices and ensure supply resilience, ATGL has implemented a diversified gas sourcing strategy. This includes a mix of Brent-linked contracts (approximately 13% of the portfolio), Henry Hub-based contracts (16-17%), and spot market purchases. This flexible approach, coupled with procuring HPHT volumes from IGX, helps optimize the average cost of gas. The company's digital transformation initiatives, spearheaded by the SOUL (Single Digital Business Platform), provide 100% connectivity and integrated GIS for real-time operational visibility and efficiency. Customer-centric digital solutions, including the Adani Gas App, video contact centers, and AI-driven support, are enhancing customer delight and streamlining services.

Healthy Balance Sheet and Outlook

ATGL maintains a healthy balance sheet, with Net Debt to EBITDA at 1.16x and Gross Debt to Fixed Assets at 33%, indicating prudent financial management and lower leverage. The company's credit ratings were upgraded to AA+ (Stable) by ICRA, CARE, and CRISIL, reflecting its strong operational performance, robust financial profile, and solid promoter backing. Management remains confident in its ability to deliver double-digit volume growth and expects its joint ventures to contribute to better profitability in the coming quarters. The long-term outlook is positive, with India's natural gas share in the fuel mix projected to increase from 7% to 15% by 2030, presenting significant growth opportunities for ATGL.