Rising gas costs drag Adani Total Gas Q1 profit down 14%
Adani Total Gas reported a 14% drop in first-quarter profit as surging natural gas costs and higher duties outpaced a 27% jump in revenue, highlighting the margin vulnerabilities in city gas distribution.
Adani Total Gas posted a first-quarter profit of Rs 142 crore, down 14% from Rs 163 crore in the same period a year earlier. Earnings also fell 15% sequentially, declining from Rs 168 crore in the March quarter. The drop in profitability occurred despite the company achieving a 27% year-over-year increase in total income, which reached Rs 1,920 crore.
The divergence between the top and bottom lines was driven by an expense base that grew significantly faster than revenue. Total expenses climbed to Rs 1,742 crore in the quarter, a sharp increase from Rs 1,288 crore in the prior year. On a sequential basis, costs rose from Rs 1,492 crore in the March quarter, outpacing the 13% sequential revenue growth.
Natural gas and traded items represented the primary margin drag. This specific cost surged to Rs 1,302 crore from Rs 928 crore a year earlier, marking a roughly 40% increase. It also rose 22% sequentially from Rs 1,064 crore. For a city gas distributor, this lag between rising raw material costs and the ability to pass those costs through to commercial and residential consumers directly compresses profitability.
The cost pressures extended beyond raw materials. Excise duty increased to Rs 153 crore from Rs 120 crore a year ago, adding another layer to the operating burden. Additionally, finance costs climbed to Rs 39 crore from Rs 28 crore, indicating higher debt servicing requirements, while depreciation and amortisation expenses rose to Rs 67 crore from Rs 56 crore.
The company's tax expense provided a partial offset to the operating pressures, falling to Rs 45 crore from Rs 57 crore in the year-ago period. Total comprehensive income for the quarter stood at Rs 141 crore, compared to Rs 163 crore previously. Other comprehensive income posted a narrower loss of Rs 0.58 crore, improving from a loss of Rs 2.07 crore a year earlier.
For market participants, these results underscore a critical operational risk within the gas distribution sector. While the 27% jump in total income to Rs 1,920 crore indicates robust underlying demand and volume growth, the contracting bottom line reveals the structural vulnerability to input cost inflation. Investors will likely monitor whether management can implement faster pricing pass-through mechanisms or secure favorable long-term supply contracts to protect margins in future quarters.
