Shares of Adani Total Gas Declined Following the 19% Drop in Q3 FY25 Net Profits

Adani Total Gas shares traded in the red on January 28 following the company's third-quarter earnings report. The consolidated net profit for the December 2024 quarter dropped by 19% to ₹142.38 crore, down from ₹176.64 crore recorded during the same period last year. This marks a 23.28% decline from Rs 185.60 crore reported in the previous quarter. 

Market Performance

During Tuesday's trading session, Adani Total Gas shares opened flat but initially climbed to a day's high of Rs 627.15 per share on the NSE, reflecting a 1.25% rise from its previous close. However, the stock later lost momentum, slipping into negative territory. Shares were down by 1.09%, trading at ₹612.65 by 10:10 AM.

Why the Earnings Declined

The primary factor behind the decline in net profit was the increase in operating costs, primarily due to the government's reduction of cheaper gas supplies to city gas distributors, including Adani Total Gas, during October and November 2024. This move was attributed to lower gas production.

To maintain an uninterrupted supply of compressed natural gas (CNG) to consumers, the company had to resort to costlier natural gas purchases, leading to a 20% year-on-year increase in gas procurement costs.

Revenue Growth Despite Profit Decline

Despite the profit setback, Adani Total Gas reported a 12.61% increase in revenue from operations, which stood at Rs 1,400.88 crore for the third quarter, up from Rs 1,244 crore in the corresponding period of the previous fiscal year.

Key Financial Highlights

• Revenue: Rs 1,400.88 crore (up 12.61% YoY)
• Net Profit: Rs 142.38 crore (down 19% YoY)
• Sequential Profit Decline: 23.28% from Rs 185.60 crore
• Natural Gas Procurement Costs: Increased by 20% YoY

Government Gas Supply Restrictions and Restoration

The government's decision to reduce cheaper gas supplies during October and November negatively impacted Adani Total Gas. However, gas supplies were later restored in January 2025. The temporary restriction forced the company to procure gas at higher prices, straining its profitability.

Industry Context

As a significant player in this segment, Adani Total Gas is navigating these challenges while striving to maintain its market position.

Summary

Adani Total Gas faced a challenging third quarter, marked by a significant decline in net profit despite revenue growth. The government's temporary reduction in gas supplies and subsequent increase in procurement costs weighed heavily on the company's bottom line. With gas supplies restored in January, the company is expected to focus on stabilizing its operations and improving profitability.