MAHANAGAR GAS LIMITED

Statement of the Chairman

Seventeenth Annual General Meeting of

Mr. B. C. Tripathi
Chairman

August 08, 2012

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STATEMENT OF THE CHAIRMAN Dear Shareholders,

At the outset, on behalf of the Board of Directors, I extend a warm welcome to you at the Seventeenth Annual General Meeting of your Company. The Annual Report containing the Directors Report and the audited accounts along with Auditors Report for the year ended March 31, 2012 have been with you for some time and with your permission, I take these as read.

Financial and Physical Performance

You will be happy to know that the year 2011-12 has been another successful year for the Company. Your Company registered an impressive increase of 23% in net turnover from ` 1051 Crores to ` 1297 Crores for the year 2011-12. The Profit after Tax reached ` 308 Crores representing a growth of around 37% over the previous year. The financial health of your Company continues to be sound and robust. The return on average capital employed improved to a healthy 30% per annum and EPS went up from ` 25 per share to ` 34 per share. Your Company does not have any interest bearing loan as on March 31, 2012. Long term rating of the Company has been reaffirmed as AAA by ICRA. The Company continued its efforts to achieve a healthy growth in developing Piped Natural Gas (PNG) and Compressed Natural Gas (CNG) infrastructure. The average gas sales volume of your Company during the financial year 2011-12 has increased to 1.95 MMSCMD and the highest daily throughput reached 2.33 MMSCMD. CNG business continued to grow during the year under review. MGL added 6 CNG stations to reach the present total of 151 CNG stations. More than 25,870 vehicles were converted on CNG during the year, taking the total number of converted CNG vehicles to over 2,39,900. The peak daily sale of CNG exceeded 11.85 lakh Kgs per day during the year. About 49,700 new homes were provided with the convenience of piped gas, taking total domestic connections to over 5.58 Lakhs. As regards pipeline infrastructure, your Company has cumulatively laid around 330 Kms of Steel pipeline and around 3290 Kms of Polyethylene pipeline.

Business Initiatives
Let me share some of the important highlights of the last financial year. Your Company commissioned the third City Gate Station (CGS) at Taloja, MIDC on June 23, 2012. The CGS at Taloja will cater to gas demand in the areas of Taloja MIDC, Kalamboli, Panvel , Kamothe, etc. Your Company has constructed a new office building at Mahape which will be helpful for better coordination and project execution while expanding infrastructure in Geographical Area 2. Your Company has made good progress by making Geographical Information System available for field applications through mobile and handheld devices. As a part of this initiative, successful trials have been completed for data acquisition from the field direct into the MGL ERP system. 2

The stability in ERP system has enabled newer initiatives in its Finance and HR sub-modules along with mobility solutions. Your Company is striving to be more customer friendly through implementation of meter reading based on smart phones, automated meter reading, mobile phone enabled bill payments, etc. MGL organised the first Knowledge Sharing Round Table of City Gas Distribution Companies in India at Mumbai this year. This forum for exchange of innovative ideas and practices for higher growth of CGD sector was well received by city gas distribution companies across the country. For better talent management, your Company has evolved an online competency assessment tool, viz., e-Competency Mapping (eCOMPMAPS) on which employees are assessed for their competency and training requirements. This is a completely in-house initiative and also in accordance with global practices.

Opportunities and Challenges

Your Company is well placed to tap existing as well as new CGD markets. Allocation of domestic gas, ability to source market priced gas from various sources through physical connectivity with the trunk pipeline networks and large demand potential in the existing authorized areas of your Company provide a good scope for growth. Major challenges before your Company are to roll out City Gas Distribution infrastructure in a time bound manner, meet the regulatory targets, develop competitive skills to prepare for the post-exclusivity scenario and source long term gas at competitive rates and terms. Availability of skilled manpower and contractors is also a challenge in view of the rapid growth expected in CGD business all over India. To address these, your Company is focusing on enhancing the skill base of its manpower and developing more vendors and contractors. Your Company is also actively focusing on efficient gas sourcing and supply management, targeted gas pricing, prudent fund management, and effective operations management.

Health, Safety & Security Environment

Your Company adheres to high safety and environmental standards as it believes that outstanding business performance requires outstanding HSSE performance. The Company has adopted best-in-class standards and safety practices in the industry. Your Company is accredited with OHSAS 18001:2007 for health and safety, ISO 14001 for Environmental and ISO 9001:2008 for Quality Management System.

Future Outlook
Your Company is committed to grow the business and increase its customer base. In the next 5 years, sales volumes are expected to be more than double. Over this period, your Company intends to increase its customer base to over 11 lakh households covering a population of over 55 lakhs, operate over 350 CNG stations, expand the steel pipeline network to around 600 KM and PE pipeline network to over 5500 KM. 3

An investment of ` 2600 Crores would be made to expand this CGD infrastructure. The Company has expansion plans to ensure greater security of supply which include commissioning of one more CGS at Ambernath connecting with the DUPL network. The CGS at Ambernath would be catering to gas demand of Kalyan, Dombivali, Ambernath, Badlapur, Ulhasnagar and Bhiwandi areas. Further, your Company plans to set up RLNG connectivity at Wadala from the nearby available RLNG network. Besides providing another source of supply to the Mumbai network, it will also cater to its future demand beyond the present gas supply from CGS at Wadala.

Corporate Social Responsibility

I am happy to share that your Company continues to make meaningful social investments, primarily in the areas of Health, Education and Environment. Many initiatives were taken during the year such as distribution of saplings in the community, organization of free health and eye check-up camps for the welfare of auto rickshaw and taxi drivers across Mumbai, Thane and Navi Mumbai.

Corporate Governance
Adoption of good governance practices has always been a high priority for your Company. Your Company goes beyond adherence of statutory frameworks to bring transparency, accountability and equity in all facets of its operations. The Company continuously endeavors to adopt innovative approaches for open and transparent management. Your Company has been voluntarily following, to the extent possible, Clause 49 of the Listing Agreement applicable to Listed Companies in respect of Corporate Governance. Your Company also continues to conduct voluntary Secretarial Audit.

Acknowledgement
Before I conclude, I would like to take this opportunity to thank all the stakeholders including GAIL (India) Limited, the BG Group, the Government of Maharashtra, employees, bankers, suppliers, contractors, and most importantly, our customers - all of whom have contributed to the success of your Company through their continued confidence and co-operation. On behalf of the Board of Directors and on my own behalf, I also express my sincere gratitude for the valuable support received from the Ministry of Petroleum & Natural Gas, Petroleum & Natural Gas Regulatory Board, Government of Maharashtra, Municipal Corporations of Greater Mumbai, Navi Mumbai, Thane, Mira-Bhayander, Kalyan, Dombivli, other State and Central Government Authorities, Mumbai Metropolitan Regional Development Authority, Maharashtra Industrial Development Corporation, and Police and Fire Brigade Authorities. I would also like to take this opportunity to express my gratitude to my colleagues on the Board for their constant support. I am confident that your Company will continue to deliver sustainable business growth and higher value creation for all stakeholders. Thank you very much ladies and gentlemen. (B.C. Tripathi)

(This does not purport to be a record of the proceeding of the Annual General Meeting.)