Alpha | Indraprastha Gas Ltd.- Equity Research Desk

Indraprastha Gas Ltd. – Alternate Fuel

Indraprastha Gas Limited (IGL) was established in December 1998 as a joint venture (JV) between GAIL (India) Ltd., Bharat Petroleum Corporation Limited (BPCL), and the Government of National Capital Territory of Delhi (GNCTD) to implement the city gas distribution project (CGD) in the NCT of Delhi. As of March 31, 2022, GAIL and BPCL held equity of 22.5% each while GNCTD owned 5% equity in the company. Over the years, the company has made two acquisitions in the CGD business viz. 50% stake in Central UP Gas Limited for Rs.68crs and 50% stake in Maharashtra Natural Gas Limited (MNGL) for Rs.190crs. CUGL serves the cities of Kanpur, Bareilly, and Jhansi in Uttar Pradesh, while MNGL serves Pune and its nearby areas.

Valuation:

IGL posted strong operational performance in the current quarter, with higher-than-expected volume growth, led by its expanding geographical footprint. Although electric vehicle (EV) sales could impact CNG volume, the company plans to venture into the EV segment by setting up 50 battery swapping stations. Further, IGL is engaging with state governments to convert their fleets to CNG. We recommend an ACCUMULATE rating in the stock with a revised target price (TP) of Rs.530, 17x FY24E EPS.