Indraprastha Gas is recommended by Nomura research

Advantage ‘CNG’ continues
 Advantage ‘CNG’ keeps increasing
Despite the sharp 26% increase in CNG prices (post the APM gas
price increase), we expect CNG growth to continue unabated as it still
remains, by far, the cheapest transportation fuel. CNG availability is
likely to increase significantly with the addition of nearly 50 new
outlets, where construction is complete and these await a few final
clearances. In recent months, key auto makers have unveiled plans to
launch CNG versions of their popular models. This, in our view, could
step-up discretionary demand for CNG vehicles.
 Gas price hike – not a concern now
Investors’ concerns on the risk of future gas price hikes and IGL's
ability to pass on these hikes have virtually vanished, in our view,
because the bulk of Indian gas (APM and KG-D6) is now priced at
US$4.2/mmbtu, and these prices are not expected to change
significantly for the next four to five years, we believe. Also importantly,
IGL retains the ability to marginally adjust prices for any small
variations in gas cost – as reflected in its price hike of Rs0.25-0.40 per
kg in Delhi/NCR from 1 October 2010.
 Regulatory chaos easing – NCR expansion on fast track
Concerns about IGL being authorised to lay network in Ghaziabad
seem to be behind us now – it has stepped-up its expansion program
and plans to spend around Rs5bn over the next five years in the city.
In our view, IGL is also likely to bid for three new cities (Jallandhar,
Panipat and Ludhiana) for which bids are being invited, and it has
already appointed consultants to conduct feasibility studies.
 Maintain BUY and price target of Rs440
Our DCF based price target of Rs440 implies potential upside of 44%.
Our PT implies an FY12F P/E of 19.3x, while the stock trades at 13.4x.
IGL remains our preferred gas downstream play. Maintain BUY.