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Indraprastha Gas Limited Incorporated in 1998, is a joint venture between
GAIL(India) Ltd and Bharat Petroleum Corporation Ltd. It is engaged in the retail gas
distribution business of supplying Compressed Natural Gas (CNG) to transport
sector, Piped Natural Gas (PNG) to domestic and commercial sectors and Regasified
Liquid Natural Gas(R-LNG) to industrial sector in National Capital Region of Delhi. As
on 31 March 2010, company derives 89% of revenue from CNG, 8% from
commercial and industrial supply and 3% from household sale.
Increasing volume and price hike to fuel the growth: Currently, IGL has 240 CNG stations and is expected to enhance it
to 280 odd stations by the end of this year with compression capacity of ~ 40 lakh kg per day. The key growth drivers for
increase in demand for CNG are car manufacturers (Maruti Suzuki, Toyota, GM) coming up with CNG variants and
conversion of existing vehicles to CNG. Post increase of APM gas price to $4.2 mmbtu by Government, IGL has
successfully been able to pass on price hike of ` 5.6/kg to ` 27.5/kg. Inspite of this price jump in CNG in Delhi, CNG based
vehicles still enjoys 59% price advantage over petrol, 40% over diesel and 47% over auto LPG respectively. Management
expects PNG connections to touch 0.5 mn in coming five years from 0.2 mn presently.
Expansion Plans: IGL plans to spend ~ ` 300 bn in next five years to expand its CNG stations and PNG network. The
company’s expansion plan in Ghaziabad is on track post Delhi high court’s favorable verdict in January 2010 and recent
approval of petroleum ministry to lay a CGD network. It has 3 CNG stations operational including one mother station and
two daughter booster stations and already entered into SPA with industrial customers to supply PNG in the current quarter.
Recently PNGRB has invited bids for retailing gas in eight cities in four states including West Bengal, Gujarat, Punjab and
Haryana. With this announcement IGL might bid to explore this opportunity to spread out its operation out side NCR.
Valuation: At the CMP of ` 325. IGL trades at a P/E of 17.3 and 14.8 on FY11E & FY12E consensus EPS estimates of
` 18.9 and ` 22.0 respectively. On EV/EBITDA basis the stock is available at a multiple of 9.1 and 7.5 on FY11E and FY12E
consensus estimate. We recommend a “BUY” on the stock with medium to long term view.
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