INDRAPRASTHA GAS ::DIWALI Muharat PICKS:: Kotak Sec,

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INDRAPRASTHA GAS
TARGET PRICE: Rs. 450
RECOMMENDATION: BUY

INVESTMENT RATIONALE
 IGL operates city gas distribution in Delhi and its adjoining areas like Noida,
Greater Noida and Ghaziabad. Supplies PNG to commercial and retail clients
 In CY12, PNG connections are expected to cross 13,000 in Nodia from current
~8,000 connections. PNG is flowing through the main pipelines in 21 sectors.
Work on laying the pipelines is in progress in ten other sectors apart from the
Phase-II industrial belt, NSEZ, Hosiery Complex and Rajat Vihar.
 Also, IGL has planned to open 5 more company owned CNG stations in Nodia
which will be operational by Mar’12. Management has further guided that
additional 50 stations will be operational by March’12 once approval is granted.
 In order to secure gas supply, IGL is in negotiating with GAIL (promoter) to enter
into a long-term contract. We believe IGL has strong parental support which will
help in securing RLNG at most competitive prices.
 We expect large scale conversion of private cars into CNG.
 As mandated by Delhi government, LCVs will be converted into CNG which will
boost the CNG sales.
 In FY12E, IGL will be investing ~Rs.6 Bn in Delhi and NCR to expand its
network and in FY13E Rs.5 Bn.
 In June’11, the government granted approval to IGL for use of unutilized APM
allocations for Gurgaon/Faridabad for its own operations. This has resulted in
lower raw material cost for IGL. The full benefit will be reflected in next quarter.
IGL was earlier getting domestic gas to the extent of about 2.3 mscmd (2
mscmd of APM gas for Delhi, 0.15 for Noida/Greater Noida, and 0.15 of KG gas)
this has now increased to about 2.6 mscmd.
RISKS & CONCERNS
 IGL did not win any CGD project in two round of bidding by PNGRB
 Competition from domestic LPG gas restricts its pricing power in PNG segment.

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DIWALI Muharat PICKS 2011 :: Kotak Sec,