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http://www.kotaksecurities.com/pdf/dmb/MorningInsight10042012.pdf
INDRAPRASTHA GAS LTD (IGL)
PRICE: RS.345 RECOMMENDATION: UNDER REVIEW
TARGET PRICE: NA
The Petroleum and Natural Gas Regulatory Board (PNGRB) has directed IGL to reduce prices for CNG, PNG and industrial consumers. This is with retrospective
effect (wef 1 April 2008).
Earlier IGL had proposed to the Board a network rate of Rs 104.05 per million
British thermal units and compression charge of Rs 6.66 per kg of CNG. The
Board approved Rs 38.58 and Rs 2.75, respectively, bringing these down by 63%
and 58.7%.
The network rate is expected to be Rs 1.86/kg as against the Rs 5.02/kg given by
IGL, a difference of Rs 3.16/kg. Another Rs 3.91/kg impact will come from in reduction of compression charges. Together, this means a price reduction of Rs
7.07 per kg of CNG from the current Rs 35.45. We believe the company could
dispute this regulatory order. IGL, in the past, has disputed the regulator’s missive
related to authorization.
Similarly, in the case of PNG, the network rate according to the order is Rs 1.33
per standard cubic metre (SCM) against the Rs 3.59 from IGL. There is a significant drop of Rs 2.26 per SCM from the current level of Rs 18.95/scm.
PNGRB has also asked the company to make refunds since FY09 based on the
changes, since that was the first financial year of operation for the company after the regulator came into being in October 2007. The regulator has asked that
its order be implemented immediately.
While company can make up for lower tariff by higher marketing margin but still
it won’t be able to recover all its losses, we believe.
PNGRB has now directed IGL to give a break-up of network rate, compression
charge and ‘last-mile connectivity’, if any, in each bill.
We believe this is a significantly negative development for the Company and will
have a major impact on the earnings, if implemented. We believe relief from
either Appellate Tribunal or any superior court will be an upside risk to the share
price. IGL would challenge this order, we opine. We would like to wait for more
clarity on the same. We will release a detailed report later.
For the time being we will maintain our earlier financials and wait for more clarity
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight10042012.pdf
INDRAPRASTHA GAS LTD (IGL)
PRICE: RS.345 RECOMMENDATION: UNDER REVIEW
TARGET PRICE: NA
The Petroleum and Natural Gas Regulatory Board (PNGRB) has directed IGL to reduce prices for CNG, PNG and industrial consumers. This is with retrospective
effect (wef 1 April 2008).
Earlier IGL had proposed to the Board a network rate of Rs 104.05 per million
British thermal units and compression charge of Rs 6.66 per kg of CNG. The
Board approved Rs 38.58 and Rs 2.75, respectively, bringing these down by 63%
and 58.7%.
The network rate is expected to be Rs 1.86/kg as against the Rs 5.02/kg given by
IGL, a difference of Rs 3.16/kg. Another Rs 3.91/kg impact will come from in reduction of compression charges. Together, this means a price reduction of Rs
7.07 per kg of CNG from the current Rs 35.45. We believe the company could
dispute this regulatory order. IGL, in the past, has disputed the regulator’s missive
related to authorization.
Similarly, in the case of PNG, the network rate according to the order is Rs 1.33
per standard cubic metre (SCM) against the Rs 3.59 from IGL. There is a significant drop of Rs 2.26 per SCM from the current level of Rs 18.95/scm.
PNGRB has also asked the company to make refunds since FY09 based on the
changes, since that was the first financial year of operation for the company after the regulator came into being in October 2007. The regulator has asked that
its order be implemented immediately.
While company can make up for lower tariff by higher marketing margin but still
it won’t be able to recover all its losses, we believe.
PNGRB has now directed IGL to give a break-up of network rate, compression
charge and ‘last-mile connectivity’, if any, in each bill.
We believe this is a significantly negative development for the Company and will
have a major impact on the earnings, if implemented. We believe relief from
either Appellate Tribunal or any superior court will be an upside risk to the share
price. IGL would challenge this order, we opine. We would like to wait for more
clarity on the same. We will release a detailed report later.
For the time being we will maintain our earlier financials and wait for more clarity
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