Incorporated in 1998, Indraprastha Gas Limited (“IGL” or the “Company”) is a Joint Venture of GAIL and BPCL. Govt. of NCT of Delhi also holds 5% equity in IGL.
IGL is engaged in retail gas distribution business, supplying Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) and Re-gasified Liquified Natural Gas (R-LNG).
CNG is used primarily in transport sector and PNG is utilized in domestic and commercial sectors while R-LNG is supplied to industrial establishments.
IGL started its operations in Delhi in 1999 with only 9 CNG stations and 1,000 PNG consumers and currently the Company has its operations in Delhi, Noida, Greater Noida and Ghaziabad with 446 CNG stations, 8.92 lacs residential consumers and 3.4 thousand industrial / commercial customers.
| Parameter | Mar -13 | Mar -15 | Mar-17 | Mar -18 |
| No. of CNG Station | 324 | 326 | 421 | 446 |
| Compression Capacity (Lakhs kg/day) | 63.83 | 68.49 | 74.00 | 76.05 |
| Average CNG Sale (Lakhs kg/day) | 20.72 | 22.07 | 25.24 | 27.89 |
Promoter Holding – 45%
(BPCL – 22.50 % and GAIL (India) – 22.50 %)
Indraprastha Gas Financial Position
| Particulars | FY14 | FY15 | FY16 | FY17 | FY18 |
| Revenue (In Rs. Cr.) | 3,922.16 | 3,680.99 | 3,685.79 | 4,222.51 | 5,071.57 |
| Growth | – | -6.15% | 0.13% | 14.56% | 20.11% |
| EBITDA (In Rs. Cr.) | 782.39 | 793.04 | 771.71 | 963.75 | 1,114.39 |
| EBITDA Margin | 19.95% | 21.54% | 20.94% | 22.82% | 21.97% |
| PAT (In Rs. Cr.) | 360.26 | 437.73 | 464.13 | 606.34 | 721.72 |
| PAT Margin | 9.19% | 11.89% | 12.59% | 14.36% | 14.23% |
| EPS (In Rs.) | 5.15 | 6.25 | 6.63 | 8.66 | 10.31 |
| EPS Growth Rate | – | 22% | 6% | 31% | 19% |
| Historic P/E (Closing Price of 31st March) | 11.62 | 13.41 | 17.18 | 23.44 | 27.10 |
| CURRENT P/E (based on price of 9th July – Rs. 254.50) | 24.68 | ||||
| D/E | 0.18 | 0.07 | 0.00 | 0.00 | 0.00 |
| Interest Coverage | 17.73 | 26.59 | 85.27 | 796.49 | 659.40 |
| ROCE | 37.54% | 35.08% | 36.48% | 32.00% | 30.56% |
| ROE | 20.43% | 20.69% | 21.94% | 20.13% | 19.79% |
*IGL split its share in the ratio of 5:1 on 9 Nov 2017. EPS and P/E numbers are adjusted to reflect the effect of issue.
Peer Comparison – Mahanagar Gas
| Particulars | FY14 | FY15 | FY16 | FY17 | FY18 | |||
| Revenue (In Rs. Cr.) | 1,885.15 | 2,094.93 | 2,078.30 | 2,239.07 | 2,452.92 | |||
| Growth | – | 11.13% | -0.79% | 7.74% | 9.55% | |||
| EBITDA (In Rs. Cr.) | 488.22 | 489.71 | 509.29 | 644.15 | 780.11 | |||
| EBITDA Margin | 25.90% | 23.38% | 24.51% | 28.77% | 31.80% | |||
| PAT (In Rs. Cr.) | 297.25 | 301.00 | 310.89 | 393.42 | 477.87 | |||
| PAT Margin | 15.77% | 14.37% | 14.96% | 17.57% | 19.48% | |||
| EPS (In Rs.) | 30.15 | 30.54 | 31.47 | 39.83 | 48.38 | |||
| EPS Growth Rate | – | 1% | 3% | 27% | 21% | |||
| Historic P/E (Closing Price of 31st March) | 0.00 | 0.00 | 16.52 | 22.48 | 19.80 | |||
| CURRENT P/E (based on price of 9th July – Rs. 832.95) | 17.22 | |||||||
| D/E | 0.01 | 0.01 | 0.00 | 0.00 | 0.00 | |||
| Interest Coverage | 2324.86 | 404.72 | 229.41 | 631.52 | 8667.89 | |||
| ROCE | 37.41% | 34.41% | 36.07% | 34.96% | 37.21% | |||
| ROE | 22.92% | 21.39% | 22.09% | 21.38% | 22.81% | |||
| Particulars | IGL | MGL |
| No. of shares (31st Mar 2018) | 70.00 Cr. | 9.88 Cr. |
| Price (29th June) | Rs. 254.50 | Rs. 832.95 |
| Market Cap (In Rs. Cr.) | 17,815.02 | 8,227.70 |
| Shareholder funds (In Rs. Cr.) | 3,646.95 | 2,095.35 |
| Minority Interest (In Rs. Cr.) | 0.00 | 0.00 |
| Debt (In Rs. Cr.) | 0.00 | 1.20 |
| Cash (In Rs. Cr.) | 558.03 | 91.88 |
| Enterprise Value (In Rs. Cr.) | 17,256.99 | 8,137.02 |
| P/E | 26.68 | 17.22 |
WHAT’S DRIVING THE STOCK
Strong Volume Growth Expected
Volume trajectory for IGL is likely to remain strong, given rising pollution concerns and addition of new buses. State government has accepted the proposal to procure 2,000 new buses in FY 2019. Also, opening of new CNG stations and continued traction in taxis/private car conversion will aid volumes. Moreover, favourable regulatory/judiciary/policy regime such as ban on new diesel vehicles above 2000cc, ban on use of polluting fuels in NCR region will aid volume momentum in medium term.
| (In MMSCM) | FY 2013 | FY 2014 | FY 2015 | FY 2016 | FY 2017 | FY 2018 |
| CNG | 1,005 | 1,028 | 1,073 | 1,123 | 1,269 | 1,412 |
| PNG | 333 | 356 | 330 | 342 | 406 | 479 |
| Total Sale | 1,338 | 1,384 | 1,403 | 1,465 | 1,675 | 1,891 |
| Daily Average | 3.67 | 3.79 | 3.84 | 4.00 | 4.59 | 5.18 |
Expansion of its Pipeline Network
The Company has started sale of CNG at two outlets in Rewari and sale of PNG to Domestic households. IGL plans to add 6 more CNG outlets and to connect 1500 domestic households in FY 2019.
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IGL recently got entry into Gurugram to lay infrastructure.
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IGL has been authorised for Karnal geographical area in the 8th round of bidding by PNGRB (Petroleum and Natural Gas Regulatory Board).
- Besides new geographies, the Company has been expanding its infrastructure in existing areas to consolidate its position for increased sales volume growth.
- Investment in Maharashtra Natural Gas (MNGL) and Central UP Gas (CUGL) – IGL owns 50% stakein CUGL and MNGL. The investment in these companies has given IGL, an access to gas demand in Pune, Kanpur, Bareilly, Unnao and Jhansi.
Recent Price Hike
In May 2018, IGL has increased the price of CNG by Rs. 1.36 per kg in Delhi and Rs. 1.55 per kg in Noida. The Company had earlier raised the prices by Rs. 0.9 per kg in Delhi and Rs. 1 per kg in Noida in April 2018.
One of the factors that helps gas distributors enjoy pricing power is cheaper gas price relative to petroleum fuels. For instance, CNG is 48% and 62% cheaper than diesel and petrol, respectively. Piped natural gas (PNG) is 11% and 33% cheaper than subsidised and non-subsidised LPG cylinder.
New Round of Bid by PNGRB to Set Up City Gas Distribution Centres
In May 2018, PNGRB has rolled out a bid round of city gas distribution network across 86 geographical areas (GAs) comprising 156 districts. IGL has announced that it plans to bid for 16-20 GAs on offer during this round of auctions and will focus on northern region.
WHAT’S DRAGGING THE STOCK
Adoption of Electric Vehicles
Potential adoption of electric vehicles in the long run, particularly for public transport, could pose a material threat to the long-term volumes for CNG business in India.
Increase in Cost Effectiveness of the Alternate Fuels
CNG sold by the Company is benchmarked to prices of other fuels available to customers such as petrol, diesel and other liquid fuels, which are again benchmarked to crude oil prices. Any change in prices of crude or alternative fuels that make natural gas less cost effective for customers, would affect IGL’s cash flows.
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