Indraprastha Gas Ltd (IGL) was incorporated in 1988 to take over the gas distribution project from GAIL India Ltd in the national capital region. With the backing of strong promoters—GAIL and BPCL, the company supplies piped natural gas (PNG) to the domestic and commercial sector, while it provides compressed natural gas (CNG) to the transport sector. The company reported a 37% profit growth in the third quarter of the current financial year, beating street estimates expectations. Standalone net profit for the December quarter came in at Rs 145 crore versus Rs 106 crore in the corresponding quarter of last year. This is the fourth consecutive quarter of double digit profit growth for the company. The 37% rise in net profit is attributable to higher sales volume, reduction in interest cost and higher other income. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 27% to Rs 247 crore, compared to Rs 194 crore last year. Revenue during the October-December quarter increased marginally to Rs 1,043 crore, from Rs 1,021 crore in the same quarter last year. The company saw overall year-on-year volume growth of 15% during the quarter. Compressed natural gas (CNG) volume increased 11% from a year earlier, while piped natural gas (PNG) volume grew at 20%. Higher sales volumes however did not translate to a sharp jump in revenue. This was because the company passed on some of the benefits of lower gas prices to customers as the government had reduced administered gas prices by 18% during the third quarter. IGL also holds a 50% stake in Central UP Gas Ltd and Maharashtra Natural Gas Ltd, having invested Rs 69 crore and Rs 180 crore in them, respectively. These present tremendous growth opportunities to IGL in Central UP and Pune. The uptick in gas volumes is likely to continue for IGL, the sole compressed natural gas (CNG) retailer in the national capital region. It has been one of the biggest beneficiaries of the gradual shift towards CNG-fitted vehicles on the back of stricter environmental norms and rising petrol prices. Likely addition of 1,000 new buses in NCR over the next few years along with car taxi conversion will help maintain demand traction and drive a 30% CAGR for IGL. The IGL stock presently hovering around the Rs 1,000 level can be bought into for a 25% price appreciation during the next two quarters.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.