Indraprastha Gas Q4 Results Review - Long-Term Headwinds Persist: Motilal Oswal

Motilal Oswal Report

Indraprastha Gas Ltd. reported in-line Ebitda of Rs 4.7 billion in Q4 FY23, with Ebitda/standard cubic metre at Rs 6.3 (down 13% YoY/up 9% QoQ).

Volumes increased 7% YoY to 8.3 million metric standard cubic metre per day. The management expects volumes to reach 9 mmscmd in FY24, driven primarily by growth from new geographical areas.

Compressed natural gas conversions are also expected to increase, driven by the stability in CNG prices and the introduction of new CNG vehicle models by original equipment manufacturers.

IGL's management highlighted that buses account for ~20% of CNG volumes (Delhi Transport Corporation /Delhi Integrated Multi-Modal Transit System buses accounting for half of it), while taxis and three wheelers account for 30% of volumes.

Hence, aggressive electric vehicle policies by the Delhi government may challenge volume growth in the medium-long term. Although IGL has guided for an Ebitda/scm of Rs 7-8, we model a lower Ebitda/scm of ~Rs 6 in our base case, considering likely margin pressure due to high proportion of industrial component in incremental volumes.

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