Indraprastha Gas Shares Tumble Nearly 11% On Delhi's EV Adoption Push

Shares of Indraprastha Gas Ltd. tumbled nearly 11% on Friday after Jefferies downgraded the stock on increasing risk of EV policy adoption by the transportation service providers in Delhi.

The EV policy adoption will potentially impact about 30% of the company's overall volumes starting in FY25, according to Jefferies. New gas agencies are unlikely to compensate for the slowdown in the national capital region, as it accounts for 88% of IGL's volumes.

This comes as the Delhi government has submitted the policy draft for final approval to the Lieutenant Governor. This would entail EV adoption by delivery service providers and e-commerce entities, along with cab aggregators.

• Downgrades the company to 'hold' from 'buy', and reduces the target price from Rs 565 apiece to Rs 465 per share, implying a 3% downside over the next 12 months.

• The EV adoption policy mandates phase-wise conversion of aggregators' fleet. As per the rules, the share of EVs in new purchases should rise by 50% in three years and 100% in the next five years, from the date of notification. The aggregators would also need to switch to an all-EV fleet by April 1, 2030.

• While EV penetration in the NCR is largely driven by two- and three-wheelers, CNG vehicles have a market share of about 18%, while EVs  at 4% for the four wheeler or the passenger vehicle segment, as per Jefferies.

• Cab aggregators in Delhi comprise 30% of IGL's overall volume, and Uber has placed an order for 25,000 EV cars with Tata Motors in the first quarter of the current calendar year.

• Similarly, DTC buses and three-wheelers constitute about 15% of IGL's volumes. This part of its market share also faces EV risk as about 5,500 buses are being procured and three-wheeler EV economics are favourable, as per Jefferies.

• The company is expanding gas agencies in Meerut, Muzaffarnagar, etc., but NCR accounts for 88% of overall volumes, and growth in new agencies would struggle to compensate for any slowdown in NCR.

• Jefferies lowers volume growth estimates for FY24 to FY26 as rising EV risks from regulatory intervention in the NCR cap volume upside.

Shares of the company fell as much as 10.85% to Rs 408 apiece, the lowest level since Dec. 26, 2022. It pared losses to trade 9.58% lower at Rs 413.80 apiece, compared to a 0.36% decline in the benchmark NSE Nifty 50 as of 10:47 a.m.

It has fallen 0.05% on a year-to-date basis. The total traded volume so far in the day stood at 24 times its 30-day average. The relative strength index was at 29, implying that the stock maybe oversold.

Twenty-five out of the 37 analysts tracking the company maintain a 'buy' rating, eight recommend a 'hold', and four suggest a 'sell,' according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 28.3%.