Indraprastha Gas (IGL)

Basis of our Recommendation

Indraprastha Gas Limited (IGL) is currently navigating a challenging landscape characterized by high gas costs and regulatory pressures, particularly in its core Delhi market. Management has indicated a strategic pivot towards diversifying its volume mix, with significant growth in non-Delhi regions contributing to overall performance. This shift is crucial as it mitigates the impact of the EV-only mandates for commercial vehicles, which pose a long-term risk. Vista's financial outlook reflects stable revenue growth, albeit with margin pressures expected to persist due to elevated gas sourcing costs. The company's proactive measures, including LNG hedging and infrastructure expansion, are expected to support a gradual recovery in margins. The gas utilities sector is experiencing a growth phase, bolstered by government initiatives to expand piped natural gas connections, although competitive pricing pressures remain a concern. Over the next 12-24 months, key opportunities include leveraging the growth in passenger vehicle conversions and expanding into new geographic areas, while watchpoints include geopolitical risks affecting gas prices and ongoing regulatory challenges. Overall, IGL's valuation appears fair, aligning with its intrinsic value amidst these dynamics