Tag: Indraprastha Gas

CLSA upgrades IGL, raises price target on both IGL and MGL on favourable regulatory regime

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm CLSA upgraded Indraprastha Gas to buy while raised its price target on both IGL and its peer Mahanagar Gas, driven by more favourable regulatory regime and pricing power.

The brokerage has upgraded state-owned IGL to ‘Buy’ and raised its price target to Rs 585 from Rs 420 earlier, reflecting potential gains of around 37 percent.

CLSA also raised the Earning Per Share (EPS) forecast to 6-15 percent led by expected double-digit volume growth.

The brokerage on the other hand maintained its ‘Buy’ call on MGL and hiked the price target to Rs 1,260 per share, implying an upside of around 30 percent from the current trading price.

CLSA also raised the price-to-earnings (PE) multiple from 11x to 13x for MGL. The brokerage in a note mentioned that regulatory regime is expected to become more favourable for city gas distributors starting April, and pricing power would return.

CLSA noted that the gas pricing formula has proposed a price ceiling at $6.5 per mmBtu, which will drive a 24 percent cut in the price of domestic gas on April 1, 2023.

Also, despite the price hike CNG is still a favoured fuel and a push by OEMs should drive volume growth, it noted.

CLSA earlier had stated that a sharp 50 percent decline in spot LNG prices to $14 per MMBtu is a clear positive for most Indian gas companies.

The brokerage expects Indian city gas distributors like IGL, MGL and Gujarat Gas Ltd to see strong margins in the last quarter of the current fiscal due to the halving of spot LNG prices compared to that in December.

IGL supplies CNG and pipe natural gas to homes and industrial consumers in the Delhi-National Capital Region (NCR) and adjoining areas.

Shares of IGL are trading 3.3 percent higher at Rs 441, while those of MGL are trading 1.2 percent higher at Rs 982.10.

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IGL to focus on CNG conversion and not hiking rates to counter higher input costs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indraprastha Gas (IGL) reported earnings for the December-ended quarter largely in line but there are many tailwinds for the company in terms of gas pricing ahead. The company’s margin saw a decline on a sequential basis while both volumes and EBITDA per standard cubic meter (SCM) were absolutely in line.

Speaking to CNBC-TV18 after the earnings report, Sanjay Kumar, MD of IGL said that the company’s focus is on increasing CNG conversions in the long term.

He also emphasized that the company is committed to keeping prices stable, as they do not want to burden their customers with any additional costs.

Also Read | MGL reduces CNG price in Mumbai by Rs 2.50 per kg; leaves PNG prices unchanged

“We have always maintained the policy of keeping the volume intact, the volume growth should be there so that the convergence continue and let the market be there rather than look at the short-term profitability,” Kumar said.

Speaking about demand, Kumar stated that IGL’s volume is around 8.2-8.3 mmscmd (million metric standard cubic meters per day), and the demand for CNG is on the rise. He acknowledged that the company has had to face challenges such as a lack of availability of raw materials due to the pandemic, but they have successfully overcome these difficulties.

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Considering this, IGL has no plans to undertake any price hikes in the near future. Rather, the company intends to continue focusing on promoting CNG as a more cost-effective and environmentally friendly alternative to traditional fuels. In doing so, they hope to encourage more individuals and businesses to convert to CNG and contribute to a cleaner and greener future.

Also Read | IGL says its overall costs will fall 18% after Kirit Parikh panel recommendations are accepted

The stock was down 0.82 percent in last five trading sessions but was up 3.19 percent in a month.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indraprastha Gas hikes CNG prices in Delhi-NCR; check revised prices here

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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City gas distributor Indraprastha Gas Ltd. has raised the prices of Compressed Natural Gas (CNG) in Delhi-NCR effective Saturday, December 17. Prices have been hiked by nearly Re. 1 per kg.

In Delhi, CNG will now cost Rs 79.56 per kg, compared to the earlier price of Rs 78.61. In Noida, Greater Noida and Ghaziabad, a kilogram of CNG will cost Rs 82.12, compared to the earlier price of Rs 81.17.

CNG price in Gurugram will now be Rs 87.89 per kg.

In an interaction with CNBC-TV18 on December 1, Pawan Kumar, director of commercial operations at Indraprastha Gas had warned of the company’s margin being hit in the December quarter due to their inability to pass on the increase in gas costs.

Incidentally, in an interaction with CNBC-TV18 in September, Pawan Kumar had mentioned that the company will not pass any increase in gas prices to customers in the short-term and will absorb them.

“In the short-term, we can absorb any hikes, we will not pass on to the consumers, we are working on a two-pronged strategy to reduce our internal operating expenses and to maximise sales,” he had said back then.

Kumar also went on to say that if the recommendations of the Kirit Parikh panel are approved, it will be a welcome move as it will bring down the overall costs for Indraprastha Gas by as much as 18 percent to $7.98 per mmBtu.

On the timelines for these recommendations to be approved, Kumar said that it may take a month before a final decision is taken.

On the question of gas prices being bought under the ambit of GST, Kumar said that there would be savings worth nearly Rs 200 crore in case such a decision is taken.

“It will help the company as well as the consumers because currently we are paying around Rs 200 crore of GST. With the gases brought under GST there’ll be net saving of Rs 200 crore on the basis of input cost of GST and the industry also will get a breather that they will be able to get a input credit of GST,” he said.

Brokerage firm Citi wrote in a note that in case the Kirit Parikh committee recommendations are accepted by the government, they have the potential to reverse years of underperformance. It cited IGL and GSPL as its preferred picks.

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UBS sees over 45% upside in these gas stocks on ‘attractive’ valuations and margin but…

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of gas companies Indraprastha Gas, Mahanagar Gas and Gujarat Gas were trading in the red on Wednesday, as global brokerage, UBS’ positive commentary failed to excite the Street.

Shares of Indraprastha Gas were down a percent in intraday trade even as UBS gave the stock a ‘buy’ rating with a target price of Rs 630 per share, meaning it expects the gas stock to jump over 48 percent from Tuesday’s closing price.

Mahanagar Gas shares too were trading lower, having slipped more than a percent during the day. UBS expects the stock to scale 48 percent from Tuesday’s closing price of Rs 868.30 to Rs 1,280.

According to the brokerage both IGL and MGL have been trading at attractive valuations compared to their past 5-year average.

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It, however, has a ‘sell’ call on Gujarat Gas shares, which traded in the green zone rising more than a percent. UBS, expect the stock of the gas distributor to fall to Rs 400 per share. This implies a 20 percent downside from the last closing price.

UBS noted that the gas companies have delivered gas costs for the second half of the July to September quarter 30 percent lower than the first half of the three-month period.

According to the brokerage, elevated spot LNG prices and depreciating currency have increased gas costs for the priority sector and the revision in gas allocation policy has improved the outlook for city gas distributors.

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UBS expects gross margin for the month of September as 25-40 percent higher than the April to June quarter levels.

The brokerage’s remarks and the negative trend in the gas stocks come at a time when crude jumped has more than 2 percent after Russian President Vladimir Putin announced a partial military mobilisation, escalating the war in Ukraine and raising concerns of tighter oil and gas supply.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IGL says it will not cut CNG prices hereon

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indraprastha Gas (IGL) will not decrease the price of compressed natural gas (CNG) hereon. In a conversation with CNBC-TV18, board member, Pawan Kumar said so and shed light on the increase in domestic gas allocation and a surge in gas prices.

In a positive move for city gas distribution companies, the government recently increased domestic gas allocation for the second quarter of this fiscal to 94 percent of the full requirement from 85 percent in Q1. This increased allocation reduces input costs since the companies now need to pay less to import higher-priced gas.

However, the company, will not be reducing prices. “We have a long-term view. So that we do not lose customers, we didn’t increase the prices and we are not going to reduce,” said Kumar.

Also Read: Mahanagar Gas cuts PNG and CNG prices on higher supply from govt

“ When the prices were increased, IGL took a conscious decision that we will not increase the prices. So we didn’t increase any price after May. And we absorbed the entire hike ourselves and we reduce the costs and maintained our profitability,” he explained.

The allocation for gas has decreased for the company. “In the case of IGL, the allocation has come down, but we have long-term contracts at a reasonable price. So we are not using any spot LNG nowadays,” Kumar said.

The company gets about 6 mmscmd of gas from the domestic allocation. He said, “We are currently getting around 6 mmscmd per day and the allocation has in fact decreased for IGL. Earlier we were getting around 6.5 million per day, but now it is around 6.06.”

For the entire interview, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This gas stock has made investors 22% richer in 3 days

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indraprastha Gas shares’ gaining spree continued on Friday, the third day after the firm posted better-than-expected quarterly earnings for the April to June 2022 period.

At the day’s high, IGL shares have gained 21.99 percent since the company announced the financial results, which beat CNBC-TV18 poll estimates on all fronts —profit, revenue, margin, and EBITDA — though its margin dipped on a sequential basis.

The stock jumped 7.25 percent in intraday trade and was trading 5.5 percent higher at Rs 430.45 on BSE at 2:45 pm.

The overall sales volume growth of the natural gas distribution company, which supplies natural gas as cooking and vehicular fuel, was 48 percent over the corresponding quarter in the last financial year.

IGL Managing Director Sanjay Kumar earlier this week said that he hoped to maintain the volume trend of 7.9-8 million cubic metre per day for this whole year.

He, however, said it would be challenging to maintain volumes at 8.5 million cubic meters of gas per day if these prices sustain. “But 8 million cubic metre per day is maintainable,” he told CNBC-TV18 on Wednesday.

Global brokerage firm Jefferies, which has a buy rating on IGL stock but has reduced the target price, believes the gas distribution company has enough room to hike prices though it must defend its margin.

IGL’s Kumar is of the view that increasing prices further would impact volumes and conversion rate, which is at Rs 15,000 per month. He said the firm would like to maintain the conversion rate at current levels.

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He added that since CNG and PNG gas prices will go up again from October 1, the cost is one challenge that all city gas distribution (CGD) companies in the country face.

IGL is also planning to add 70-75 CNG stations this financial year, Kumar said.

Post the result, IGL shares also advanced after the government diverted natural gas from industries to city gas operators to check the spiralling CNG and piped cooking gas prices.

The Ministry of Petroleum and Natural Gas amended an earlier order to increase the allocation of domestically produced gas to city gas operators. The allocation for city gas operators such as Indraprastha Gas Ltd of Delhi and Mahanagar Gas Ltd of Mumbai has been increased to 20.78 million standard cubic meters per day, officials said.

The move follows a massive jump in CNG and PNG prices in the country in the last year as operators used costlier imported LNG.

CNG prices in Delhi went up by a massive 74 per cent (from Rs 43.40 per kg in July 2021 to Rs 75.61 per kg now) while PNG prices rose by 70 per cent (from Rs 29.66 per standard cubic meter to Rs 50.59 per scm).

By increasing allocations, the country will be able to meet 94 percent of its demand for gasoline for automobiles and piped gas for cooking. In the past, about 83 percent of the demand was met by GAIL’s import of LNG.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IGL shares rise post strong earnings beat but Jefferies cuts target price by 24%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Indraprastha Gas Ltd (IGL) surged as much as four percent on Wednesday after the company’s earnings beat expectations on all fronts-profit, revenue, EBITDA — a measure of operating profitability — and margin.

At 9:21 am, shares of the company were trading 3.6 percent higher at Rs 371.5 on the BSE.

Here’s a look at the company’s financials:

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IGL’s expenses increased tremendously. On a quarter-on-quarter basis, higher excise duty, employee benefits expense, depreciation and amortisation expenses weighed on profitability.

Jefferies has a ‘buy’ call on IGL shares and has trimmed its target price by 24 percent to Rs 450. The brokerage firm believes that the gas company’s margin should be under pressure in the second quarter. IGL has reported a 9 percent EBITDA beat led by a better margin.

IGL has enough room to hike prices, Jefferies said while adding that it expects the gas retailer to defend its margin.

Last week, the company hiked the price of piped cooking gas (PNG) for household kitchens in the national capital and adjoining cities. PNG price was increased by Rs 2.63 per unit to “offset input gas cost”, marking the second increase in less than two weeks. On July 26, rates were revised by Rs 2.1 per standard cubic meter (scm).

However, the foreign brokerage firm has cut its earnings per share estimates for FY23 by 10 percent and FY24 by 9 percent.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gas distributors’ stocks feel the heat as global fuel prices soar

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Credit Suisse has downgraded gas distributors Indraprastha Gas Ltd (IGL), Gujarat Gas Ltd (GGAS), and Mahanagar Gas Ltd (MGL) after their stocks corrected 20-30 percent from their peak, with high domestic gas prices and blending impacting the margins of these companies.

On the back of margin pressure led by the potentially increasing blending requirement, higher domestic gas price for the next 18 months and medium-term risk on volume growth from EV conversion, the brokerage downgraded IGL to underperform (from outperform) with a new target price of Rs 290 (from Rs 640), GGL to underperform (from neutral) with a target price of Rs 380 (from Rs 635). It also downgraded MGL to neutral (from outperform) with a new target price of Rs 785 (from Rs 1,500).

Credit Suisse said city gas players will no longer be able to take accretive price increases like in the past and steady-state margins will most likely settle down below levels seen in 2019-20 fiscal. It also maintains a negative outlook for the sector.

CNG (compressed natural gas) and residential PNG (piped natural gas) segments account for 85-90 percent of earnings before deductions for IGL, 85 percent for MGL, and 45 percent for Gujarat Gas.

Also Read: CNG to get costlier in Mumbai from April 30; check new prices here

Also, if crude oil stays above $100/bbl, it will allow city gas players to expand margins in the steady-state. Also, if the government caps the domestic gas prices or changes the gas pricing formula, a sharp reduction in LNG spot gas prices, and higher allocation to the city gas sector in the near term, will affect the city gas players, the note said.

Another negative for city gas companies is gas blending. The brokerage expects that the blending requirement for city gas companies could increase to 50 percent by the 2026 fiscal. Already, CNG station additions to the system last fiscal were twice that of the year before, and are set to further double from the 2025 fiscal onwards. The 2025-26 fiscal’s residential PNG connections will be four times the connections set up by last fiscal.

The government can make some short-term quick fixes by diverting three mmscmd (million standard cubic metres per day) of gas from fertiliser and power plants to the city gas distribution sector, but that does not solve the longer-term issue of increasing demand and lack of additional supply.

City gas CNG and residential PNG demands are expected to double from 22-23 mmscmd in the 2022 fiscal to close to 47 mmscmd in the 2026 financial year. Currently, the industry is working at a 12-15 percent APM gas shortfall (3 mmscmd). This blending is set to cross 40 percent by FY25 and 50 percent by FY26 given the current scenario.

Also Read: India crude oil production dipped 2.6% in FY22; natural gas output up

On the supply side, ONGC’s new fields can add net 8 mmscmd of gas but the net increase in domestic gas supply may still be low due to a decline in production from existing fields.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow