Indraprastha Gas - Double Trouble On The Cards: Motilal Oswal

Motilal Oswal Report

Compressed natural gas and domestic piped natural gas volumes for listed city gas distributions (Indraprastha Gas Ltd., Mahanagar Gas Ltd., Gujarat Gas Ltd. and Adani Total Gas Ltd.) reported a 7% compound annual grwoth rate over the past four years, while gas production from nominated fields declined at 3% CAGR during the same period.

The supply-demand imbalance is likely to continue, thereby increasing the proportion of expensive non-administered price mechanism volumes in sourcing mix for CGDs. This should further lead to structural margin challenges going forward.

For Indraprastha Gas, we estimate that the 20% penetration of electric vehicles in sales of new CNG vehicles over the next three years would result in a decline in average CNG sales volume growth to 9% from 12% in our base case.

Prospects of long-term high volume growth remain even bleaker for the company.

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