Detailed Narrative
Navigating the APM Gas Crisis
IGL faced a severe supply shock in Q3 FY25 as APM gas allocation was slashed by nearly 37%, dropping from 5.11 MMSCMD to 3.23 MMSCMD. This forced the company to source expensive spot gas at $14-$15/MMBTU, leading to a 36% YoY drop in EBITDA. However, management proactively secured 1.65 MMSCMD of new long-term RLNG contracts linked to Henry Hub and Brent at competitive rates (₹38-₹40/SCM). Furthermore, a partial restoration of 1 MMSCMD of domestic gas in January 2025 has provided much-needed relief to the cost structure.
Volume Growth Remains Resilient
Despite sourcing challenges, sales volumes grew 7% YoY to 9.11 MMSCMD. The industrial segment was a standout performer, growing 16% and crossing the 1 million SCM/day milestone for the first time in December. New Geographical Areas (GAs) outside Delhi NCR are growing at a robust 30% YoY, now contributing significantly to the total mix. Management remains confident in reaching a 9.5 MMSCMD exit rate for FY25 and 10.5 MMSCMD within a year.
Path to Margin Recovery
Current EBITDA per SCM has dipped to approximately ₹4.3, well below the historical ₹7-₹8 range. Management indicated that a retail price hike of roughly ₹2 per SCM would be sufficient to restore margins to the target level, given the partial restoration of domestic gas. They have already implemented price hikes of up to ₹4 in certain GAs outside Delhi and are 'taking a call' on the Delhi market, balancing growth with profitability.
Aggressive Capex and Diversification
IGL has significantly raised its capex guidance for FY26 to ₹13,000-₹15,000 crores, up from previous projections. This capital is earmarked not just for traditional CGD infrastructure but also for diversification into Compressed Biogas (CBG), LNG retailing, and potential inorganic acquisitions. The company is setting up 10 CBG plants with an estimated investment of ₹200-₹300 crores and is nearing the start of production for its gas meter manufacturing initiative by April 2025.
Infrastructure Expansion and Vehicle Conversion
The company now operates 899 CNG stations and serves nearly 3 million domestic PNG customers. A key driver for future volume is the accelerating pace of CNG vehicle conversions, which saw 17,100 additions this quarter compared to 14,700 in the previous quarter. Management noted that while DTC bus volumes are a drag in Delhi, the surge in private passenger vehicle conversions (up 46% between April and November) is more than offsetting this loss.