Indraprastha Gas Limited — Q2 FY25 earnings call

Call held 29 Oct 2024

Management summary

IGL delivered record-breaking volumes and revenue in Q2 FY25, driven by robust CNG and PNG growth across new geographical areas. However, the quarter was overshadowed by a 20% cut in low-cost APM gas allocation, creating margin pressure. Management is pivoting towards higher-cost RLNG and HPHT gas while evaluating price hikes to maintain their target EBITDA margin of ₹6-7 per SCM.

Highlights

  • Achieved all-time high quarterly turnover of ₹4,070 crores, up 7% YoY.

  • Total sales volume crossed the 9 MMSCMD landmark, averaging 9.03 MMSCMD for the quarter.

  • CNG volumes grew 9% YoY to 6.78 MMSCMD, supported by 10% growth in vehicular population.

  • EBITDA stood at ₹536 crores, a decline from ₹582 crores in Q1 FY25 due to higher input costs.

  • PAT increased slightly on a QoQ basis to ₹431 crores from ₹401 crores in Q1.

  • Management reported a significant 20% reduction in APM gas allocation starting October 2024.

  • Interim dividend of ₹5.5 per share declared, representing a ~45% payout ratio.

Concerns

  • APM Gas Allocation Cut

Key financials

  1. Revenue ₹4,070 Cr +7%YoY
  2. EBITDA ₹536 Cr -7.9%QoQ
  3. PAT ₹431 Cr +7.5%QoQ
  4. Sales Volume 9.03 MMSCMD +4.5%QoQ
  5. EBITDA Margin ₹6.7/scm

What they filed

Q1 FY27: revenue up 17.2%, net profit down 44.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,698 3,759 3,948 3,914 4,023 +9%4,068 +8%4,163 +5%4,587 +17%
EBITDA535 362 493 511 441 −18%471 +30%421 −15%294 −42%
Net profit454 325 453 428 385 −15%392 +21%339 −25%238 −44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • CNG
    6.78 MMSCMD Volume9% Volume Growth
  • PNG
    12% Overall Volume Growth12% Domestic Growth13% Commercial Growth11% Industrial Growth

Guidance & targets

Volume

  • Total Sales Volume Volume · FY25 · High confidence 9.5 MMSCMD
    We have a target of 9.5 million per day. And if we see the Q2 average, we have returned around 9.03. So we are hopeful of touching in the balance period of the half year of around 9.5 million.

    — Mohit Bhatia, Director Commercial

Capex

  • Annual Capex Capex · FY25 · High confidence ₹1,700 crores
    So we have a target of around INR1,700 crores of capex for this financial year. And almost, during the first half, we have incurred around INR500 crores already incurred.

    — Mohit Bhatia, Director Commercial

Margin

  • EBITDA per SCM Margin · FY25 · Medium confidence ₹6 to ₹7

    Previously ₹7 to ₹7.5 → ₹6 to ₹7

    our aspiration is to maintain between INR6 to INR7. And for H1, it is already in that line, almost INR6.7. But there is a stress definitely on the EBITDA because of the APM cuts.

    — Mohit Bhatia, Director Commercial

Capacity

  • LNG Stations Capacity · next 3 to 5 years · Medium confidence 50 stations
    We have aggressive plans. So we -- as far for around 50 LNG stations in next 3 to 5 years.

    — Mohit Bhatia, Director Commercial

Risks & concerns

  • APM Gas Allocation Cut

    high

    A 20% reduction in APM allocation forces IGL to source more expensive market gas, directly impacting margins.

    Both acknowledged

  • EV Transition in Delhi

    medium

    Mandatory EV registration for cab aggregators could dent CNG demand, though management cites poor charging infra as a buffer.

    Analyst downplayed

  • Input Cost Volatility

    medium

    Increased reliance on RLNG (Henry Hub and Brent linked) exposes the company to global price fluctuations.

    Management acknowledged

Areas of evasion (1)

  • Specific formula for Henry Hub linked contracts was withheld as a commercial secret.

Q&A highlights

2 direct
Impact of APM Allocation Reduction Direct
Just to add more, if you're talking about the reduction, how much price increase it warrants, that is around INR5 in Delhi and around INR5.5 to INR6 in other states.

Quantifies the exact price hike needed to offset the 20% APM cut, which is the primary concern for investors.

Asked by Kirtan Mehta, BOB Capital Markets

EV Policy for Cab Fleets Direct
We are not seeing much enthusiasm about this policy among the cab aggregators... unless they change the model, it will be -- from a financial perspective or from an economic perspective, it will be difficult.

Management downplays the threat of Delhi's mandatory EV registration policy for cabs, citing infrastructure and cost barriers.

Asked by Amit Murarka, Axis Capital

Volume Growth Guidance for FY26 Partial
I think at an average of around 8% to 10% will be growing year-on-year basis in terms of absolute volumes of all these segments.

Establishes a medium-term growth trajectory despite the high base and regulatory headwinds.

Asked by Yogesh Patil, Dolat Capital

2 min read 5 chapters

Detailed narrative

Record Volume Performance and Growth Drivers

IGL achieved a significant milestone in Q2 FY25, crossing 9 million standard cubic meters per day (MMSCMD) in sales for the first time, averaging 9.03 MMSCMD. This growth was underpinned by a 9% YoY increase in CNG volumes and a 12% increase in PNG volumes. The company is seeing particularly strong momentum in newer geographical areas like Noida and Ghaziabad, which are growing at 17-18%, compared to 8% growth in Delhi (excluding DTC). Management remains committed to an exit rate of 9.5 MMSCMD for FY25, supported by the addition of approximately 15,740 new CNG vehicles per month.

Navigating the APM Allocation Crisis

The most critical development discussed was the 20% reduction in APM gas allocation by authorities in October 2024. This cut forces IGL to replace low-cost domestic gas with more expensive RLNG or HPHT gas. Management quantified the impact, stating that a price hike of ₹5 per kg in Delhi and ₹5.5-6 per kg in other states would be required to fully offset the cost increase and maintain EBITDA margins. While they have not yet implemented these hikes due to the Diwali festive season, they indicated that price revisions are inevitable and 'on the cards'.

Margin Sustainability and Sourcing Strategy

IGL has revised its EBITDA margin aspiration to ₹6-7 per SCM, down from the previous informal guidance of ₹7-7.5, reflecting the new cost reality. To mitigate the APM cut, the company is diversifying its sourcing portfolio, which currently includes 2.5 million units of RLNG (split between Henry Hub and Brent linked contracts) and 5.6% HPHT gas. They are actively participating in new gas biddings from ONGC and GAIL and exploring long-term LNG contracts to stabilize input costs over the next 2-3 months.

Infrastructure Expansion and Diversification

The company is maintaining an aggressive capex plan of ₹1,700 crores for FY25, with roughly 45-55% allocated to Delhi NCR and the remainder to newer GAs. Beyond traditional CGD, IGL is expanding into the LNG for long-haul transport segment, with plans to commission three new stations by year-end and a long-term target of 50 stations. They are also focusing on CBG (Compressed Bio-Gas) and inorganic growth opportunities to strengthen their market position and deliver sustainable shareholder returns.

Resilience Against EV Competition

Management addressed concerns regarding Delhi's EV policy for cab aggregators, noting that they have not seen any significant fall in CNG penetration. Current CNG penetration across 3-wheelers and 4-wheelers remains steady at 27-28%. They argued that the lack of charging infrastructure and the high upfront cost of EVs (₹11-12 lakhs vs ₹6-7 lakhs for CNG) make a rapid transition difficult for individual drivers. Furthermore, the emergence of CNG variants in the 2-wheeler segment (e.g., Bajaj) is seen as a new growth opportunity rather than a threat.

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