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    Indraprastha Gas Limited

    IGLGood
    Oil, Gas & Consumable Fuels·14 Nov 2025
    Management Summary

    IGL reported a quarter of resilient volume growth despite structural headwinds from the Delhi Transport Corporation's (DTC) transition to electric vehicles. While margins were compressed by a shift in the gas sourcing mix toward more expensive RLNG (37% vs 25% previously), management is optimistic about a recovery to ₹7-₹8 per SCM margins. This recovery is expected to be driven by tax rationalization, unified tariffs, and a significant strategic pivot into the Saudi Arabian industrial gas market.

    Highlights

    8

    • Total revenue for Q2 FY26 stood at ₹4,432 crores, representing a 9% YoY growth.

    • EBITDA for the quarter was ₹443 crores, a decline from ₹532 crores in Q2 FY25, primarily due to higher gas procurement costs.

    • PAT stood at ₹373 crores, down 13.4% YoY from ₹431 crores in the same period last year.

    • Total sales volume grew 3% YoY to 857 million SCM; excluding DTC sales, CNG volumes grew by approximately 10%.

    • Average daily sales volume reached 9.31 million SCMD, with NCR growing at 7% and new GAs at 16%.

    • Management announced a strategic international expansion into Saudi Arabia with a 40% equity stake in a JV targeting 5 industrial cities.

    • EBITDA margin guidance maintained at ₹7-₹8 per SCM, supported by a ₹1/SCM benefit from Gujarat VAT reduction and upcoming unified tariff framework.

    • CNG vehicle adoption remains robust with 31,000 new additions in October alone, aided by GST rationalization on CNG vehicles.

    Concerns

    1

    • EV Transition of Public Transport

    What Changed3

    vs Q3 FY26

    Guidance items12 → 6 (-6)Risks discussed5 → 4 (-1)Q&A highlights8 → 3 (-5)

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹4,432 Cr+9%YoY
    2. 02EBITDA₹443 Cr-16.7%YoY
    3. 03PAT₹373 Cr-13.4%YoY
    4. 04Average Daily Volume9.31 MMSCMD+3.1%YoY
    5. 05EBITDA Margin5.17 Rs/SCM

    Segment breakdown

    CNG
    3% Volume Growth (Total)10% Volume Growth (Ex-DTC)7 MMSCMD Daily Sales
    PNG
    6% Volume Growth1.84 MMSCMD Daily Sales
    Geographical Areas
    7.0% NCR Growth16% New GAs Growth
    List

    Guidance & targets

    6
    CategoryTargetPriority
    Volume
    Overall Volume Growth
    8%-10%
    		Medium
    Volume
    Exit Daily Volume
    10
    		High
    Margin
    EBITDA Margin
    ₹7-₹8
    		High
    Capex
    Core Business Capex
    ₹1,200-₹1,400
    		High
    Capex
    Diversification Capex
    ₹700-₹800
    		Medium
    Other
    Saudi JV Investment
    ₹100-₹150
    		Medium

    Risks & concerns

    5
    RiskSeverity

    EV Transition of Public Transport

    DTC and DIMTS bus fleets are rapidly transitioning to electric, causing a significant drop in high-volume CNG sales (from 200,000 kg/day to 30,000 kg/day). — Both acknowledged

    high

    Gas Sourcing Mix Shift

    RLNG component in the priority segment increased from 25% to 37% as APM and HPHT allocations declined, increasing average procurement costs. — Management acknowledged

    medium

    Currency Depreciation

    INR depreciation impacts gas import costs; management has factored in ₹88-89/USD for future guidance. — Analyst acknowledged

    medium

    Competition from Alternate Fuels

    Softening LPG and propane prices have led to minor switching in the industrial segment where flexibility exists. — Management acknowledged

    low

    Areas of Evasion(1)

    • Specific details on Saudi JV tender pricing and exclusivity periods were withheld as they are part of ongoing bidding.

    Q&A highlights

    3

    “Saudi has divided the whole kingdom in 36 industrial cities... each industrial city has a potential of 1-1.5 million of gas. The laying cost for the network is also not much since the gas is nearby.”

    Clarifies that IGL is moving from a domestic-only player to an international infrastructure investor with significant volume potential.

    asked by Probal Sen

    2 min read5 chapters

    Detailed Narrative

    01

    Navigating the DTC Electric Transition

    IGL is facing a structural shift in its Delhi volume base as the Delhi Transport Corporation (DTC) and DIMTS transition their bus fleets to electric mobility. Daily sales to these entities have plummeted from 200,000 kg/day last year to just 30,000 kg/day in September 2025. The remaining fleet of approximately 2,000 CNG buses is expected to be phased out shortly. However, management emphasizes that excluding this 'diminishing' segment, underlying CNG growth is robust at 10%, driven by private and commercial vehicle adoption.

    02

    Strategic International Pivot: Saudi Arabia

    A major highlight of the call was IGL's entry into the Saudi Arabian industrial gas market. The company is bidding for a JV (40% equity stake) to develop gas networks in 5 industrial cities, with a total volume potential of 4-5 million SCMD. Management highlighted that the investment requirement is relatively low (₹100-₹150 crores for Phase 1) because trunk pipelines operated by Aramco are already in close proximity to the industrial zones, significantly reducing infrastructure costs compared to Indian GAs.

    03

    Margin Recovery Levers: VAT and Unified Tariffs

    Despite Q2 margin pressure, IGL identified two key catalysts for recovery to the ₹7-₹8 per SCM range. First, the reduction of Gujarat VAT on domestic gas from 15% to 2% (effective October 1) provides an immediate ₹1/SCM cost saving. Second, the upcoming implementation of the PNGRB's unified tariff framework for Zone 1 is expected to provide an additional benefit of over ₹1/SCM. These regulatory tailwinds are expected to offset the increased cost of RLNG in the sourcing mix.

    04

    Robust Infrastructure and Network Expansion

    IGL continues to expand its physical footprint, now operating over 2,500 km of steel pipelines and 29,000 km of MDPE networks. The company services 31.75 lakh households and 955 CNG stations. Capex guidance for FY26 remains firm at ₹1,200-₹1,400 crores for core infrastructure, with an additional ₹700-₹800 crores earmarked for diversification projects, reflecting a commitment to long-term capacity building.

    05

    Gas Sourcing Dynamics and Cost Pressures

    The quarter saw a significant shift in gas sourcing, with the RLNG component rising to 37% from 25% in the previous quarter. This was necessitated by a drop in APM allocation (from 44% to 41%) and HPHT domestic gas (from 16% to 10%). This mix change, coupled with INR depreciation and higher Henry Hub prices, was the primary driver behind the decline in EBITDA from ₹532 crores to ₹443 crores YoY.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.