Indraprastha Gas Limited — Q2 FY26 earnings call

Call held 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

  • 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

  • EV Transition of Public Transport

Key financials

  1. Revenue ₹4,432 Cr +9%YoY
  2. EBITDA ₹443 Cr -16.7%YoY
  3. PAT ₹373 Cr -13.4%YoY
  4. Average Daily Volume 9.31 MMSCMD +3.1%YoY
  5. EBITDA Margin ₹5.17/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
    3% Volume Growth (Total)10% Volume Growth (Ex-DTC)7 MMSCMD Daily Sales
  • PNG
    6% Volume Growth1.84 MMSCMD Daily Sales
  • Geographical Areas
    7% NCR Growth16% New GAs Growth

Guidance & targets

Volume

  • Overall Volume Growth Volume · FY26 · Medium confidence 8%-10%

    Previously 6%-7% → 8%-10%

    Yes, we look forward for the same around, may be 8%-10%. If we exclude the DTC volumes... we expect to have in the range of maybe 8%-10%.

    — K. K. Chatiwal, Managing Director

  • Exit Daily Volume Volume · FY26 Exit · High confidence 10
    I think our exit would be around 10.

    — K. K. Chatiwal, Managing Director

Margin

  • EBITDA Margin Margin · FY26 Exit / FY27 · High confidence ₹7-₹8
    We are confident that Rs. 7-Rs. 8 guidance we will be able to maintain... our long term guidance remains on Rs. 7-Rs. 8 and we are on path to that.

    — K. K. Chatiwal, Managing Director

Capex

  • Core Business Capex Capex · FY26 · High confidence ₹1,200-₹1,400
    So, we have plans for around Rs. 1,200-Rs. 1,400 on our core in the CAPEX.

    — K. K. Chatiwal, Managing Director

  • Diversification Capex Capex · FY26 · Medium confidence ₹700-₹800
    and some diversification thing if it happens, we are trying so another maybe Rs. 700-Rs. 800 crores.

    — K. K. Chatiwal, Managing Director

Other

  • Saudi JV Investment Other · Phase 1 · Medium confidence ₹100-₹150
    but for these 5 cities, we are looking at 100-150 kind of, for 5 cities, Rs. 100-Rs. 150 crores and the volume should be 4-5 million.

    — K. K. Chatiwal, Managing Director

Risks & concerns

  • EV Transition of Public Transport

    high

    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

  • Gas Sourcing Mix Shift

    medium

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

    Management acknowledged

  • Currency Depreciation

    medium

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

    Analyst acknowledged

  • Competition from Alternate Fuels

    low

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

    Management acknowledged

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

2 direct
Strategic Rationale for Saudi JV Direct
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

DTC Volume Loss vs. Underlying Growth Direct
Last year, September, we were averaging out around 2 lakhs per day. So, we just come down to almost 30,000 per day... once we get the zero base of the DTC, I think we will be achieving these numbers [10% growth].

Explains the mathematical drag of the EV transition in Delhi and confirms that private/commercial CNG demand remains very strong.

Asked by Yogesh Patil

Margin Compression and Recovery Levers Partial
The Re. 1 plus kind of benefit should come in... if we get Re. 1 plus kind of a benefit in tariff and Re. 1 from this VAT deduction, then I think we are in Rs. 7-Rs. 8 range.

Identifies specific regulatory and tax tailwinds that will offset the current high cost of RLNG procurement.

Asked by Amit

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

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