Indraprastha Gas Limited — Q3 FY25 earnings call

Call held 28 Jan 2025

Management summary

IGL faced a challenging Q3 FY25 due to a massive reduction in low-cost APM gas allocation, which dropped from 5.11 to 3.23 MMSCMD, severely impacting margins. Despite this, the company maintained strong volume momentum, particularly in industrial and new geographical areas. Management is now focused on margin recovery through price hikes and newly secured long-term gas contracts, targeting a return to historical EBITDA levels by Q4 FY25.

Highlights

  • Average sales volume reached 9.11 MMSCMD, representing a 7% YoY growth.

  • Gross turnover stood at ₹4,130 crores, showing a 6% sequential (QoQ) increase.

  • EBITDA reported at ₹363 crores, a significant 36% YoY decline due to higher gas input costs.

  • Profit After Tax (PAT) was ₹285 crores, down from ₹392 crores in the same quarter last year.

  • CNG segment grew by 6%, while the PNG segment achieved double-digit growth of 12%.

  • Industrial PNG segment saw an impressive 16% growth, crossing the 1 million SCM/day milestone in December.

  • Domestic gas allocation was partially restored by ~1 MMSCMD effective January 16, 2025, following major cuts in Q3.

  • CNG vehicle additions accelerated with 17,100 new/retrofitted vehicles, a 16% QoQ increase.

Concerns

  • Domestic Gas Allocation Uncertainty

Key financials

  1. Gross Turnover ₹4,130 Cr +6%QoQ
  2. EBITDA ₹363 Cr -36%YoY
  3. PAT ₹285 Cr -27%YoY
  4. Sales Volume 9.11 MMSCMD +7%YoY
  5. EBITDA per SCM ₹4.3

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
    6.7 MMSCMD Sales Volume6% Volume Growth
  • PNG - Industrial
    16% Volume Growth
  • PNG - Domestic
    17% Volume Growth
  • Outside Delhi NCR GAs
    30% Overall Growth

Guidance & targets

Volume

  • Exit Sales Volume Volume · FY25 · High confidence 9.5 MMSCMD
    With this continued focus on our volume growth, we are very confident of achieving 9.5 million of exit sales target for this current financial year '24-'25.

    — Mohit Bhatia, Director Commercial

  • Sales Volume Volume · by Jan 2026 · Medium confidence 10.5 MMSCMD
    anticipate that we'll be reaching in 1 year's time 10.5 MMSCMD.

    — Kamal Kishore Chatiwal, Managing Director

Margin

  • EBITDA per SCM Margin · Annual · Medium confidence ₹7 to ₹8
    maintaining an EBITDA in future in the range of around INR7 to INR8 per SCM annually.

    — Mohit Bhatia, Director Commercial

Capex

  • Annual Capex Capex · FY26 · Medium confidence ₹13,000 to ₹15,000 crores

    Previously ₹13,000 crores → ₹13,000 to ₹15,000 crores

    Yes, it will be in the INR13,000 crores to INR15,000 crores, because we are looking at some of the diversification initiatives also.

    — Kamal Kishore Chatiwal, Managing Director

Risks & concerns

  • Domestic Gas Allocation Uncertainty

    high

    Management admitted they have no assurance against future cuts in APM gas, which is dependent on declining domestic production.

    Both acknowledged

  • High Input Cost Volatility

    medium

    Spot prices reached $14-$15/MMBTU during the quarter, making immediate pass-through difficult without shocking customers.

    Management acknowledged

  • EV Adoption in Commercial Segments

    low

    Management argues CNG adoption (46% growth) is far outstripping EV growth (4-5%) in the passenger and commercial vehicle categories.

    Analyst downplayed

Areas of evasion (2)

  • Specific pricing formulas for new long-term contracts (cited commercial sensitivity).
  • Sub judice matters regarding Gurgaon area disputes.

Q&A highlights

2 direct
Margin Recovery Timeline Direct
If we have INR2 increase per kg, then I think -- INR2 per SCM rather, then I think that should take care of us reaching back to around INR7 to INR8 range.

Confirms that IGL needs further retail price hikes to offset the loss of cheap domestic gas and restore profitability.

Asked by Probal Sen, ICICI Securities

Impact of DTC Bus Attrition Partial
Delhi was almost flat, maybe 3% growth. But otherwise, if you leave aside the DTC, it has grown by 6%. So impact is still being felt. I think 40% buses are still there.

Highlights a structural headwind in the core Delhi market as the state transport utility shifts away from CNG, though private vehicle growth is compensating.

Asked by Amit Murarka, Axis Capital

Gas Sourcing Mix and Costs Direct
Presently, 2/3 is Henry Hub linked and 1/3 is combined JCC, Brent... Both of them are at similar values, INR35, INR36 per SCM kind of range.

Provides clarity on the cost of replacement gas (RLNG) which is significantly higher than APM gas (~₹20/SCM) but lower than recent spot prices.

Asked by Nitin Tiwari, PhillipCapital

2 min read 5 chapters

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.

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