Indraprastha Gas Share Price: A Detailed Analysis of the Gas Distribution Company

Indraprastha Gas Limited (IGL) is one of the leading gas distribution companies in India, supplying compressed natural gas (CNG) and piped natural gas (PNG) to various segments such as domestic, industrial, commercial, and transport. The company operates in Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Rewari, Muzaffarnagar, Karnal, and Kaithal. The company is a joint venture of GAIL (India) Limited, Bharat Petroleum Corporation Limited, and the Government of the National Capital Territory of Delhi. The company was incorporated in 1998 and listed on the stock exchanges in 2003. In this blog post, we will analyse the share price performance, financial performance, valuation, and outlook of Indraprastha Gas.

Indraprastha Gas Share Price Performance

Indraprastha Gas share price has been on an upward trend since its listing, reflecting its consistent growth and profitability. The share price has increased from Rs. 25.15 in December 2003 to Rs. 394.75 in December 2021, registering a compound annual growth rate (CAGR) of 21.6%. The share price has also outperformed the benchmark indices such as Nifty 50 and BSE Oil & Gas, which have delivered CAGRs of 14.8% and 15.4%, respectively, in the same period. The share price has also been resilient to the market volatility and the Covid-19 pandemic, as the company’s business model is largely immune to the fluctuations in crude oil prices and the demand for gas is relatively stable.

The share price performance of Indraprastha Gas can be attributed to its strong fundamentals, such as its dominant market position, its diversified customer base, its expanding network, its operational efficiency, its robust financials, and its attractive dividend policy. The company has a market share of over 70% in the CNG segment and over 50% in the PNG segment in its operational areas. The company has a customer base of over 14 lakh in the domestic PNG segment, over 12 lakh in the transport CNG segment, and over 6,000 in the industrial and commercial PNG segment. The company has a network of over 600 CNG stations and over 15,000 km of pipeline3. The company has a high operating margin of over 30% and a high return on equity of over 20%4. The company has a healthy balance sheet, with a low debt-to-equity ratio of 0.05 and a high interest coverage ratio of 91.54. The company has also been paying regular dividends to its shareholders, with a dividend yield of 3.34%1.

Indraprastha Gas Financial Performance

Indraprastha Gas has been delivering consistent and impressive financial performance over the years, despite the challenges posed by the Covid-19 pandemic and the lockdowns. The company has maintained its revenue and profit growth, driven by its volume growth, price revisions, and cost optimization. The company has also improved its margins and profitability, aided by its operational efficiency, lower gas costs, and higher value-added products. The company has also generated strong cash flows and maintained its capital expenditure, reflecting its growth potential and financial strength.

The table below shows the financial performance of Indraprastha Gas for the last five financial years and the first half of the current financial year:

Financial YearRevenue (Rs. Crore)Profit After Tax (Rs. Crore)Earnings Per Share (Rs.)Operating Margin (%)Return on Equity (%)
2016-174,222.9571.08.023.518.9
2017-184,916.6671.99.424.119.5
2018-196,337.9787.211.026.920.7
2019-206,111.31,136.415.933.624.9
2020-214,902.41,142.516.036.923.7
H1 2021-223,144.8787.811.038.624.1

The financial performance of Indraprastha Gas shows that the company has been growing its revenue and profit at a CAGR of 10.6% and 18.8%, respectively, in the last five years. The company has also increased its earnings per share from Rs. 8.0 in 2016-17 to Rs. 16.0 in 2020-21, registering a CAGR of 19.0%. The company has also improved its operating margin from 23.5% in 2016-17 to 36.9% in 2020-21, indicating its operational efficiency and cost optimization. The company has also enhanced its return on equity from 18.9% in 2016-17 to 23.7% in 2020-21, reflecting its profitability and capital utilization. The company has also generated positive cash flows from operations in every year, amounting to Rs. 1,924.4 crore in 2020-21. The company has also maintained its capital expenditure, investing Rs. 1,027.8 crore in 2020-21.

The financial performance of Indraprastha Gas for the first half of the current financial year also shows that the company has recovered well from the impact of the Covid-19 pandemic and the lockdowns. The company has reported a revenue growth of 54.2% and a profit growth of 108.6% in H1 2021-22, compared to H1 2020-21. The company has also reported an earnings per share of Rs. 11.0 and an operating margin of 38.6% in H1 2021-22, which are higher than the full-year figures of 2020-21. The company has also reported a return on equity of 24.1% and a cash flow from operations of Rs. 1,056.9 crore in H1 2021-22.

Indraprastha Gas Valuation and Outlook

Indraprastha Gas is currently trading at a price-to-earnings (PE) ratio of 15.08, which is lower than its five-year average PE ratio of 18.87 and the industry PE ratio of 34.501. The company is also trading at a price-to-book (PB) ratio of 3.44, which is lower than its five-year average PB ratio of 4.29 and the industry PB ratio of 4.691. The company is also trading at a dividend yield of 3.34%, which is higher than its five-year average dividend yield of 2.13% and the industry dividend yield of 2.04%1. These valuation metrics indicate that the company is undervalued and offers a good margin of safety and return potential for the investors.

The outlook for Indraprastha Gas is positive, as the company is expected to benefit from the increasing demand for natural gas in India, driven by the government’s policies, environmental concerns, and economic growth. The company is also expected to leverage its strong market position, diversified customer base, expanding network, operational efficiency, robust financials, and attractive dividend policy to sustain its growth and profitability in the future. The company is also expected to explore new opportunities and markets, such as electric vehicles, hydrogen, and bio-CNG, to diversify its revenue streams and enhance its competitive edge. The company is also expected to maintain its capital expenditure and invest in new projects and technologies, such as smart meters, prepaid cards, and mobile dispensers, to improve its customer service and satisfaction.

Conclusion

Indraprastha Gas is one of the leading gas distribution companies in India, offering CNG and PNG to various segments such as domestic, industrial, commercial, and transport. The company has a dominant market position, a diversified customer base, an expanding network, an operational efficiency, a robust financials, and an attractive dividend policy. The company has delivered consistent and impressive financial performance over the years, despite the challenges posed by the Covid-19 pandemic and the lockdowns. The company has also recovered well from the impact of the pandemic and reported strong growth and profitability in the first half of the current financial year. The company is currently trading at a low valuation, which offers a good margin of safety and return potential for the investors. The outlook for the company is positive, as the company is expected to benefit from the increasing demand for natural gas in India and explore new opportunities and markets in the future. Indraprastha Gas is a quality stock that deserves a place in the portfolio of long-term investors.

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